Exhibit 4.1


 


FORM OF SECURITIES PURCHASE AGREEMENT


 


Advanced
Life Sciences Holdings, Inc.


1440 Davey Road


Woodridge, IL 60517


 


Ladies &
Gentlemen:


 


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


 


1.                                       This Securities Purchase Agreement (the “Agreement”)
is made as of December     , 2007 by and among
Advanced Life Sciences Holdings, Inc., a Delaware corporation (the “Company”),
and the Investor.


 


2.                                       The Company and the Investor agree that the Investor
will purchase from the Company and the Company will issue and sell to the
Investor               
shares of common stock of the Company, $0.01 par value per share (the “Common
Stock”), at a purchase price of $1.90 per share, and warrants, in the form of Exhibit B
attached hereto, to purchase up to             
shares of Common Stock in the aggregate at an exercise price of $2.15 per
share, in each case, pursuant to the Terms and Conditions for Purchase of the
Shares and the Warrants attached hereto as Annex I and incorporated herein
by reference as if fully set forth herein (the “Terms and Conditions”).  Such             
shares of Common Stock to be purchased by the Investor pursuant to this
Agreement are referred to herein as the “Shares,” and such warrants to be
issued to the Investor pursuant to this Agreement to purchase up to         
shares of Common Stock are referred to herein as the “Warrants.”   Each Investor will purchase the number of
the Shares and the number of the Warrants as set forth below their respective
names on the signature pages hereto for the purchase price set forth
thereon.  This Securities Purchase
Agreement, together with the investor questionnaire, exhibits and Terms and
Conditions, which are incorporated herein by reference as if fully set forth
herein, may hereinafter be referred to as the “Agreement”.  Unless otherwise requested by the Investor,
the certificates representing the Shares and the Warrants purchased by the
Investor will be registered in the Investor’s name and address as set forth
below.


 


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


 


	
  AGREED AND ACCEPTED:

  	
   

  	
   

  
	
  Advanced Life Sciences
  Holdings, Inc.

  	
   

  	
  Investor:  [NAME OF INVESTOR]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Print Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  	
  Telephone:

  	
   

  
	
   

  	
   

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Number of Shares:

  	
   

  	
   

  
	
   

  	
   

  	
  Number of Warrants:

  	
   

  	
   

  
	
   

  	
   

  	
  Aggregate Purchase
  Price:

  	
   

  	
   

  
														



 

















 


ANNEX I


 


TERMS AND CONDITIONS FOR PURCHASE OF
SHARES AND WARRANTS


 


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


 


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


 


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


 


2.2                                       On or about the Closing Date (as defined
in Section 3), the Company will sell additional securities to one or more
third party purchasers other than the Investor (the “Contemporaneous
Offering”).


 


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


 


3.                                       Delivery of the Shares and the Warrants at Closing. 
It is expected that the completion of the purchase and sale of the
Shares and the Warrants (the “Closing”) shall occur on or about December 12,
2007 (the “Closing Date”), at the Chicago offices of the Company’s
counsel.  At the Closing, the Company
shall deliver to the Investor (a) one or more stock certificates
representing the Investor’s number of the Shares and (b) one or more
warrant certificates representing the Investor’s number of the Warrants, in
each case as is set forth in Paragraph 2 of the Securities Purchase Agreement,
each such certificate to be registered in the name of the Investor or, if so
indicated on the signature page of the Securities Purchase Agreement, in
the name of a nominee designated by the Investor.


 


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


 


The Investor’s
obligation to purchase the number of the Shares and the number of the Warrants
being purchased by such Investor hereunder shall be subject to the following
conditions, any one or more of which may be waived by such Investor: (a) the


 

















 


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


 


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


 


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


 


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


 


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


 

















 


been made or
obtained, and except for any post-closing securities filings or notifications
required to be made under federal or state securities laws.


 


4.4                                       Capitalization. 
The capitalization of the Company as of September 30, 2007 is as
set forth in the most recent applicable SEC Documents, increased as set forth
in the next sentence.  The Company has
not issued any capital stock since that date other than pursuant to (i) employee
benefit plans disclosed in the SEC Documents, or (ii) outstanding
warrants, options or other securities disclosed in the SEC Documents.  The outstanding shares of capital stock of
the Company have been duly and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and were not issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities.  Except as set forth in or contemplated by the
SEC Documents, and other than options issued to officers, directors and
employees of the Company under its employee benefit plans, the Warrants and any
warrants issued pursuant to the Contemporaneous Offering, there are no
outstanding rights (including, without limitation, preemptive rights), warrants
or options to acquire, or instruments convertible into or exchangeable for, any
unissued shares of capital stock or other equity interest in the Company, or
any contract, commitment, agreement, understanding or arrangement of any kind
to which the Company is a party or of which the Company has knowledge and
relating to the issuance or sale of any capital stock of the Company, any such
convertible or exchangeable securities or any such rights, warrants or
options.  Without limiting the foregoing,
no preemptive right, co-sale right, right of first refusal or other similar
right exists with respect to the Shares, the Warrants or the Warrant Shares or
the issuance and sale thereof.  No
further approval or authorization of any stockholder or the Board of Directors
of the Company or others is required for the issuance and sale of the Shares
and the Warrants or the issuance of the Warrant Shares upon exercise of the
Warrants. Except as disclosed in the SEC Documents, there are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Common Stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders. The issuance and
sale of the Shares and the Warrants, and the issuance of the Warrant Shares
upon exercise of the Warrants, will not result in a right of any current holder
of Company securities to adjust the exercise, conversion, exchange or reset
price under such securities.  Subject to
the filing of the notification with Nasdaq, the issuance and sale of the Shares
under the Agreement does not contravene the rules and regulations of
Nasdaq, and, in furtherance of the foregoing sentence, no approval of the
stockholders of the Company thereunder is required for the Company to issue and
deliver to the Investors the maximum number of the Shares and the Warrants, or
the issuance of the Warrant Shares upon exercise of the Warrants, contemplated
by the Agreement.


 


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


 


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


 


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


 


4.8                                       Intellectual Property. 
Except as specifically disclosed in the SEC Documents (i)  the
Company owns or possesses sufficient rights to use all patents, patent rights,
trademarks, copyrights, licenses, inventions, trade secrets, trade names and
know-how (including trade secrets and other unpatented and/or unpatentable
property or confidential information, systems, processes or procedures) (collectively,
“Intellectual Property”) described or referred to in the SEC Documents as owned
or possessed by it or that are necessary for the conduct of its business as now
conducted as described in the SEC Documents  except
where the failure to currently own or possess would not have a Material Adverse
Effect, (ii) the Company is not infringing, and has not received any
notice of, and has no knowledge of, any asserted infringement by the Company of
any rights of a third party with


 

















 


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


 


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


 


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


 


4.10                                 No Material Adverse Change. 
Except as disclosed in the SEC Documents, since September 30, 2007,
there has not been (i) any material adverse change in the financial
condition or earnings of the Company, (ii) any material adverse event
affecting the Company, (iii) any obligation, direct or contingent, that is
material to the Company, incurred by the Company, except obligations incurred
in the ordinary course of business, (iv) any dividend or distribution of
any kind declared, paid or made on the capital stock of the Company or (v) any
loss or damage (whether or not insured) to the physical property of the Company
which has been sustained, in each case, which has a Material Adverse Effect.


 


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


 


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


 


4.13                                 Reporting Status.  The Company
has filed in a timely manner all documents that the Company was required to file
under the Exchange Act since December 31, 2006.  All such documents complied in all material
respects with the SEC’s requirements as of their respective filing dates, and
the information contained therein as of the date thereof did not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein in light of
the circumstances under which they were made not misleading.


 


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


 

















 


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


 


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


 


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


 


4.18                           Accountants. 
Deloitte & Touche LLP, who have audited certain financial
statements included or incorporated by reference in the Registration Statement
(as defined below), is an independent registered public accounting firm as
required by the Securities Act, the rules and regulations promulgated
thereunder and the Public Company Accounting Oversight Board.  Except as pre-approved in accordance with the
requirements set forth in Section 10A of the Exchange Act, Deloitte &
Touche LLP has not been engaged by the Company to perform any “ prohibited
activities” (as defined in Section 10A of the Exchange Act).


 


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


 


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


 


4.21                                 Private Offering.  Assuming
the correctness of the representations and warranties of the Investor set forth
in Section 5 hereof and assuming that Lazard Frères & Co. LLC,
Susquehanna Financial Group, LLLP and CRT Capital Group LLC (collectively, the “Placement
Agents”) has not offered or sold any of the Shares or Warrants by any form of
general solicitation or advertising, the offer and sale of the Shares and the
Warrants and the issuance of the Warrant Shares upon exercise of the Warrants
is exempt from registration under the Securities Act.  The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection with
the transaction contemplated by the Agreement and sale of the Shares and the
Warrants other than the documents of which the Agreement is a part or the SEC
Documents.  The Company has not in the
past nor will it hereafter take any action independent of the placement agent
to sell, offer for sale or solicit offers to buy any securities of the Company
which would bring the offer, issuance or sale of the Shares and the Warrants as
contemplated by the Agreement within the provisions of Section 5 of the
Securities Act, unless such offer, issuance or sale was or shall be within the
exemptions of Section 4 of the Securities Act.  Neither the Company
nor any person acting on behalf of the Company (other than the Placement
Agents) has offered or sold any of the Shares or the Warrants by any form of
general solicitation or general advertising. 
The Company has offered the Shares and the Warrants for sale only to the
Investors and certain other “accredited investors” within the meaning of Rule 501
under the Securities Act.  The Company
has not entered, and will not enter, any agreement with a third party purchaser
in the Contemporaneous Offering that contains any provision that is different
from these Terms and Conditions and advantageous to such third party investor,
unless it provides the Investor the option, in its sole discretion, to cause
such provision to become part of these Terms and Conditions.


 


4.22                                 Disclosure Controls and Procedures. 
The Company is in material compliance with all provisions of the
Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing
Date.  The Company maintains a system of
internal control over financial reporting (as such term is defined in the
Exchange Act) sufficient to provide reasonable assurance that (i)


 

















 


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


 


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


 


4.24                           No Registration Rights. 
Except for third party purchasers in the Contemporaneous Offering, no
person will have the right, which right has not been waived, to require the
Company to register any securities for sale under the Securities Act by reason
of the filing of the Registration Statement with the SEC or the issuance and
sale of the Shares or the Warrant Shares.


 


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


 


5.                                       Representations, Warranties and Covenants of the
Investor.


 


5.1                                       The Investor represents and warrants to,
and covenants with, the Company that: (i) the Investor is an “accredited
investor” as defined in Regulation D under the Securities Act and the Investor
is also knowledgeable, sophisticated and experienced in making, and is
qualified to make decisions with respect to investments in shares presenting an
investment decision like that involved in the purchase of the number of the
Shares and the number of the Warrants, in each case, set forth on the Investor’s
signature page to this Agreement, including investments in securities
issued by the Company and investments in comparable companies, and has
requested, received, reviewed and considered all information it deemed relevant
in making an informed decision to purchase the Shares and the Warrants; (ii) the
Investor is acquiring the Shares and the Warrants in the ordinary course of its
business and for its own account and with no present intention of distributing
any of the Shares or the Warrant Shares (other than pursuant to the
Registration Statement) or any arrangement or understanding with any other
persons regarding the distribution of the Shares or the Warrant Shares; (iii) the
Investor will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares or the Warrant Shares except in
compliance with the Securities Act, applicable state securities laws and the
respective rules and regulations promulgated thereunder; (iv) the
Investor has answered all questions on the Investor Questionnaire attached
hereto for use in preparation of the Registration Statement and the answers
thereto are true, correct and complete as of the date hereof and will be true,
correct and complete as of the Closing Date and the Filing Date; (v) the
Investor will notify the Company immediately of any change in any of such
information until such time as such Investor has sold all of the Shares and the
Warrant Shares owned by it or until the Company is no longer required to keep
the Registration Statement effective (other than changes in the number of
Shares or Warrant Shares); and (vi) the Investor has, in connection with
its decision to purchase the number of the Shares and the Warrants relied only
upon the SEC Documents and the representations and warranties of the Company
contained herein.  The Investor
understands that its acquisition of the Shares and the Warrants has not been
registered under the Securities Act or registered or qualified under any state
securities law in reliance on specific exemptions therefrom, which exemptions
may depend upon, among other things, the bona fide nature of the Investor’s
investment intent as expressed herein. 
Subject to compliance with the Securities Act, applicable securities laws
and the respective rules and regulations promulgated thereunder, nothing
contained herein shall be deemed a representation or warranty by the Investor
to hold the Shares, the Warrants or the Warrant Shares for any period of time.


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


7.1                                       Registration Procedures and Other Matters. 
The Company shall:


 


(a)                            subject to receipt of necessary
information from the Investors after prompt request from the Company to the
Investors to provide such information, prepare and file with the SEC, within 45
days after the Closing Date (the “Filing Date”), a registration statement on Form S-3
(except if the Company is not then eligible to register for resale the
Registrable


 

















 


Securities on Form S-3,
in which case such registration shall be on another appropriate form in
accordance with the Securities Act and the Exchange Act) (the “Registration
Statement”) to enable the resale of the Shares and the Warrant Shares by the
Investors from time to time in compliance with the Securities Act;


 


(b)                           subject to receipt of necessary
information from the Investor after prompt request from the Company to the
Investors to provide such information, use its best efforts to cause the
Registration Statement to become effective on or prior to the sixtieth (60th)
day after the Closing Date (the “Required Effective Date”).  However, so long as the Company filed the
Registration Statement by the Filing Date, if the Registration Statement
receives SEC review, then the Required Effective Date will be the ninetieth (90th)
calendar day after the Closing Date;


 


(c)                            use its best efforts to prepare and file
with the SEC such amendments and supplements to the Registration Statement in
compliance with applicable laws, and the prospectus used in connection
therewith (the “Prospectus”) as may be necessary to keep the Registration
Statement current, effective and free from any material misstatement or
omission to state a material fact for a period not exceeding, with respect to
the Shares purchased by the Investor and the Warrant Shares issued pursuant to
the Warrants, the earlier of (i) the second anniversary of the Closing
Date, (ii) the date on which the Investor may sell all of the Shares and
the Warrant Shares then held by the Investor under Rule 144(k) of the
Securities Act, or (iii) such time as all of the Shares purchased by the
Investor in the transaction contemplated by the Agreement and the Warrant
Shares issued to the Investor pursuant to the Warrants have been sold pursuant
to a registration statement;


 


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


 


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


 


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


 


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


 


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


 


Notwithstanding
anything to the contrary herein, the Registration Statement shall cover only
the Shares and the Warrant Shares.  In no
event at any time before the Registration Statement becomes effective with
respect to the Shares and the Warrant Shares shall the Company publicly
announce or file any other registration statement, other than registrations on Form S-8,
without the prior written consent of a majority in interest of the Investor and
the third-party purchasers in the Contemporaneous Offering.


 


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


 


The Company may
exclude Common Stock from the Registration Statement if required by the SEC in
order for the SEC to declare the Registration Statement effective; provided,
however, that the Company will use its commercially reasonable efforts to file
and have declared effective a subsequent Registration Statement that includes
the Common Stock excluded from the initial


 

















 


Registration
Statement at such time as it may do so in accordance with the Securities Act as
interpreted by the SEC.  With respect to
any Common Stock that is not included in the initial Registration Statement or
a subsequent Registration Statement within 120-days following the Closing Date,
the Company shall be required to pay the Investor Liquidated Damages in
accordance with Section 7.7; provided, however, that the 10% cap, imposed
by Section 7.7 on Liquidated damages shall be deemed ineffective and
inoperative.


 


If the SEC deems
the registration of the Common Stock to be a primary offering by the Company or
any of the third party purchasers in the Contemporaneous Offering, and the SEC
prohibits the use of Rule 415 under the Securities Act (or any similar
provision then in force) to sell Common Stock on a delayed or continuous basis,
then the Investor shall not be obligated to commit to any such primary offering
to allow the Registration Statement to be declared effective by the SEC.  In such event, if the Registration Statement
is not declared effective within 120 days following the Closing Date, then the
Company shall be required to pay the Investor Liquidated Damages in accordance
with Section 7.7; provided, however, that the 10% cap, imposed by Section 7.7,
on Liquidated damages shall be deemed ineffective and inoperative.


 


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


 


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


 


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


 


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


 


(c)                            Subject to paragraph (d) below, in
the event (i) of any request by the SEC or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to a Registration Statement or related
Prospectus or for additional information; (ii) of the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose; (iii) of the receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Shares for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose; or (iv) of
any event or circumstance which, upon the good faith judgment of the Company’s
Board of Directors based on the advice of its counsel, necessitates the making
of any changes in the Registration Statement or Prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in
the case of the Prospectus, it will not contain any untrue 


 

















 


statement of a
material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; then the Company
shall deliver a certificate in writing to the Investor (the “Suspension Notice”)
to the effect of the foregoing and, upon receipt of such Suspension Notice,
such Investor will refrain from selling any of the Shares or the Warrant Shares
pursuant to the Registration Statement (a “Suspension”) until a supplemented or
amended Prospectus is prepared and filed by the Company, or until it is advised
in writing by the Company that the current Prospectus may be used.  In the event of any Suspension, the Company
will use its best efforts to cause the use of the Prospectus so suspended to be
resumed as soon as reasonably practicable within 20 business days after the
delivery of a Suspension Notice to the Investor.


 


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


 


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


 


7.3                                       Indemnification. 
For the purpose of this Section 7.3:


 


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


 


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


 


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


 


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


 


(b)                           The Investor agrees to indemnify and hold
harmless the Company (and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act, each officer of the
Company who signs the


 

















 


Registration
Statement and each director of the Company) from and against any losses,
claims, damages or liabilities to which the Company (or any such officer,
director or controlling person) may become subject (under the Securities Act or
otherwise), insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of, or are based upon, (i) any
failure to comply with the covenants and agreements contained in Section 7.2
hereof respecting sale of the Shares or (ii) any untrue statement of a
material fact contained in the Registration Statement or any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such untrue statement or omission was made in
reliance upon and in conformity with written information furnished by or on
behalf of such Investor specifically for use in preparation of the Registration
Statement, and the Investor will reimburse the Company (or such officer,
director or controlling person), as the case may be, for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided, that an Investor’s obligation
to indemnify the Company shall be limited to the net amount received by the
Investor from the sale of the Shares or Warrant Shares by the Investor.


 


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


 


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


 

















 


entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.  The Investor’s
obligations in this subsection to contribute shall be in proportion to its sale
of the Shares or the Warrant Shares to which such loss relates and shall not be
joint with any other Selling Stockholders.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


The Investor expressly
agrees that any sale by such Investor of the Shares or the Warrant Shares
pursuant to the Registration Statement shall be sold in a manner described under
the caption “Plan of Distribution” in such Registration Statement and the
Investor will deliver a copy of the Prospectus contained in the Registration
Statement to the purchaser or purchasers (including through deemed delivery) in
connection with such sale, in each case in compliance with the requirements of
the Securities Act and Exchange Act applicable to such sale.  The Investor further agrees that the Shares
or the Warrant Shares shall


 

















 


only be sold while the
Registration Statement is effective, unless another exemption from registration
is available.  On the basis of compliance
by the Investor with the foregoing covenants, upon effectiveness of the
Registration Statement, the Company shall as soon as practicable (but not later
than three business days after surrender of the legended certificates to the
Company and notice of such surrender has been provided pursuant to Section 8
below) cause certificates evidencing the Shares, the Warrants and the Warrant
Shares previously issued to be replaced with certificates which do not bear the
restrictive legends specified above in this Section 7.6, and all of the
Shares, the Warrants and the Warrant Shares subsequently issued shall not bear
the restrictive legend specified above in this Section 7.6.  The Investor acknowledges that the removal of
the restrictive legends from certificates representing the Shares, the Warrants
and the Warrant Shares as provided in this Section 7.6 is predicated upon
the Company’s reliance on the Investor’s compliance with its covenants in this Section 7.6.


 


                                                                                                7.7                                 Damages. The Company and the Investor agree that the Investor
will suffer damages if the Company fails to fulfill its obligations pursuant to
Section 7.1 and 7.2 hereof and that it would not be possible to ascertain
the extent of such damages with precision. 
Accordingly, the Company hereby agrees to pay partial damages (“Liquidated
Damages”) to the Investors under the following circumstances:  (a) if the Registration Statement is not
filed by the Company on or prior to 45 days after the Closing Date (such an
event, a “Filing Default”); (b) if the Registration Statement is not
declared effective by the SEC on or prior to 60 days or, 90 days in the event
that the Registration Statement receives SEC review, after the Closing Date
(such an event, an “Effectiveness Default”); or (c) if the Registration
Statement (after its effectiveness date) ceases to be effective and available
to the Investors for any continuous period that exceeds 30 days or for one or
more periods that exceed in the aggregate 60 days in any 12-month period (such
an event, a “Suspension Default” and together with a Filing Default and an
Effectiveness Default, a “Registration Default”).  In the event of a Registration Default, the
Company shall as Liquidated Damages pay, as set forth below, to each Investor,
for each 30-day period of a Registration Default, an amount in cash equal to 1%
of the aggregate purchase price paid by such Investor for the Shares purchased
pursuant to this Agreement and held at the time of the Registration Default; provided,
that in no event shall the aggregate amount of cash to be paid as Liquidated
Damages pursuant to this Section 7.7 exceed 10% of the aggregate purchase
price paid by the Investor.  The Company
shall pay the Liquidated Damages as follows: 
(i) in connection with a Filing Default, on the 46th day
after the Closing Date, and each 30th day thereafter until the Registration
Statement is filed with the SEC; (ii) in connection with an Effectiveness
Default, on the 61st day after the Closing Date (or, in the event that the
Registration Statement receives SEC review, the 91st day after the Closing
Date), and each 30th day thereafter until the Registration Statement is
declared effective by the SEC; or (iii) in connection with a Suspension
Default, on either (x) the 31st consecutive day of any Suspension or (y) the
61st day (in the aggregate) of any Suspensions in any 12-month period, and each
30th day thereafter until the Suspension is terminated in accordance with Section 7.2.  Notwithstanding the foregoing, all periods
shall be tolled during delays directly caused by the action or inaction of any
Investor, and the Company shall have no liability to any Investor in respect of
any such delay.  The Liquidated Damages
payable herein shall apply on a pro rata basis for any portion of a 30-day
period of a Registration Default.


 


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


 


(a)                                        if to the Company, to:


 


Advanced
Life Sciences Holdings, Inc.


1440
Davey Road


Woodridge,
IL 60517


Attn:  Patrick Flavin, Chief
Legal Counsel


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


Fax:  (630) 739-6754


 


(b)                                       with a copy to:


 


Winston & Strawn LLP


35 West Wacker Drive


Chicago, IL 60601


 

















 


Attention: R. Cabell Morris, Esq.


Phone: (312) 558-5609


Fax: (312) 558-5700


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


16.                                 Confidential Information.


 


(a)                                        The Investor represents to the Company
that, at all times during the Company’s offering of the Shares and the
Warrants, such Investor has maintained in confidence all non-public information
regarding the Company received by such Investor from the Company or its agents,
including without limitation, the existence of the transaction contemplated
herein, and covenants that it will continue to maintain in confidence such
information until such information (a) becomes generally publicly
available other than through a violation of this provision by such Investor or
its agents or (b) is required to be disclosed in legal proceedings (such
as by deposition, interrogatory, request for documents, subpoena, civil
investigation demand, filing with any


 

















 


governmental authority
or similar process); provided, however, that before making any
use or disclosure in reliance on this subparagraph (b) the Investor shall
give the Company at least fifteen (15) days prior written notice (or such
shorter period as required by law) specifying the circumstances giving rise
thereto and will furnish only that portion of the non-public information which
is legally required and will exercise its best efforts to obtain reliable
assurance that confidential treatment will be accorded any non-public
information so furnished.


 


(b)                                       The Company shall prior to 9:30 a.m.
Eastern Standard Time on the first business day following the date of this
Agreement, issue a press release disclosing the material terms of the
transactions contemplated hereby (including at least the number of the Shares
and the Warrants sold and proceeds therefrom). 
The Company shall not publicly disclose the name of the Investor, or
include the name of the Investor in such press release or any filing with the
SEC or any regulatory agency or Nasdaq (other than the filing of the Agreement
with the SEC pursuant to the Exchange Act or the filing of the Registration
Statement in accordance with the provisions of Section 7 of the
Agreement), without the prior written consent of such Investor, except to the
extent such disclosure is required by law or Nasdaq regulations.


 


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


 


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


 


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