Exhibit 4.1


 


Execution Copy


 


STANDBY EQUITY DISTRIBUTION AGREEMENT


 


THIS AGREEMENT dated
as of the 29th day of September 2008 (this “Agreement”) between YA GLOBAL INVESTMENTS, L.P., a Cayman
Islands exempt limited partnership (the “Investor”), and ADVANCED LIFE SCIENCES HOLDINGS, INC., a
corporation organized and existing under the laws of the State of Delaware (the
“Company”).


 


WHEREAS, the parties
desire that, upon the terms and subject to the conditions contained herein, the
Company shall issue and sell to the Investor, from time to time as provided
herein, and the Investor shall purchase from the Company up to $15,000,000 of
the Company’s common stock, par value $0.01 per share (the “Common Stock”);
and


 


WHEREAS, such
investments will be made in reliance upon the provisions of Regulation D (“Regulation
D”) of the Securities Act of 1933, as amended, and the regulations
promulgated thereunder (the “Securities Act”), and or upon such other
exemption from the registration requirements of the Securities Act as may be
available with respect to any or all of the investments to be made hereunder.


 


NOW, THEREFORE, the parties hereto agree as
follows:


 


Article I.
Certain Definitions


 


Section 1.01           “Advance” shall mean the
portion of the Commitment Amount requested by the Company in the Advance
Notice.


 


Section 1.02            “Advance Date” shall mean the
1st Trading Day after expiration of the applicable Pricing Period
for each Advance.


 


Section 1.03            “Advance Notice” shall mean a
written notice in the form of Exhibit A attached hereto to the
Investor executed by an officer of the Company and setting forth the Advance
amount that the Company requests from the Investor.


 


Section 1.04            “Advance Notice Date” shall
mean each date the Company delivers (in accordance with  of this Agreement) to the Investor an Advance
Notice requiring the Investor to advance funds to the Company, subject to the
terms of this Agreement.  No Advance
Notice Date shall be less than 5 Trading Days after the prior Advance Notice
Date.


 


Section 1.05            “Bid Price” shall mean, on
any date, the closing bid price (as reported by Bloomberg L.P.) of the Common
Stock on the Principal Market or if the Common Stock is not traded on a
Principal Market, the highest reported bid price for the Common Stock, as
furnished by the National Association of Securities Dealers, Inc.


 


Section 1.06            “Closing” shall mean one of
the closings of a purchase and sale of Common Stock pursuant to .


 

















 


Section 1.07            “Commitment Amount” shall
mean the aggregate amount of up to $15,000,000 which the Investor has agreed to
provide to the Company in order to purchase the Company’s Common Stock pursuant
to the terms and conditions of this Agreement provided
that, the Company shall not effect any sales under this Agreement and the
Investor shall not have the obligation to purchase shares of Common Stock under
this Agreement to the extent that after giving effect to such purchase and sale
the aggregate number of shares of Common Stock issued under this Agreement
would exceed 7,700,000 shares of Common Stock (which is less than 20% of the
38,521,987 outstanding shares of Common Stock as of the date of this  Agreement) except that such limitation shall
not apply in the event that the Company (i) obtains the approval of its
stockholders as required by the applicable rules of the Principal Market
for the Common Stock for issuances of Common Stock in excess of such amount or (ii) obtains
a written opinion from outside counsel to the Company that such approval is not
required, which opinion shall be reasonably satisfactory to the Investor.


 


Section 1.08            “Commitment Period” shall
mean the period commencing on the Effective Date, and expiring upon the
termination of this Agreement in accordance with .


 


Section 1.09            “Common Stock” shall mean the
Company’s common stock, par value $0.01 per share.


 


Section 1.10            “Condition Satisfaction Date”
shall have the meaning set forth in .


 


Section 1.11            “Damages” shall mean any
loss, claim, damage, liability, costs and expenses (including, without
limitation, reasonable attorney’s fees and disbursements and costs and expenses
of expert witnesses and investigation).


 


Section 1.12            “Effective Date” shall mean
the date on which the SEC first declares effective a Registration Statement
registering the resale of the Registrable Securities as set forth in .


 


Section 1.13            “Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.


 


Section 1.14           “Material Adverse Effect”
shall mean any condition, circumstance, or situation that has resulted in, or
would reasonably be expected to result in (i) a material adverse effect on
the legality, validity or enforceability of this Agreement, (ii) a
material adverse effect on the results of operations, assets, business or condition
(financial or otherwise) of the Company, taken as a whole, or (iii) a
material adverse effect on the Company’s ability to perform in any material
respect on a timely basis its obligations under this Agreement.


 


Section 1.15            “Market Price” shall mean the
lowest daily VWAP of the Common Stock during the Pricing Period.


 


Section 1.16            “Maximum Advance Amount”
shall, per Advance Notice, be the greater of (i) $400,000 or (ii) the
average daily trading volume for the 5 Trading Days prior to the Advance Notice
Date.


 

















 


Section 1.17           “Person” shall mean an
individual, a corporation, a partnership, an association, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.


 


Section 1.18           “Pricing Period” shall mean
the 5 consecutive Trading Days after the Advance Notice Date.


 


Section 1.19            “Principal Market” shall mean
the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital
Market, the American Stock Exchange, the OTC Bulletin Board or the New York
Stock Exchange, whichever is at the time the principal trading exchange or
market for the Common Stock.


 


Section 1.20            “Purchase Price” shall be set
at 95% of the Market Price during the Pricing Period.


 


Section 1.21            “Registrable Securities”
shall mean the shares of Common Stock to be issued hereunder  (i) in respect of which the
Registration Statement has not been declared effective by the SEC, (ii) which
have not been sold under circumstances meeting all of the applicable conditions
of Rule 144 (or any similar provision then in force) under the Securities
Act (“Rule 144”) or (iii) which have not been otherwise
transferred to a holder who may trade such shares without restriction under the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such securities not bearing a restrictive legend.


 


Section 1.22            “Registration Rights Agreement”
shall mean the Registration Rights Agreement dated the date hereof, regarding
the filing of the Registration Statement for the resale of the Registrable
Securities, entered into between the Company and the Investor.


 


Section 1.23            “Registration Statement”
shall mean a registration statement on Form S-3 (if use of such form is
then available to the Company pursuant to the rules of the SEC and, if
not, Form S-1 or on such other form promulgated by the SEC for which the
Company then qualifies and which counsel for the Company shall deem
appropriate, and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of
this Agreement and the Registration Rights Agreement, and in accordance with
the intended method of distribution of such securities), for the registration
of the resale by the Investor of the Registrable Securities under the
Securities Act.


 


Section 1.24            “Regulation D” shall have the
meaning set forth in the recitals of this Agreement.


 


Section 1.25            “SEC” shall mean the United
States Securities and Exchange Commission.


 


Section 1.26            “Securities Act” shall have
the meaning set forth in the recitals of this Agreement.


 


Section 1.27            “Trading Day” shall mean any
day during which the New York Stock Exchange shall be open for business.


 


Section 1.28            “VWAP” means, as of any date,
the daily dollar volume-weighted average price for such security as reported by
Bloomberg, LP through its “Historical Price Table Screen (HP)” 


 

















 


with Market:
Weighted Ave function selected, or, if no dollar volume-weighted average price
is reported for such security, then the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such
security.


 


Article II.
Advances


 


Section 2.01           Advances. Subject to the terms
and conditions of this Agreement (including, without limitation, the provisions
of Article VII hereof), the Company, at its sole and exclusive option, may
issue and sell to the Investor, and the Investor shall purchase from the
Company, shares of the Company’s Common Stock by the delivery, in the Company’s
sole discretion, of Advance Notices.  The
number of shares of Common Stock that the Investor shall purchase pursuant to
each Advance shall be determined by dividing the amount of the Advance by the
Purchase Price.  No fractional shares
shall be issued. Fractional shares shall be rounded to the next higher whole
number of shares.  The aggregate maximum
amount of all Advances that the Investor shall be obligated to make under this
Agreement shall not exceed the Commitment Amount.


 


Section 2.02           Mechanics.


 


(a)               Advance Notice.  At any time during the Commitment Period, the
Company may require the Investor to purchase shares of Common Stock by
delivering an Advance Notice to the Investor, subject to the conditions set
forth in ; provided, however, the amount for each Advance as designated by the
Company in the applicable Advance Notice shall not be more than the Maximum
Advance Amount and the aggregate amount of the Advances pursuant to this
Agreement shall not exceed the Commitment Amount.  The Company acknowledges that the Investor
may sell shares of the Company’s Common Stock corresponding with a particular
Advance Notice after the Advance Notice is received by the Investor.  There shall be a minimum of 5 Trading Days
between each Advance Notice Date.


 


(b)              Date of Delivery
of Advance Notice.  Advance Notices
shall be delivered in accordance with the instructions set forth on the bottom
of Exhibit A.  An Advance Notice
shall be deemed delivered on (i) the Trading Day it is received by
facsimile or otherwise by the Investor if such notice is received prior to 5:00
pm Eastern Time, or (ii) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 5:00 pm Eastern Time on a Trading Day
or at any time on a day which is not a Trading Day.  No Advance Notice may be deemed delivered on
a day that is not a Trading Day.


 


Section 2.03           Closings.  On each Advance Date (i) the Company
shall deliver to the Investor such number of shares of the Common Stock
registered in the name of the Investor as shall equal (x) the amount of
the Advance specified in such Advance Notice pursuant to  herein, divided by (y) the Purchase
Price and (ii) upon receipt of such shares, the Investor shall deliver to
the Company the amount of the Advance specified in the Advance Notice by wire
transfer of immediately available funds. 
In addition, on or prior to the Advance Date, each of the Company and
the Investor shall deliver to the other all documents, instruments and writings
required to be delivered by either of them pursuant to this Agreement in order
to implement and effect the 


 





















 


transactions
contemplated herein.  To the extent the
Company has not paid the fees, expenses, and disbursements of the Investor in
accordance with , the amount of such fees, expenses, and disbursements may be
deducted by the Investor (and shall be paid to the relevant party) directly out
of the proceeds of the Advance with no reduction in the amount of shares of the
Company’s Common Stock to be delivered on such Advance Date.


 


(a)               Company’s
Obligations Upon Closing.


 


(i)      The
Company shall deliver to the Investor the shares of Common Stock applicable to
the Advance in accordance with .  The
certificates evidencing such shares shall be free of restrictive legends.


 


(ii)     The
Registration Statement shall be effective and available for the resale of all
applicable shares of Common Stock to be issued in connection with the Advance
and certificates evidencing such shares shall be free of restrictive legends.


 


(iii)    The
Company shall have obtained all material permits and qualifications required by
any applicable state for the offer and sale of the Registrable Securities, or
shall have the availability of exemptions therefrom.  The sale and issuance of the Registrable
Securities shall be legally permitted by all laws and regulations to which the
Company is subject.


 


(iv)    The
Company shall have filed with the SEC in a timely manner all reports, notices
and other documents required of a “reporting company” under the Exchange Act
and applicable Commission regulations.


 


(v)     The
Company shall pay any unpaid fees as set forth in  or withhold such amounts as provided in .


 


(vi)    The
Company’s transfer agent shall be DWAC eligible.


 


(b)     Investor’s
Obligations Upon Closing.  Upon
receipt of the shares referenced in Section 2.03(a)(i) above and
provided the Company is in compliance with its obligations in , the Investor
shall deliver to the Company the amount of the Advance specified in the Advance
Notice by wire transfer of immediately available funds.


 


Section 2.04           Hardship.  In the event the Investor sells shares of the
Company’s Common Stock after receipt of an Advance Notice and the Company fails
to perform its obligations as mandated in , and specifically the Company fails
to deliver to the Investor on the Advance Date the shares of Common Stock
corresponding to the applicable Advance pursuant to Section 2.03(a)(i),
the Company acknowledges that the Investor shall suffer financial hardship and
therefore shall be liable for any and all losses, commissions, fees, or
financial hardship caused to the Investor.


 


Article III.
Representations and Warranties of Investor


 


Investor hereby represents and warrants to, and agrees with, the
Company that the following are true and correct as of the date hereof and as of
each Advance Date:


 

















 


Section 3.01           Organization and Authorization.  The Investor is duly incorporated or
organized and validly existing in the jurisdiction of its incorporation or
organization and has all requisite power and authority to purchase and hold the
securities issuable hereunder.  The
decision to invest and the execution and delivery of this Agreement by such
Investor, the performance by such Investor of its obligations hereunder and the
consummation by such Investor of the transactions contemplated hereby have been
duly authorized and requires no other proceedings on the part of the
Investor.  The undersigned has the right,
power and authority to execute and deliver this Agreement and all other instruments
(including, without limitations, the Registration Rights Agreement), on behalf
of the Investor.  This Agreement has been
duly executed and delivered by the Investor and, assuming the execution and
delivery hereof and acceptance thereof by the Company, will constitute the
legal, valid and binding obligations of the Investor, enforceable against the
Investor in accordance with its terms.


 


Section 3.02           Evaluation of Risks.  The Investor has such knowledge and
experience in financial, tax and business matters as to be capable of
evaluating the merits and risks of, and bearing the economic risks entailed by,
an investment in the Company and of protecting its interests in connection with
this transaction.  It recognizes that its
investment in the Company involves a high degree of risk.


 


Section 3.03           No Legal Advice From the Company.  The Investor acknowledges that it had the
opportunity to review this Agreement and the transactions contemplated by this
Agreement with his or its own legal counsel and investment and tax advisors.  The Investor is relying solely on such
counsel and advisors and not on any statements or representations of the
Company or any of its representatives or agents for legal, tax or investment
advice with respect to this investment, the transactions contemplated by this
Agreement or the securities laws of any jurisdiction.


 


Section 3.04           Investment Purpose. The
securities are being purchased by the Investor for its own account, and for
investment purposes.  The Investor agrees
not to assign or in any way transfer the Investor’s rights to the securities or
any interest therein and acknowledges that the Company will not recognize any
purported assignment or transfer except in accordance with applicable Federal
and state securities laws.  No other
person has or will have a direct or indirect beneficial interest in the
securities.  The Investor agrees not to
sell, hypothecate or otherwise transfer the Investor’s securities unless the
securities are registered under Federal and applicable state securities laws or
unless, in the opinion of counsel satisfactory to the Company, an exemption
from such laws is available.


 


Section 3.05           Accredited Investor.  The Investor is an “Accredited Investor”
as that term is defined in Rule 501(a)(3) of Regulation D of the
Securities Act.


 


Section 3.06           Information.  The Investor and its advisors (and its
counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information it deemed
material to making an informed investment decision.  The Investor and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and its
management.  Neither such inquiries nor
any other due diligence investigations conducted by such Investor or its
advisors, if any, or its representatives shall modify, amend or affect the
Investor’s right to rely on the Company’s representations and warranties
contained in this Agreement.  The
Investor understands that its investment involves a high degree of risk.  The 


 

















 


Investor is in
a position regarding the Company, which, based upon employment, family
relationship or economic bargaining power, enabled and enables such Investor to
obtain information from the Company in order to evaluate the merits and risks
of this investment.  The Investor has sought
such accounting, legal and tax advice, as it has considered necessary to make
an informed investment decision with respect to this transaction.


 


Section 3.07           Receipt of Documents. The
Investor and its counsel have received and read in their entirety:  (i) this Agreement and the Exhibits
annexed hereto; (ii) all due diligence and other information necessary to
verify the accuracy and completeness of such representations, warranties and
covenants; (iii) the Company’s Form 10-K for the year ended December 31,
2007, Forms 10-Q for the periods ended March 31, 2008 and June 30,
2008 and Forms 8K filed on February 5, 2008, February 19, 2008, March 7,
2008, April 18, 2008, May 7, 2008 and August 14, 2008; and (iv) answers
to all questions the Investor submitted to the Company regarding an investment
in the Company; and the Investor has relied on the information contained
therein and has not been furnished any other documents, literature, memorandum
or prospectus.


 


Section 3.08           No General Solicitation.  Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the shares of Common Stock offered hereby.


 


Section 3.09           Not an Affiliate.  The Investor is not an officer, director or a
person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with the Company or
any “Affiliate” of the Company (as that term is defined in Rule 405
of the Securities Act).


 


Section 3.10           Trading Activities.  The Investor’s trading activities with
respect to the Company’s Common Stock shall be in compliance with all applicable
federal and state securities laws, rules and regulations and the rules and
regulations of the Principal Market on which the Company’s Common Stock is
listed or traded. Neither the Investor nor its affiliates has an open short
position in the Common Stock of the Company, the Investor agrees that it shall
not, and that it will cause its affiliates not to, engage in any short sales of
or hedging transactions with respect to the Common Stock, provided that the Company acknowledges and
agrees that upon receipt of an Advance Notice the Investor has the right to
sell the shares to be issued to the Investor pursuant to the Advance Notice
during the applicable Pricing Period.


 


Article IV.
Representations and Warranties of the Company


 


Except as stated below, on the disclosure schedules attached hereto or
in the SEC Documents (as defined herein), the Company hereby represents and
warrants to, and covenants with, the Investor that the following are true and
correct as of the date hereof:


 


Section 4.01           Organization and Qualification.  The Company is duly incorporated or organized
and validly existing in the jurisdiction of its incorporation or organization
and has all requisite corporate power to own its properties and to carry on its
business as now being conducted.  Each of
the Company and its subsidiaries is duly qualified as a foreign corporation to
do business and 


 

















 


is in good
standing in every jurisdiction in which the nature of the business conducted by
it makes such qualification necessary, except to the extent that the failure to
be so qualified or be in good standing would not have a Material Adverse
Effect.


 


Section 4.02           Authorization, Enforcement,
Compliance with Other Instruments.  (i) The
Company has the requisite corporate power and authority to enter into and
perform this Agreement, the Registration Rights Agreement and any related
agreements, in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement, the Registration Rights Agreement and
any related agreements by the Company and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized by the
Company’s Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders, (iii) this
Agreement, the Registration Rights Agreement and any related agreements have
been duly executed and delivered by the Company, (iv) this Agreement, the
Registration Rights Agreement and assuming the execution and delivery thereof
and acceptance by the Investor and any related agreements constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies.


 


Section 4.03           Capitalization.  The authorized capital stock of the Company
consists of 60,000,000 shares of Common Stock and 5,000,000 shares of preferred
stock, no par value per share (“Preferred Stock”), of which 38,521,987
shares (as may be increased as set forth in the last sentence of this Section 4.03)
of Common Stock and 0 shares of Preferred Stock are issued and
outstanding.  All of such outstanding
shares have been validly issued and are fully paid and nonassessable.  Except as disclosed in the SEC Documents and
the last sentence of this Section 4.03, no shares of Common Stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company.  Except as disclosed in the SEC Documents, as
of the date hereof, (i) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities (iii) there are no
outstanding registration statements other than on Form S-8 and
Registration Statements No. 333-148483 filed on Form S-3 and No. 333-132900
filed on Form S-3 and (iv) other than the Stock Purchase Agreements
dated as of February 24, 2006 and December 13, 2007 between the
Company and various investors, there are no agreements or arrangements under
which the Company or any of its subsidiaries is obligated to register the sale
of any of their securities under the Securities Act (except pursuant to the
Registration Rights Agreement).  There
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by this Agreement or any related agreement or the
consummation of the transactions described herein or therein.  The Company has furnished to the Investor
true and correct copies of the Company’s Certificate of Incorporation, as
amended and as in effect on the date hereof (the “Certificate of
Incorporation”), and the Company’s By-laws, as in effect on the 


 

















 


date hereof
(the “By-laws”), and the terms of all securities convertible into or
exercisable for Common Stock and the material rights of the holders thereof in
respect thereto.  On or about the date
hereof, the Company expects to (i) enter into that certain Stock Purchase
Agreement with a private investor, pursuant to which such investor shall
purchase a number of shares equal to less than 5.0% of the Company’s
outstanding Common Stock and such investor shall receive certain “piggyback”
registration rights in connection therewith and (ii) enter into a
commitment letter with the Company’s bank lender obligating the Company to
issue warrants for a number of shares of Common Stock not exceeding 100,000.


 


Section 4.04           No Conflict.  The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby will not (i) result in a violation of the
Certificate of Incorporation, any certificate of designations of any
outstanding series of preferred stock of the Company or By-laws or (ii) conflict
with or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment
or decree (including federal and state securities laws and regulations and the rules and
regulations of the Principal Market on which the Common Stock is quoted)
applicable to the Company or any of its subsidiaries or by which any material
property or asset of the Company or any of its subsidiaries is bound or
affected and which would cause a Material Adverse Effect.  Except as disclosed in the SEC Documents,
neither the Company nor its subsidiaries is in violation of any term of or in
default under its Articles of Incorporation or By-laws or their organizational
charter or by-laws, respectively, or any material contract, agreement,
mortgage, indebtedness, indenture, instrument, judgment, decree or order or any
statute, rule or regulation applicable to the Company or its
subsidiaries.  The business of the
Company and its subsidiaries is not being conducted in violation of any
material law, ordinance or regulation of any governmental entity.  Except as specifically contemplated by this
Agreement and as required under the Securities Act and any applicable state
securities laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or governmental agency in order for it to execute, deliver or perform any of
its obligations under or contemplated by this Agreement or the Registration
Rights Agreement in accordance with the terms hereof or thereof.  All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the date
hereof.  The Company and its subsidiaries
are unaware of any fact or circumstance which might give rise to any of the
foregoing.


 


Section 4.05           SEC Documents; Financial
Statements.  The Company has filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC under the Securities Exchange Act for the two years
preceding the date hereof (or such shorter period as the Company was required
by law or regulation to file such material) (all of the foregoing filed prior
to the date hereof or amended after the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to as the “SEC
Documents”) on timely basis or has received a valid extension of such time
of filing and has filed any such SEC Document prior to the expiration of any
such extension.  The Company has
delivered to the Investors or their representatives, or made available through
the SEC’s website at http://www.sec.gov, true and complete copies of 


 

















 


the SEC
Documents.  As of their respective dates,
the SEC Documents complied in all material respects with the requirements of
the Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.  As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared
in accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in
the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).  No other information provided
by or on behalf of the Company to the Investors which is not included in the
SEC Documents contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements therein, in
the light of the circumstance under which they are or were made and not
misleading.


 


Section 4.06           10b-5.  The SEC Documents do not include any untrue
statements of material fact, nor do they omit to state any material fact
required to be stated therein necessary to make the statements made, in light
of the circumstances under which they were made, not misleading.


 


Section 4.07           No Default.  Except as disclosed in the SEC Documents, the
Company is not in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust or other material instrument or agreement to which it
is a party or by which it is or its property is bound and neither the
execution, nor the delivery by the Company, nor the performance by the Company
of its obligations under this Agreement or any of the exhibits or attachments
hereto will conflict with or result in the breach or violation of any of the
terms or provisions of, or constitute a default or result in the creation or
imposition of any lien or charge on any assets or properties of the Company
under its Certificate of Incorporation, By-Laws, any material indenture,
mortgage, deed of trust or other material agreement applicable to the Company
or instrument to which the Company is a party or by which it is bound, or any
statute, or any decree, judgment, order, rules or regulation of any court
or governmental agency or body having jurisdiction over the Company or its
properties, in each case which default, lien or charge is likely to cause a
Material Adverse Effect.


 


Section 4.08           Absence of Events of Default.  Except for matters described in the SEC
Documents and/or this Agreement, no Event of Default, as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (as so defined), has occurred and is continuing, which would have a
Material Adverse Effect.


 

















 


Section 4.09           Intellectual Property Rights.  The Company and its subsidiaries own or possess
adequate rights or licenses to use all material trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted.   The
Company and its subsidiaries do not have any knowledge of any infringement by
the Company or its subsidiaries of trademark, trade name rights, patents,
patent rights, copyrights, inventions, licenses, service names, service marks,
service mark registrations, trade secret or other similar rights of others,
and, to the knowledge of the Company, there is no claim, action or proceeding
being made or brought against, or to the Company’s knowledge, being threatened
against, the Company or its subsidiaries regarding trademark, trade name,
patents, patent rights, invention, copyright, license, service names, service
marks, service mark registrations, trade secret or other infringement.


 


Section 4.10           Employee Relations.  Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened.  None of the Company’s or its subsidiaries’
employees is a member of a union and the Company and its subsidiaries believe
that their relations with their employees are good.


 


Section 4.11           Environmental Laws.  Except as would not have a Material Adverse
Effect, the Company and its subsidiaries are (i) in compliance with any
and all applicable material foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or approval.


 


Section 4.12           Title.  Except as set forth in the SEC Documents, the
Company has good and marketable title to its properties and material assets
owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest other than such as are not material to
the business of the Company.  Any real
property and facilities held under lease by the Company and its subsidiaries
are held by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries.


 


Section 4.13           Insurance.  The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary for similarly situated companies in the businesses in
which the Company and its subsidiaries are engaged.  Neither the Company nor any such subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at
a cost that would not have a Material Adverse Effect.


 


Section 4.14           Regulatory Permits.  The Company and its subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company


 
















 


nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification
of any such certificate, authorization or permit.


 


Section 4.15                                Internal
Accounting Controls.  The Company and
each of its subsidiaries maintain a system of internal accounting controls
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 generally accepted accounting principles 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.


 


Section 4.16                                Absence
of Litigation.  Except as set forth
in the SEC Documents, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending against or affecting the Company,
the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable
decision, ruling or finding would (i) have a material adverse effect on
the transactions contemplated hereby (ii) adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein,
or (iii) except as expressly disclosed in the SEC Documents, have a
Material Adverse Effect.


 


Section 4.17                                Subsidiaries.  Except as disclosed in the SEC Documents, the
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business entity.


 


Section 4.18                                Tax
Status.  Except as disclosed in the
SEC Documents, the Company and each of its subsidiaries has made or filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and (unless and only to the
extent that the Company and each of its subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) has paid all taxes and other governmental assessments and charges that
are material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply.  There are no unpaid
taxes in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim.


 


Section 4.19                                Certain
Transactions.  Except as set forth in
the SEC Documents none of the officers, directors, or employees of the Company
is presently a party to any transaction with the Company (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner.


 

















 


Section 4.20                                Fees
and Rights of First Refusal.  The
Company is not obligated to offer the securities offered hereunder on a right
of first refusal basis or otherwise to any third parties including, but not
limited to, current or former shareholders of the Company, underwriters,
brokers, agents or other third parties.


 


Section 4.21                                Use
of Proceeds.  The Company shall use
the net proceeds from this offering for working capital and other general
corporate purposes.


 


Section 4.22                                Opinion
of Counsel.  Investor shall receive
an opinion letter from counsel to the Company on the date hereof.


 


Section 4.23                                Dilution.  The Company is aware and acknowledges that
issuance of shares of the Company’s Common Stock could cause dilution to
existing shareholders and could significantly increase the outstanding number
of shares of Common Stock.


 


Section 4.24                                Acknowledgment
Regarding Investor’s Purchase of Shares. The Company acknowledges and
agrees that the Investor is acting solely in the capacity of an arm’s length
investor with respect to this Agreement and the transactions contemplated
hereunder. The Company further acknowledges that the Investor is not acting as
a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereunder and
any advice given by the Investor or any of its representatives or agents in
connection with this Agreement and the transactions contemplated hereunder is
merely incidental to the Investor’s purchase of the Common Stock
hereunder.  The Company is aware and
acknowledges that it may not be able to request Advances under this Agreement
if it cannot obtain an effective Registration Statement or if any issuances of
Common Stock pursuant to any Advances would violate any rules of the
Principal Market.  The Company further is
aware and acknowledges that any fees paid pursuant to  hereunder or shares issued pursuant to  hereunder shall be earned on the date hereof
and not refundable or returnable under any circumstances.


 


Article V.   Indemnification


 


The Investor
and the Company represent to the other the following with respect to itself:


 


Section 5.01                                Indemnification.


 


(a)              In consideration of
the Investor’s execution and delivery of this Agreement, and in addition to all
of the Company’s other obligations under this Agreement, the Company shall
defend, protect, indemnify and hold harmless the Investor, and all of its
officers, directors, partners, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Investor Indemnitees”) from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Investor Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”),
incurred by the Investor Indemnitees or any of them as a result of, or arising
out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement or the 


 

















 


Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in
this Agreement or the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made against such Investor Indemnitee not
arising out of any action or inaction of an Investor Indemnitee, and arising
out of or resulting from the execution, delivery, performance or enforcement of
this Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Investor Indemnitees. 
To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities, which
is permissible under applicable law.


 


(b)             In consideration of
the Company’s execution and delivery of this Agreement, and in addition to all
of the Investor’s other obligations under this Agreement, the Investor shall
defend, protect, indemnify and hold harmless the Company and all of its
officers, directors, shareholders, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Company Indemnitees”) from and
against any and all Indemnified Liabilities incurred by the Company Indemnitees
or any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Investor in this Agreement, the Registration Rights Agreement, or any
instrument or document contemplated hereby or thereby executed by the Investor,
(b) any breach of any covenant, agreement or obligation of the Investor(s) contained
in this Agreement,  the Registration
Rights Agreement or any other certificate, instrument or document contemplated
hereby or thereby executed by the Investor, or (c) any cause of action,
suit or claim brought or made against such Company Indemnitee based on  misrepresentations or due to a  breach by the Investor and arising out of or
resulting from the execution, delivery, performance or enforcement of this
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Company Indemnitees. 
To the extent that the foregoing undertaking by the Investor may be
unenforceable for any reason, the Investor shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities, which
is permissible under applicable law.


 


(c)              The obligations of
the parties to indemnify or make contribution under this  shall survive termination.


 


Article VI. 

Covenants of the Company


 


Section 6.01                                Registration
Rights.  The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the
Company shall comply in all material respects with the terms thereof.


 

















 


Section 6.02                                Listing
of Common Stock.  The Company shall
use its commercially reasonable efforts to maintain the Common Stock’s
authorization for quotation on the Principal Market.


 


Section 6.03                                Exchange
Act Registration.  The Company will
cause its Common Stock to continue to be registered under Section 12(g) of
the Exchange Act, will file in a timely manner all reports and other documents
required of it as a reporting company under the Exchange Act and will not take
any action or file any document (whether or not permitted by Exchange Act or
the rules thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under said Exchange
Act.


 


Section 6.04                                Transfer
Agent Instructions.  Upon
effectiveness of the Registration Statement the Company shall deliver
instructions to its transfer agent to issue shares of Common Stock to the
Investor free of restrictive legends on or before each Advance Date.


 


Section 6.05                                Corporate
Existence.  The Company will take all
steps necessary to preserve and continue the corporate existence of the
Company.


 


Section 6.06                                Notice
of Certain Events Affecting Registration; Suspension of Right to Make an
Advance.  The Company will
immediately notify the Investor upon its becoming aware of the occurrence of
any of the following events in respect of a registration statement or related
prospectus relating to an offering of Registrable Securities: (i) receipt
of any request for additional information 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 the registration
statement or related prospectus; (ii) the issuance by the SEC or any other
Federal or state governmental authority of 
any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose; (iii) receipt
of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in
the Registration Statement or related prospectus of any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect or that requires the making of any changes in the Registration
Statement, related prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case
of the related prospectus, it will not contain any untrue statement of a
material fact or omit to state any 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; and (v) the Company’s
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus.  The Company shall not deliver to the Investor
any Advance Notice during the continuation of any of the foregoing events.


 


Section 6.07                                Consolidation;
Merger.  The Company shall not, at
any time after the date hereof, effect any merger or consolidation of the
Company with or into, or a transfer of all or substantially all the assets of
the Company to another entity (a “Consolidation Event”) unless the
resulting successor or acquiring entity (if not the Company) assumes by written
instrument the 


 

















 


obligation to deliver to the
Investor such shares of stock and/or securities as the Investor is entitled to
receive pursuant to this Agreement.


 


Section 6.08                                Issuance
of the Company’s Common Stock.  The
sale of the shares of Common Stock shall be made in accordance with the
provisions and requirements of Regulation D and any applicable state
securities law.


 


Section 6.09                                Review
of Public Disclosures.  None of the
public disclosures made by the Company, including, without limitation, press
releases, investor relations materials, and scripts of analysts meetings and
calls will contain any untrue statements of material fact, nor will they omit
to state any material fact required to be stated therein necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading.


 


Section 6.10                                Market
Activities.  The Company will not,
directly or indirectly, (i) take any action designed to cause or result
in, or that constitutes or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Common Stock or (ii) sell, bid for or
purchase the Common Stock, or pay anyone any compensation for soliciting
purchases of the Common Stock.


 


Section 6.11                                Opinion
of Counsel.  Provided that the Investor’s
resale of Common Stock received pursuant to this Agreement may be freely sold
by the Investor either pursuant to an effective Registration Statement, in
accordance with Rule 144, or otherwise, the Company shall obtain for the
Investor, at the Company’s expense, any and all opinions of counsel which may
be required by the Company’s transfer agent to issue such shares free of
restrictive legends, or to remove legends from such shares.


 


Article VII. 

Conditions for Advance and Conditions to Closing


 


Section 7.01                                Conditions
Precedent to the Obligations of the Company.  The obligation hereunder of the Company to
issue and sell the shares of Common Stock to the Investor incident to each
Closing is subject to the satisfaction, or waiver by the Company, at or before
each such Closing, of each of the conditions set forth below.


 


(a)               Accuracy of the
Investor’s Representations and Warranties. 
The representations and warranties of the Investor shall be true and
correct in all material respects.


 


(b)              Performance by
the Investor.  The Investor shall
have performed, satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement and the Registration
Rights Agreement to be performed, satisfied or complied with by the Investor at
or prior to such Closing.


 


Section 7.02                                Conditions
Precedent to the Right of the Company to Deliver an Advance Notice.  The right of the Company to deliver an
Advance Notice is subject to the fulfillment by the Company, on such Advance
Notice Date (a “Condition Satisfaction Date”), of each of the following
conditions:


 

















 


(a)               Registration of
the Common Stock with the SEC.  There
is an effective Registration Statement pursuant to which the Investor is
permitted to utilize the prospectus thereunder to resell all of the shares of
Common Stock issuable pursuant to such Advance Notice, and the Company
believes, in good faith, that such effectiveness will continue uninterrupted
for the foreseeable future.  Neither the
Company nor the Investor shall have received notice that the SEC has issued or
intends to issue a stop order with respect to the Registration Statement or
that the SEC otherwise has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently, or intends or has
threatened to do so (unless the SEC’s concerns have been addressed and the
Investor is reasonably satisfied that the SEC no longer is considering or
intends to take such action), and (ii) no other suspension of the use or
withdrawal of the effectiveness of the Registration Statement or related
prospectus shall exist.


 


(b)              Authority.  The Company shall have obtained all permits
and qualifications required by any applicable state in accordance with the
Registration Rights Agreement for the offer and sale of the shares of Common
Stock, or shall have the availability of exemptions therefrom.  The sale and issuance of the shares of Common
Stock shall be legally permitted by all laws and regulations to which the
Company is subject.


 


(c)               Fundamental Changes.
There shall not exist any fundamental changes to the information set forth in
the Registration Statement which would require the Company to file a
post-effective amendment to the Registration Statement.


 


(d)              Performance by
the Company.  The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Registration
Rights Agreement to be performed, satisfied or complied with by the Company at
or prior to each Condition Satisfaction Date.


 


(e)               No Injunction.  No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits or directly and adversely affects any of the
transactions contemplated by this Agreement, and no proceeding shall have been
commenced that may have the effect of prohibiting or adversely affecting any of
the transactions contemplated by this Agreement.


 


(f)                 No Suspension
of Trading in or Delisting of Common Stock. 
The Common Stock is trading on a Principal Market and all of the shares
issuable pursuant to such Advance Notice will be listed or quoted for trading
on such Principal Market (and the Company believes, in good faith, that trading
of the Common Stock on a Principal Market will continue uninterrupted for the
foreseeable future.  The issuance of
shares of Common Stock with respect to the applicable Advance Notice will not
violate the shareholder approval requirements of the Principal Market.  The Company shall not have received any
notice threatening the continued listing of the Common Stock on the Principal
Market.


 


(g)              Maximum Advance
Amount.  The amount of an Advance
requested by the Company shall not exceed the Maximum Advance Amount.  In addition, in no event shall the 


 

















 


number of shares issuable to the Investor
pursuant to an Advance cause the aggregate number of shares of Common Stock
beneficially owned by the Investor and its affiliates to exceed 9.99% of the
then outstanding Common Stock of the Company (“Ownership Limitation”).  Any portion of an Advance that would cause
the Investor to exceed the Ownership Limitation shall automatically be
withdrawn.  For the purposes of this section
beneficial ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act.


 


(h)              Authorized.  There shall be a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the shares issuable pursuant to such Advance Notice.


 


(i)                  Executed
Advance Notice.  The Investor shall
have received the Advance Notice executed by an officer of the Company and the
representations contained in such Advance Notice shall be true and correct as
of each Condition Satisfaction Date.


 


Article VIII. 

Due Diligence Review; Non-Disclosure of Non-Public Information


 


Section 8.01                                Non-Disclosure
of Non-Public Information.


 


(a)              The Company
covenants and agrees that it shall refrain from disclosing, and shall cause its
officers, directors, employees and agents to refrain from disclosing, any
material non-public information to the Investor without also disseminating such
information to the public, unless prior to disclosure of such information the
Company identifies such information as being material non-public information
and provides the Investor with the opportunity to accept or refuse to accept
such material non-public information for review.


 


(b)             Nothing herein shall
require the Company to disclose non-public information to the Investor or its
advisors or representatives, and the Company represents that it does not
disseminate non-public information to any investors who purchase stock in the
Company in a public offering, to money managers or to securities analysts,
provided, however, that notwithstanding anything herein to the contrary, the
Company will, as hereinabove provided, immediately notify the advisors and
representatives of the Investor and, if any, underwriters, of any event or the
existence of any circumstance (without any obligation to disclose the specific
event or circumstance) of which it becomes aware, constituting non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein, in
light of the circumstances in which they were made, not misleading.  Nothing contained in this  shall be construed to mean that such persons
or entities other than the Investor (without the written consent of the
Investor prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of 


 

















 


their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.


 


Article IX. 

Choice of Law/Jurisdiction


 


This Agreement
shall be governed by and interpreted in accordance with the laws of the State
of New Jersey without regard to the principles of conflict of laws.  The parties further agree that any action
between them shall be heard in Hudson County, New Jersey, and expressly consent
to the jurisdiction and venue of the Superior Court of New Jersey, sitting in
Hudson County, New Jersey and the United States District Court of New Jersey,
sitting in Newark, New Jersey, for the adjudication of any civil action
asserted pursuant to this paragraph.


 


Article X. Assignment; Termination


 


Section 10.01                          Assignment.  Neither this Agreement nor any rights or
obligations of either party hereunder may be assigned to any other Person.


 


Section 10.02                          Termination.


 


(a)               Unless earlier
terminated as provided hereunder, this Agreement shall terminate automatically
on the earliest of (i) the first day of the month next following the
24-month anniversary of the Effective Date, or (ii) the date on which the
Investor shall have made payment of Advances pursuant to this Agreement in the
aggregate amount of the Commitment Amount.


 


(b)              The Company may
terminate this Agreement effective upon fifteen Trading Days’ prior written
notice to the Investor; provided that (i) there are no Advances
outstanding, and (ii) The Company has paid all amounts owed to the
Investor pursuant to this Agreement. 
This Agreement may be terminated at any time by the mutual written
consent of the parties, effective as of the date of such mutual written consent
unless otherwise provided in such written consent.  In the event of any termination of this
Agreement by the Company hereunder, so long as the Investor owns any shares of
Common Stock issued hereunder, unless all of such shares of Common Stock may be
resold by the Investor without registration and without any time, volume or
manner limitations pursuant to Rule 144, the Company shall not suspend
(except as provided for in the Registration Rights Agreement) or withdraw the
Registration Statement or otherwise cause the Registration Statement to become
ineffective, or voluntarily delist the Common Stock from, the Principal Market
without listing the Common Stock on another Principal Market.


 


(c)               The obligation of
the Investor to make an Advance to the Company pursuant to this Agreement shall
terminate permanently (including with respect to an Advance Date that 


 

















 


has not yet occurred) in the event that (i) there
shall occur any stop order or suspension of the effectiveness of the
Registration Statement for an aggregate of 50 Trading Days, other than due to
the acts of the Investor, during the Commitment Period, or (ii) the Company
shall at any time fail materially to comply with the requirements of Article VI
and such failure is not cured within 30 days after receipt of written notice
from the Investor, provided, however, that this termination
provision shall not apply to any period commencing upon the filing of a
post-effective amendment to such Registration Statement and ending upon the
date on which such post effective amendment is declared effective by the SEC


 


(d)              Nothing in this  shall be deemed to release the Company or the
Investor from any liability for any breach under this Agreement, or to impair
the rights of the Company and the Investor to compel specific performance by
the other party of its obligations under this Agreement.  The indemnification provisions contained in
Sections 5.01 and 5.02 shall survive termination hereunder.


 


Article XI. Notices


 


Any notices,
consents, waivers, or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to have
been delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile, provided a copy is mailed by U.S. certified
mail, return receipt requested; (iii) 3 days after being sent by U.S.
certified mail, return receipt requested, or (iv) 1 day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. 
The addresses and facsimile numbers for such communications, except for Advance
Notices which shall be delivered in accordance with Section 2.02 hereof,
shall be:


 


	
  If to the
  Company, to:

  	
   

  	
  Advanced
  Life Sciences Holdings, Inc.

  
	
   

  	
   

  	
  1440 Davey
  Road

  
	
   

  	
   

  	
  Woodridge,
  IL 60517

  
	
   

  	
   

  	
  Attention:

  	
  General
  Counsel

  
	
   

  	
   

  	
  Telephone:

  	
  (630)
  739-6744

  
	
   

  	
   

  	
  Facsimile:

  	
  (630)
  739-6754

  
	
   

  	
   

  	
   

  
	
  With a copy
  to:

  	
   

  	
  Winston &
  Strawn LLP

  
	
   

  	
   

  	
  35 W. Wacker
  Drive

  
	
   

  	
   

  	
  Chicago, IL
  60601

  
	
   

  	
   

  	
  Attention:

  	
  R. Cabell
  Morris

  
	
   

  	
   

  	
  Telephone:

  	
  (312)
  558-5609

  
	
   

  	
   

  	
  Facsimile:

  	
  (312)
  558-5700

  



 

















 


	
  If to the
  Investor(s):

  	
   

  	
  YA Global
  Investments, LP

  
	
   

  	
   

  	
  101 Hudson
  Street –Suite 3700

  
	
   

  	
   

  	
  Jersey City,
  NJ 07302

  
	
   

  	
   

  	
  Attention:

  	
  Mark Angelo

  
	
   

  	
   

  	
   

  	
  Portfolio
  Manager

  
	
   

  	
   

  	
  Telephone:

  	
  (201)
  985-8300

  
	
   

  	
   

  	
  Facsimile:

  	
  (201)
  985-8266

  
	
   

  	
   

  	
   

  
	
  With a Copy
  to:

  	
   

  	
  David
  Gonzalez, Esq.

  
	
   

  	
   

  	
  101 Hudson
  Street – Suite 3700

  
	
   

  	
   

  	
  Jersey City,
  NJ 07302

  
	
   

  	
   

  	
  Telephone:

  	
  (201)
  985-8300

  
	
   

  	
   

  	
  Facsimile:

  	
  (201)
  985-8266

  



 


Each party
shall provide 5 days’ prior written notice to the other party of any change in
address or facsimile number.


 


Article XII. Miscellaneous


 


Section 12.01                          Counterparts.  This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. 
In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall cause 4 additional
original executed signature pages to be physically delivered to the other
party within 5 days of the execution and delivery hereof, though failure to
deliver such copies shall not affect the validity of this Agreement.


 


Section 12.02                          Entire
Agreement; Amendments.  This
Agreement supersedes all other prior oral or written agreements between the
Investor, the Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Investor makes any
representation, warranty, covenant or undertaking with respect to such
matters.  No provision of this Agreement
may be waived or amended other than by an instrument in writing signed by the
party to be charged with enforcement.


 


Section 12.03                          Reporting
Entity for the Common Stock.  The
reporting entity relied upon for the determination of the trading price or
trading volume of the Common Stock on any given Trading Day for the purposes of
this Agreement shall be Bloomberg, L.P. or any successor thereto.  The written mutual consent of the Investor
and the Company shall be required to employ any other reporting entity.


 


Section 12.04                          Fees
and Expenses.  The Company hereby
agrees to pay the following fees:


 

















 


(a)               Structuring and
Due Diligence Fee.  Each of the
parties shall pay its own fees and expenses (including the fees of any
attorneys, accountants, appraisers or others engaged by such party) in
connection with this Agreement and the transactions contemplated hereby, except
that (i) the Company shall pay a structuring and due diligence fee of
$25,000 to Yorkville Advisors, LLC, of which $10,000 has been paid and the
remaining $15,000 shall be paid on the date hereof, and (ii) On each
Advance Date, the Company shall pay Yorkville Advisors, LLC a structuring fee
of $500 directly out the gross proceeds of each Advance.


 


(b)              Commitment Fees.  Upon the execution of this Agreement the
Company shall issue to the Investor shares of Common Stock in an amount equal
to $300,000 divided by the VWAP of the Common Stock on the last full Trading
Day prior to the date hereof (the “Investor’s Shares”). The Investor’s
Shares shall be deemed fully earned as of the date hereof regardless of the
amount of Advances, if any, that the Company is able to, or choices to, request
hereunder.  The Investor’s Shares shall
be deemed fully earned as of the date hereof.


 


Section 12.05                          Brokerage.  Each of the parties hereto represents that it
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other
party.  The Company on the one hand, and
the Investor, on the other hand, agree to indemnify the other against and hold
the other harmless from any and all liabilities to any person claiming
brokerage commissions or finder’s fees on account of services purported to have
been rendered on behalf of the indemnifying party in connection with this
Agreement or the transactions contemplated hereby.


 


Section 12.06                          Confidentiality.  If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties hereto
shall keep confidential any information obtained from any other party (except
information publicly available or in such party’s domain prior to the date
hereof, and except as required by court order) and shall promptly return to the
other parties all schedules, documents, instruments, work papers or other
written information without retaining copies thereof, previously furnished by
it as a result of this Agreement or in connection herein.


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


 

















 


IN
WITNESS WHEREOF, the parties hereto have caused this
Standby Equity Distribution Agreement to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.


 


	
   

  	
  COMPANY:

  
	
   

  	
  ADVANCED LIFE SCIENCES HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Michael T. Flavin

  
	
   

  	
  Name: Michael
  T. Flavin, Ph.D

  
	
   

  	
  Title: Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INVESTOR:

  
	
   

  	
  YA GLOBAL INVESTMENTS, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Yorkville Advisors, LLC

  
	
   

  	
  Its:

  	
  Investment Manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Gerald Eicke

  
	
   

  	
  Name: Gerald
  Eicke

  
	
   

  	
  Title: Managing
  Member

  
					



 

















 


EXHIBIT A


 


ADVANCE NOTICE


 


ADVANCED LIFE SCIENCES HOLDINGS, INC.


 


The
undersigned,                                               
hereby certifies, with respect to the sale of shares of Common Stock of ADVANCED LIFE SCIENCES HOLDINGS, INC. (the “Company”)
issuable in connection with this Advance Notice, delivered pursuant to the
Standby Equity Distribution Agreement (the “Agreement”), as follows:


 


1.                                       The
undersigned is the duly elected                                                
of the Company.


 


2.                                       There
are no fundamental changes to the information set forth in the Registration
Statement which would require the Company to file a post effective amendment to
the Registration Statement.


 


3.                                     The
Company has performed in all material respects all covenants and agreements to
be performed by the Company and has complied in all material respects with all
obligations and conditions contained in this Agreement on or prior to the
Advance Notice Date, and shall continue to perform in all material respects all
covenants and agreements to be performed by the Company through the applicable
Advance Date.  All conditions to the
delivery of this Advance Notice are satisfied as of the date hereof.


 


4.                                       The
undersigned hereby represents, warrants and covenants that it has made all
filings (“SEC Filings”) required to be made by it pursuant to applicable
securities laws (including, without limitation, all filings required under the
Securities Exchange Act of 1934, which include Forms 10-Q or 10-QSB, 10-K or
10-KSB, 8-K, etc.).  No SEC Filings or
other public disclosures made by the Company, including, without limitation,
all press releases, analysts meetings and calls, etc. (collectively, the “Public
Disclosures”) contain any untrue statement of a material fact or omit to
state any 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.


 


5.                                       The
Advance requested is                                                    .


 


The
undersigned has executed this Certificate this            
day of                                         .


 


	
   

  	
  ADVANCED LIFE SCIENCES HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


Please deliver this Advance
Notice by mail or facsimile to:


YA Global
Investments, LP


101 Hudson
Street, Suite 3700, Jersey City, NJ 07302 


Facsimile:    (201) 946-0851