Exhibit
10.26


 


STANDBY EQUITY DISTRIBUTION AGREEMENT


 


THIS AGREEMENT dated as of the 27th day of September 2010 (this “Agreement”)
between YA GLOBAL MASTER SPV LTD.,
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 $10,000,000 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 rules and 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 transactions to be entered into
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 Section 2.01(b) 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 will be less than 5
Trading Days after the prior Advance Notice Date.


 


Section 1.05           “Affiliate”
shall have the meaning set forth in Section 3.08.


 


Section 1.06           “By-laws”
shall have the meaning set forth in Section 4.03.


 


Section 1.07           “Certificate
of Incorporation” shall have the meaning set forth in Section 4.03.


 


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Section 1.08           “Commitment
Amount” shall mean the aggregate amount of up to $10,000,000 which the
Investor has agreed to provide to the Company in order to purchase the Shares
pursuant to the terms and conditions of this Agreement.


 


Section 1.09           “Commitment
Fee” shall have the meaning set forth in Section 12.04(a).


 


Section 1.10           “Commitment
Period” shall mean the period commencing on the Effective Date, and
expiring upon the termination of this Agreement in accordance with Section 10.02.


 


Section 1.11           “Common
Stock” shall have the meaning set forth in the recitals of this Agreement.


 


Section 1.12           “Company
Indemnitees” shall have the meaning set forth in Section 5.02.


 


Section 1.13           “Condition
Satisfaction Date” shall have the meaning set forth in Section 7.01.


 


Section 1.14           “Consolidation
Event” shall have the meaning set forth in Section 6.07.


 


Section 1.15           “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 1.16           “Effective
Date” shall mean the date on which the SEC first declares effective a
Registration Statement registering the resale of the Shares.


 


Section 1.17           “Environmental
Laws” shall have the meaning set forth in Section 4.10.


 


Section 1.18           “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.


 


Section 1.19           “Indemnified
Liabilities” shall have the meaning set forth in Section 5.01.


 


Section 1.20           “Investor
Indemnitees” shall have the meaning set forth in Section 5.01.


 


Section 1.21           “Market Price”
shall mean the lowest daily VWAP of the Common Stock during the relevant
Pricing Period.


 


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Section 1.22           “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 or the transactions contemplated herein, (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 1.23           “Maximum
Advance Amount” shall be the greater of (i) $300,000 or (ii) the
average of the Daily Value Traded for each of the 5 Trading Days prior to the
Advance Notice Date where Daily Value Traded is the product obtained by
multiplying the daily trading volume for such day by the VWAP for such day.


 


Section 1.24           “Ownership
Limitation” shall have the meaning set forth in Section 2.01(a).


 


Section 1.25           “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 1.26           “Plan of
Distribution” shall have the meaning set forth in Section 6.01(a).


 


Section 1.27           “Pricing
Period” shall mean the 5 consecutive Trading Days after the Advance Notice
Date.


 


Section 1.28           “Principal
Market” shall mean the Nasdaq Global Select Market, the Nasdaq Global
Market, the Nasdaq Capital Market, the OTC Bulletin Board, the NYSE Euronext or
the New York Stock Exchange, whichever is at the time the principal trading
exchange or market for the Common Stock.


 


Section 1.29           “Purchase
Price” shall be set at 95% of the Market Price during the Pricing Period.


 


Section 1.30           “Registrable
Securities” shall mean (i) the Shares, and (ii) any securities
issued or issuable with respect to any of the foregoing by way of exchange,
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise.  As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) the Registration Statement has been
declared effective by the SEC and such Registrable Securities have been
disposed of pursuant to the Registration Statement, (b) such Registrable
Securities have been sold under circumstances under which all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the Securities
Act (“Rule 144”) are met, or (c) in the opinion of counsel to
the Company such Registrable Securities may permanently be sold without
registration or without any time, volume or manner limitations pursuant to Rule 144.


 


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Section 1.31           “Registration
Period” shall have the meaning set forth in Section 6.01(b).


 


Section 1.32           “Registration
Statement” shall mean a registration statement on Form S-1 or Form S-3
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 registration of the resale by the Investor of
the Registrable Securities under the Securities Act.


 


Section 1.33           “Regulation
D” shall have the meaning set forth in the recitals of this Agreement.


 


Section 1.34           “SEC”
shall have the meaning set forth in the recitals of this Agreement.


 


Section 1.35           “SEC
Documents” shall have the meaning set forth in Section 4.05.


 


Section 1.36           “Securities
Act” shall have the meaning set forth in the recitals of this Agreement.


 


Section 1.37           “Settlement
Document” shall have the meaning set forth in Section 2.02(a).


 


Section 1.38           “Shares”
shall mean the shares of Common Stock to be issued from time to time hereunder
pursuant to Advances and the Commitment Shares.


 


Section 1.39           “Trading Day”
shall mean any day during which the Principal Market shall be open for
business.


 


Section 1.40           “VWAP”
means, for any Trading Day, the daily volume weighted average price of the
Common Stock for such date on the Principal Market as reported by Bloomberg
L.P. (based on a Trading Day from 9:00 a.m. (New York City time) to 4:02 p.m.
(New York City time)).


 


Article II. Advances


 


Section 2.01           Advances;
Mechanics. 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
Common Stock on the following terms:


 


(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 Section 7.01; provided, however, that (i) the amount for
each Advance as designated by the Company in the applicable Advance Notice
shall not be more than the Maximum Advance Amount, (ii) the aggregate
amount of the Advances pursuant to this Agreement shall not exceed the
Commitment Amount, and (iii) in no event shall the number of shares of
Common Stock issuable to the Investor pursuant to an Advance cause the
aggregate number of shares of Common Stock beneficially owned (as calculated
pursuant to Section 13(d) of the Exchange Act) by the Investor and
its affiliates to exceed 9.99% of the then outstanding Common Stock (the


 


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“Ownership Limitation”).  Notwithstanding any other provision in this
Agreement, the Company acknowledges and agrees that upon receipt of an Advance
Notice, the Investor may sell shares that it is unconditionally obligated to
purchase under such Advance Notice prior to taking possession of such shares.


 


(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 if it is received by facsimile or otherwise by the
Investor 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.


 


(c)               Ownership Limitation.  In connection with each Advance Notice
delivered by the Company, any portion of an Advance that would cause the
Investor to exceed the Ownership Limitation shall automatically be withdrawn.


 


(d)              Registration Limitation.  In connection with each Advance Notice, any
portion of an Advance that would cause the aggregate number of Shares to exceed
the aggregate number of shares of Common Stock available for resale under the
Registration Statement shall automatically be deemed to be withdrawn by the
Company with no further action required by the Company.  At the Company’s request from time to time,
the Investor shall report to the Company the total amount of Shares offered and
sold pursuant to this Agreement and the portion of the total Commitment Amount
remaining.


 


Section 2.02           Closings.  Each Closing shall take place as soon as
practicable after each Advance Date in accordance with the procedures set forth
below.  In connection with each Closing the Company and the Investor shall
fulfill each of its obligations as set forth below:


 


(a)               Within 1 Trading Day after
each Advance Date, the Investor shall deliver to the Company a written document
(each a “Settlement Document”) setting forth the amount of the Advance
(taking into account any adjustments pursuant to Section 2.01(c) or Section 2.01(d)),
the Purchase Price, the number of shares of Common Stock to be issued and
subscribed for (which in no event will be greater than the Ownership
Limitation), and a report by Bloomberg, LP indicating the VWAP for each of the
Trading Days during the Pricing Period, in each case taking into account the
terms and conditions of this Agreement. 
The Settlement Document shall be in the form attached hereto as Exhibit B.


 


(b)              Upon receipt of the
Settlement Document with respect to each Advance, the Company shall confirm
that it has obtained all material permits and qualifications required for the
issuance and transfer of the shares of Common Stock applicable to such Advance,
or shall have the availability of exemptions therefrom and that the sale and
issuance of such shares of Common Stock shall be legally permitted by all laws
and regulations to which the Company is subject.


 


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(c)               Promptly after receipt of
the Settlement Document with respect to each Advance (and, in any event, not
later than three Trading Days after each Advance Date), the Company will, or
will cause its transfer agent to, electronically transfer such number of shares
of Common Stock registered in the name of the Investor as shall equal (x) the
amount of the Advance specified in such Advance Notice (as may be reduced
according to the terms of this Agreement), divided by (y) the Purchase Price
by crediting the Investor’s account or its designee’s account at the Depository
Trust Company through its Deposit Withdrawal Agent Commission System or by such
other means of delivery as may be mutually agreed upon by the parties hereto
(which in all cases will be covered by an effective Registration Statement
pursuant to which the Investor is permitted to resell such shares) against
payment of the Purchase Price in same day funds to an account designated by the
Company.  No fractional shares shall be issued,
and any fractional amounts shall be rounded to the next higher whole number of
shares.


 


(d)              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.


 


Section 2.03           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 Section 2.02, the Company agrees
that in addition to and in no way limiting the rights and obligations set forth
in Article V hereto and in addition to any other remedy to which the
Investor is entitled at law or in equity, including, without limitation,
specific performance, the Investor shall be entitled to an injunction or
injunctions to prevent such breaches of this Agreement and to specifically
enforce, without the posting of a bond or other security, the terms and
provisions of this Agreement.


 


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 organized, validly existing and in good standing under the
laws of the Cayman Islands and has all requisite power and authority to
purchase and hold the Shares.  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 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


 


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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 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 the Company’s
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           Investor Status.  The Investor is an “Accredited Investor”
as that term is defined in Rule 501(a)(3) of Regulation D of the
Securities Act and a “Qualified Institutional Buyer” as that term is
defined in Rule 144A under 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           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 3.08           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


 


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common control with the Company or any “Affiliate” of the
Company (as that term is defined in Rule 405 of the Securities Act).


 


Section 3.09           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 Common Stock is listed or traded. 
Neither the Investor nor its affiliates has an open short position in
the Common Stock, the Investor agrees that it shall not, and that it will cause
its affiliates not to, engage in any short sales of 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
prior to receiving such shares.


 


Article IV. Representations and Warranties of the
Company


 


Except as stated below, on the disclosure schedules attached hereto or
in the SEC Documents, the Company hereby represents and warrants to, 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, validly existing and in good standing under the laws of
the State of Delaware 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 and any
related agreements, in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this 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 and any related
agreements have been duly executed and delivered by the Company, (iv) this
Agreement and assuming the execution and delivery thereof and acceptance by the
Investor, 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 620,000,000 shares of Common Stock and 5,000,000 shares of
preferred stock (“Preferred Stock”), of which 221,806,714 shares of
Common Stock are issued and outstanding as of September 24, 2010 and no 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


 


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SEC Documents, 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 Registration Statement No. 333-165388
on Form S-1 and registration statements on Form S-8 and (iv) 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 this 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 or made available 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.


 


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 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 that would cause a Material Adverse
Effect.  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 in accordance with the
terms hereof or thereof.  All consents,
authorization, orders, filings and registrations which the Company is required
to make or obtain


 


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pursuant to the preceding sentence have been obtained or effected on or
prior to the date hereof.  The Company
and its subsidiaries are not aware of any fact or circumstance which might give
rise to any of the foregoing.


 


Section 4.05           SEC Documents;
Financial Statements.  The Common
Stock is registered pursuant to Section 12(g) of the Exchange Act and
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC under the 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 Investor 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, 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


 


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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; and the Company is not aware of any facts or circumstances which
might give rise to any of the foregoing.


 


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


 


11

















 


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.  The Company has not been refused any
insurance coverage sought or applied for and the Company does not have 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           No Material
Adverse Breaches, etc.  Except
as set forth in the SEC Documents, the Company is not subject to any charter,
corporate or other legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company’s officers has or is expected
in the future to have a Material Adverse Effect.


 


Section 4.17           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 have a Material Adverse Effect.


 


Section 4.18           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 4.19           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


 


12

















 


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 4.20           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 4.21           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 4.22           Use
of Proceeds.  The Company shall use
the net proceeds from this offering for working capital and other general
corporate purposes.


 


Section 4.23           Dilution.  The Company is aware and acknowledges that
issuance of shares of the 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 Shares hereunder.  The Company is aware and acknowledges that it
may not be able to request Advances under this Agreement if the Registration
Statement is not declared effective 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 or shares issued pursuant to Section 12.04
hereunder shall be earned on the date hereof and are 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:


 


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Section 5.01           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 reasonable 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 untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement for the registration of the Shares as originally filed or in any
amendment thereof, or in any related prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Investor specifically for
inclusion therein; (b) any misrepresentation or breach of any representation or
warranty made by the Company in this Agreement or any other certificate,
instrument or document contemplated hereby or thereby; (c) any breach of
any covenant, agreement or obligation of the Company contained in this
Agreement or any other certificate, instrument or document contemplated hereby
or thereby; and (d) 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.


 


Section 5.02           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
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement for the registration of the Shares as originally
filed or in any amendment thereof, or in any related prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; provided,
however, that the Investor will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information


 


14

















 


furnished to the Investor by or on behalf of the Company specifically
for inclusion therein; (b) any misrepresentation or breach of any
representation or warranty made by the Investor in this Agreement or any
instrument or document contemplated hereby or thereby executed by the Investor;
(c) any breach of any covenant, agreement or obligation of the Investor(s) contained
in this Agreement or any other certificate, instrument or document contemplated
hereby or thereby executed by the Investor; or (d) any cause of action,
suit or claim brought or made against such Company Indemnitee not arising out
of any action or inaction of a Company 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 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.


 


Section 5.03           Promptly
after receipt by an Investor Indemnitee or Company Indemnitee under this Article V
of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving an Indemnified Liability, such
Investor Indemnitee or Company Indemnitee shall, if an Indemnified Liability in
respect thereof is to be made against any indemnifying party under this Article V
deliver to the indemnifying party a written notice of the commencement thereof;
but the failure to so notify the indemnifying party will not relieve it of
liability under this Article V unless and to the extent the indemnifying
party did not otherwise learn of such action and such failure result in the
forfeiture by the indemnifying party of substantial rights and defenses and
will not, in any event, relieve the indemnifying party from any obligations
provided in this Article V.  The
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Investor Indemnitee or
Company Indemnitee, as the case may be; provided, however, that an Investor
Indemnitee or Company Indemnitee shall have the right to retain its own counsel
with the reasonable fees and expenses of not more than one counsel for such
Investor Indemnitee or Company Indemnitee to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party,
the representation by such counsel of the Investor Indemnitee or Company
Indemnitee and the indemnifying party would be inappropriate due to actual or
potential differing interests between such Investor Indemnitee or Company
Indemnitee and any other party represented by such counsel in such proceeding.
The Investor Indemnitee or Company Indemnitee shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the Investor Indemnitee or
Company Indemnitee which relates to such action or claim.  The indemnifying party shall keep the
Investor Indemnitee or Company Indemnitee fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto.  No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its prior
written consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent.  No indemnifying party shall, without the
prior written consent of the Investor Indemnitee or Company Indemnitee, consent
to entry of any judgment or enter into any settlement or other compromise which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Investor Indemnitee or Company Indemnitee of a release from
all liability in respect to such claim or litigation.  Following indemnification as


 


15

















 


provided for hereunder, the indemnifying party shall be subrogated to
all rights of the Investor Indemnitee or Company Indemnitee with respect to all
third parties, firms or corporations relating to the matter for which
indemnification has been made.


 


Section 5.04           The
indemnification required by this Article V shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received.


 


Section 5.05           The
indemnity agreements contained herein shall be in addition to (i) any
cause of action or similar right of the Investor Indemnitee or Company
Indemnitee against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.


 


Section 5.06           The
obligations of the parties to indemnify or make contribution under this Article V
shall survive termination.


 


Article VI. 

Covenants of the Company


 


Section 6.01           Registration
Statement.


 


(a)               Filing of a Registration
Statement.  The Company
shall prepare and file with the SEC a Registration Statement, or multiple
Registration Statements for the resale by the Investor of the Registrable
Securities.  The Company in its sole
discretion may chose when to file such Registration Statements; provided, however, that the Company shall not have the ability
to request any Advances until the effectiveness of a Registration
Statement.  Each Registration Statement
shall contain the “Plan of Distribution” section in substantially the
form attached hereto as Exhibit C.


 


(b)              Maintaining a Registration
Statement.  The Company
shall cause any Registration Statement that has been declared effective to
remain effective at all times until all Registrable Securities contained in
such Registration Statement cease to be Registrable Securities (the “Registration
Period”).  Each Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein, or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading.


 


(c)               Filing Procedures.  Prior to the filing of any Registration
Statement with the SEC, the Company shall, (i) furnish a draft of such
Registration Statement to the Investor for its review and comment and (ii) not
less than three business days prior to the filing of a Registration Statement
and not less than one business day prior to the filing of any related
amendments and supplements to all Registration Statements (except for any
amendments or supplements caused by the filing of any annual reports on Form 10-K,
quarterly reports on Form 10-Q and periodic reports on Form 8-K),
furnish to the Investor copies of all such documents proposed to be filed,
which documents (other than those incorporated or deemed to be incorporated by
reference) will be subject to the reasonable


 


16

















 


and prompt review of the
Investor.  The Investor shall furnish
comments on a Registration Statement to the Company within 24 hours of the
receipt thereof.


 


(d)              Delivery of Final Documents.  The Company shall furnish to the Investor
without charge, (i) at least one copy of such Registration Statement as
declared effective by the SEC and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, all exhibits and each preliminary prospectus, (ii) at the
request of the Investor, 10 copies of the final prospectus included in such
Registration Statement and all amendments and supplements thereto (or such
other number of copies as the Investor may reasonably request) and (iii) such
other documents as the Investor may reasonably request from time to time in
order to facilitate the disposition of the Registrable Securities owned by the
Investor.


 


(e)               Amendments and Other Filings.  The Company shall (i) prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the related prospectus used in
connection with such Registration Statement, which prospectus is to be filed
pursuant to Rule 424 promulgated under the Securities Act, as may be
necessary to keep such Registration Statement effective at all times during the
Registration Period, and prepare and file with the SEC such additional
Registration Statements in order to register for resale under the Securities
Act all of the Registrable Securities; (ii) cause the related prospectus
to be amended or supplemented by any required prospectus supplement (subject to
the terms of this Agreement), and as so supplemented or amended to be filed
pursuant to Rule 424; (iii) provide the Investor copies of all
correspondence from and to the SEC relating to a Registration Statement
(provided that the Company may excise any information contained therein which
would constitute material non-public information, and (iv) comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such Registration Statement.  In the case of amendments and supplements to
a Registration Statement which are required to be filed pursuant to this
Agreement (including pursuant to this Section 6.01(e)) by reason of the
Company’s filing a report on Form 10-K, Form 10-Q or Form 8-K or
any analogous report under the Exchange Act, the Company shall incorporate such
report by reference into the Registration Statement, if applicable, or shall
file such amendments or supplements with the SEC either on the day on which the
Exchange Act report is filed which created the requirement for the Company to
amend or supplement the Registration Statement, if feasible, or otherwise
promptly thereafter.


 


(f)                 Blue-Sky.  The Company shall use its reasonable best
efforts to (i) register and qualify the Registrable Securities covered by
a Registration Statement under such other securities or “blue sky” laws of such
jurisdictions in the United States as the Investor reasonably requests,
(ii) prepare and file in those jurisdictions, such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary
to maintain such registrations and


 


17

















 


qualifications in effect at
all times during the Registration Period, and (iv) take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for
sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (w) make any
change to its certificate of incorporation or by-laws, (x) qualify to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 6.01(f), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. 
The Company shall promptly notify the Investor of the receipt by the
Company of any notification with respect to the suspension of the registration
or qualification of any of the Registrable Securities for sale under the
securities or “blue sky” laws of any jurisdiction in the United States or its
receipt of actual notice of the initiation or threat of any proceeding for such
purpose.


 


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           Opinion
of Counsel.  The Company shall cause
the Investor to have received an opinion from counsel to the Company in form
and substance reasonably satisfactory to the Investor prior to the first
Advance Notice.


 


Section 6.04           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 6.05           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, and confirm in writing, 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


 


18

















 


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, or of the necessity to amend the Registration
Statement or supplement a related prospectus to comply with the Securities Act
or any other law; 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, and the Investor shall not sell any Shares pursuant to a
Registration Statement, during the continuation of any of the foregoing events.


 


Section 6.07           Consolidation;
Merger.  If an Advance Notice has
been delivered to the Investor and the transaction contemplated in such Advance
Notice has not yet been closed in accordance with its terms, then the Company
shall not 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 by the Company to the Investor hereunder
shall be made in accordance with the provisions and requirements of the
Securities Act 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 Concerning Resales. 
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.


 


Section 6.12           Expenses.  The Company, whether or not the transactions
contemplated hereunder are consummated or this Agreement is terminated, will
pay all expenses incident to the performance of its obligations hereunder,
including but not limited to (i) the preparation, printing and filing of the
Registration Statement and each amendment and supplement thereto, of each
prospectus and of each amendment and supplement thereto; (ii) the
preparation, issuance and


 


19

















 


delivery of any Shares issued pursuant to this Agreement, (iii) all
fees and disbursements of the Company’s counsel, accountants and other
advisors, (iv) the qualification of the Shares under securities laws in
accordance with the provisions of this Agreement, including filing fees in
connection therewith, (v) the printing and delivery of copies of any
prospectus and any amendments or supplements thereto, (vi) the fees and
expenses incurred in connection with the listing or qualification of the Shares
for trading on the Principal Market, or (vii) filing fees of the SEC and
the Principal Market.


 


Section 6.13           Current
Report.  Promptly after the date
hereof (and prior to the Company delivering an Advance Notice to the Investor
hereunder), the Company shall file with the SEC a report on Form 8-K or
such other appropriate form as determined by counsel to the Company, relating
to the transactions contemplated by this Agreement and shall provide the
Investor with a reasonable opportunity to review such report prior to its
filing.


 


Article VII. 

Conditions for Advance and Conditions to Closing


 


Section 7.01           Conditions
Precedent to the Right of the Company to Deliver an Advance Notice.  The right of the Company to deliver an
Advance Notice and the obligations of the Investor hereunder with respect to an
Advance is subject to the satisfaction by the Company, on  each Advance Notice Date and Advance Date (a “Condition
Satisfaction Date”), of each of the following conditions:


 


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


 


(b)              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 considered or intends to take such action), and no
other suspension of the use or withdrawal of the Registration Statement or
related prospectus shall exist.  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 SEC regulations.


 


(c)               Authority.  The Company shall have obtained all permits
and qualifications required by any applicable state 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


 


20
















 


Stock shall be legally
permitted by all laws and regulations to which the Company is subject.


 


(d)              No Material Notices. None of the
following events shall have occurred and be continuing:  (i) receipt by the Company of any
request for additional information from the SEC or any other federal or state
governmental, administrative or self regulatory authority during the period of
effectiveness of the Registration Statement, the response to which would
require any 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
by the Company 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 occurrence of any event that makes
any statement made in the Registration Statement or related prospectus or 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 and as of the date which they were made, not misleading; and (v) the
Company’s reasonable determination that a post-effective amendment to the
Registration Statement would be required. 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.


 


(e)               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 to be performed, satisfied or complied
with by the Company at or prior to each Condition Satisfaction Date.


 


(f)                 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 a Material Adverse Effect.


 


(g)              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


 


21

















 


any notice threatening the
continued listing of the Common Stock on the Principal Market.


 


(h)              Maximum Advance Amount.  The amount of an Advance requested by the
Company shall not exceed the Maximum Advance Amount.


 


(i)                  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.


 


(j)                  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.


 


(k)               Consecutive Advance Notices.  Except with respect to the first Advance
Notice, the Company shall have delivered all Shares relating to all prior
Advances.


 


Article VIII. 


Non-Disclosure of Non-Public Information


 


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.


 


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 of the
parties hereto 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


 


22

















 


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 or withdraw the Registration Statement or otherwise cause the
Registration Statement to become ineffective, or voluntarily delist the Common
Stock from the Principal Markets.


 


(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 Section 10.02
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 Article V 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 2.01(b) hereof,
shall be:


 


23

















 


	
  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 Master SPV Ltd.

  
	
   

  	
  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


 


24

















 


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.


 


(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 the Company shall pay a structuring and due diligence fee of $25,000 to
Yorkville Advisors, LLC, which has been paid in full as of the date hereof.


 


(b)              Commitment Fee; Commitment
Shares.  On the date hereof, the
Company shall pay to the Investor a commitment fee (the “Commitment Fee”)
of $100,000.  The Company shall pay the
Commitment Fee by issuing to the Investor shares of Common Stock (such shares,
the “Commitment Shares”) within three days of the date hereof in an
amount equal to the Commitment Fee divided by the VWAP for the Trading Day
immediately prior to the date hereof.  
The Commitment Shares shall be deemed fully earned as of the date they
are issued regardless of the amount of Advances, if any, that the Company is able
to, or chooses to, request hereunder. 
The Commitment Shares shall be included on any registration statement
filed by the Company after the date hereof, unless such shares may be resold
without any limitation pursuant to Rule 144.


 


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]


 


25

















 


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 MASTER SPV LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Yorkville Advisors, LLC

  
	
   

  	
   

  	
  Its:

  	
  Investment Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/ David Gonzalez

  
	
   

  	
   

  	
  Name: David Gonzalez

  
	
   

  	
   

  	
  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, 10-K, 8-K, etc.).  All SEC Filings and other public disclosures
made by the Company, including, without limitation, all press releases,
analysts meetings and calls, etc. (collectively, the “Public
Disclosures”), have been reviewed and approved for release by the Company’s
attorneys and, if containing financial information, the Company’s independent
certified public accountants.  None of
the Company’s 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
                                          .


 


6.             9.99% of the
outstanding Common Stock of the Company as of the date hereof 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 with a follow up phone call to:


Yorkville Advisors, LLC


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


Fax: (201) 946-0851


Attention:  Trading Department and Compliance Officer


Confirmation Telephone
Number:  (201) 985-8300 ext. 129.


 


A-1

















 


EXHIBIT B


FORM OF SETTLEMENT DOCUMENT


 


VIA FACSIMILE & EMAIL


 


Advanced Life Sciences Holdings, Inc.


Attn:


Fax:


Email:


 


	
   

  	
   

  	
  Below please find the settlement information with
  respect to the Advance Notice Date of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  (a) Amount
  of Advance Notice:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b) Amount
  of Advance Notice (after taking into account any adjustments pursuant to
  Section 2.01):

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Market
  Price:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Purchase
  Price (Market Price X         %) per
  share:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Number
  of Shares due to Investor:

  	
   

  	
   

  



 


Please issue the number of Shares due to the Investor to the account of
the Investor as follows:


 


[TO COME]


 


	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  YA GLOBAL MASTER SPV, LTD.

  



 


Approved By Advanced Life Sciences Holdings, Inc.:


 


 


	
   

  	
   

  
	
  Name:

  	
   

  



 


B-1

















 


EXHIBIT C


 


PLAN OF DISTRIBUTION


 


The selling stockholder of the common stock and any of its pledgees,
assignees and successors-in-interest (the “Selling Stockholder”) may,
from time to time, sell any or all of their shares of common stock on the
Nasdaq Global Market or any other stock exchange, market or trading facility on
which the shares are traded or in private transactions.  These sales may be at fixed or negotiated
prices.  A Selling Stockholder may use
any one or more of the following methods when selling shares:


 


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


 


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


 


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


 


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


 


·                  privately negotiated transactions;


 


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


 


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


 


·                  a combination of any such methods of sale; or


 


·                  any other method permitted pursuant to
applicable law.


 


The Selling Stockholders may also sell shares under Rule 144 under
the Securities Act of 1933, as amended (the “Securities Act”), if
available, rather than under this prospectus.


 


Broker-dealers engaged by the Selling Stockholders may arrange for
other broker dealer to participate in sales. 
Broker-dealers may receive commissions or discounts from the Selling
Stockholders (or, if any broker-dealer acts as agent for the purchaser of
shares, from the purchaser) in amounts to be negotiated, but, except as set
forth in a supplement to this Prospectus, in the case of an agency transaction
not in excess of a customary brokerage commission in compliance with NASDR Rule 2440;
and in the case of a principal transaction a markup or markdown in compliance
with NASDR IM-2440.


 


C-1

















 


In connection with the sale of the common stock or interests therein,
the Selling Stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn engage in
short sales of the Common Stock in the course of hedging the positions they
assume.  The Selling Stockholders may
also enter into option or other transactions with broker-dealers or other
financial institutions or the creation of one or more derivative securities
which require the delivery to such broker-dealer or other financial institution
of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented
or amended to reflect such transaction).


 


YA Global is, and any other Selling Stockholder, broker-dealer or agent
that are involved in selling the shares may be deemed to be, an “underwriters”
within the meaning of the Securities Act in connection with such sales.  In such event, any commissions received by
such broker-dealers or agents and any profit on the resale of the shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.  Each Selling
Stockholder has informed the Company that it does not have any written or oral
agreement or understanding, directly or indirectly, with any person to
distribute the Common Stock. In no event shall any broker-dealer receive fees,
commissions and markups which, in the aggregate, would exceed eight percent
(8%).


 


The Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the shares.  The Company has agreed to indemnify the
Selling Stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.


 


Because YA Global is, and any other Selling Stockholder may be deemed
to be, an “underwriter” within the meaning of the Securities Act, they will be
subject to the prospectus delivery requirements of the Securities Act including
Rule 172 thereunder.  In addition,
any securities covered by this prospectus which qualify for sale pursuant to Rule 144
under the Securities Act may be sold under Rule 144 rather than under this
prospectus.  There is no underwriter or
coordinating broker acting in connection with the proposed sale of the resale
shares by the Selling Stockholders.


 


We agreed to keep this prospectus effective until the earlier of (i) the
date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule 144
under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to this prospectus or Rule 144 under
the Securities Act or any other rule of similar effect.  The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.


 


Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the resale shares may not simultaneously
engage in market making activities with respect to the common stock for the
applicable restricted period, as defined in Regulation M, prior to the
commencement of the distribution.  In
addition, the Selling Stockholders will be 


 


C-2

















 


subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of the common stock by the Selling Stockholders
or any other person.  We will make copies
of this prospectus available to the Selling Stockholders and have informed them
of the need to deliver a copy of this prospectus to each purchaser at or prior
to the time of the sale (including by compliance with Rule 172 under the
Securities Act).


 


C-3