Document:

Exhibit
10.1

STOCK
PURCHASE AGREEMENT

by and among

CRAUN RESEARCH SDN. BHD.,

ADVANCED LIFE SCIENCES HOLDINGS, INC.

and

ADVANCED LIFE SCIENCES, INC.

_____________

October 27, 2006

 

 

Table of Contents

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
  ARTICLE I  DEFINITIONS AND CONSTRUCTION

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.1

  	
   

  	
  Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.2

  	
   

  	
  Additional Defined Terms

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.3

  	
   

  	
  Construction

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II  THE TRANSACTION

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  Section 2.1

  	
   

  	
  Purchase and Sale

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.2

  	
   

  	
  Purchase Price

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.3

  	
   

  	
  Closing

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.4

  	
   

  	
  Closing Deliveries.

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III  REPRESENTATIONS AND
  WARRANTIES OF THE SELLER

  	
   

  	
  6

  
	
   

  	
   

  	
   

  
	
  Section 3.1

  	
   

  	
  Organization and Good Standing

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.2

  	
   

  	
  Authority and Enforceability

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.3

  	
   

  	
  No Conflict

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.4

  	
   

  	
  Ownership

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.5

  	
   

  	
  Financial Statements

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.6

  	
   

  	
  Books and Records

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.7

  	
   

  	
  Phase 1

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.8

  	
   

  	
  Calanolide and API

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.9

  	
   

  	
  No Undisclosed Liabilities

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.10

  	
   

  	
  Absence of Certain Changes and Events

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.11

  	
   

  	
  Assets

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.12

  	
   

  	
  Real Property

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.13

  	
   

  	
  Intellectual Property

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.14

  	
   

  	
  Contracts

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.15

  	
   

  	
  Employee Benefit Matters

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.16

  	
   

  	
  Employment and Labor Matters

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.17

  	
   

  	
  Compliance with Laws, Judgments and Governmental
  Authorizations

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.18

  	
   

  	
  Legal Proceedings

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.19

  	
   

  	
  Insurance

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.20

  	
   

  	
  Relationships with Affiliates

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 i
 

 

Table of Contents

(continued)

 

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
  Section 3.21

  	
   

  	
  Creditors

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV  REPRESENTATIONS AND WARRANTIES
  OF THE PURCHASER

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  Section 4.1

  	
   

  	
  Organization and Good Standing

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.2

  	
   

  	
  Authority and Enforceability

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.3

  	
   

  	
  No Conflict

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.4

  	
   

  	
  Investment Intent

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.5

  	
   

  	
  Intellectual Property

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V  INDEMNIFICATION

  	
   

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 5.1

  	
   

  	
  Survival

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.2

  	
   

  	
  Seller Indemnification

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.3

  	
   

  	
  Purchaser Indemnification

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.4

  	
   

  	
  Indemnification Payments

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.5

  	
   

  	
  Exclusive Remedy

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.6

  	
   

  	
  No Limitation

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI  GENERAL PROVISIONS

  	
   

  	
  14

  
	
   

  	
   

  	
   

  
	
  Section 6.1

  	
   

  	
  Further Assurances

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.2

  	
   

  	
  Notices

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.3

  	
   

  	
  Amendment

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.4

  	
   

  	
  Waiver and Remedies

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.5

  	
   

  	
  Expenses

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.6

  	
   

  	
  Entire Agreement

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.7

  	
   

  	
  Assignment and Successors

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.8

  	
   

  	
  Severability

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.9

  	
   

  	
  Exhibits and Schedules

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.10

  	
   

  	
  Interpretation

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.11

  	
   

  	
  Governing Law

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.12

  	
   

  	
  Specific Performance

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.13

  	
   

  	
  Jurisdiction and Service of Process

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.14

  	
   

  	
  Waiver of Jury Trial

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.15

  	
   

  	
  Counterparts

  	
   

  	
  17

  

 

 ii

  
  
  

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (“Agreement”)
is made as of October 27, 2006, by and among CRAUN Research Sdn. Bhd., a
limited liability company organized under the laws of Malaysia (the “Purchaser”),
Advanced Life Sciences Holdings, Inc., a Delaware corporation (“Holdings”),
and Advanced Life Sciences, Inc., an Illinois corporation and wholly owned
subsidiary of Holdings (the “Seller”).

PRELIMINARY STATEMENTS

A.            Sarawak
MediChem Pharmaceuticals, Inc, a Delaware corporation (the “Company”),
was formed and operated as a joint venture of the Purchaser and the Seller
pursuant to the Joint Venture Agreement by and between the Purchaser and the
Seller dated December 21, 1996 (the “Joint Venture Agreement”).  Prior to the consummation of this Agreement,
the Purchaser and the Seller each owned 50% of the issued and outstanding
shares of the capital stock of the Company.

B.            The
Government of the State of Sarawak, Malaysia (“Sarawak”), lent to the
Company a principal amount of $12,000,000 pursuant to: (i) the Loan Agreement
by and between Sarawak and the Company dated November 25, 1999; (ii) the Loan
Agreement by and between Sarawak and the Company dated November 27, 2000; (iii)
the Loan Agreement by and between Sarawak and the Company dated January 20,
2001; (iv) the Loan Agreement by and between Sarawak and the Company dated
September 4, 2001; and (v) the Loan Agreement by and between Sarawak and the
Company dated October 29, 2001 (collectively, the “Loan Agreements”).

C.            The
Company has not tendered payment of any of the principal or interest that the
Company owes to Sarawak pursuant to the Loan Agreements.

D.            On
July 12, 2006, an involuntary bankruptcy petition under chapter 7 of the
Bankruptcy Code (as defined below) was filed in the United States Bankruptcy
Court for the Northern District of Illinois, Chicago Division by Sarawak as
creditor and with the Company as the alleged debtor.  This case is administered under Case No.
06-08241 (the “Bankruptcy Petition”).

E.             The
Seller desires to sell, and the Purchaser desires to purchase, all of the
issued and outstanding shares of capital stock of the Company held of record or
owned beneficially by the Seller in accordance with the provisions of this
Agreement.

NOW, THEREFORE, intending to be legally bound and in
consideration of the mutual provisions set forth in this Agreement and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:

ARTICLE I

DEFINITIONS AND CONSTRUCTION

Section 1.1             Definitions.  For the purposes of
this Agreement and the Ancillary Agreements:

“Affiliate” means, with respect to a
specified Person, a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with, the
specified Person.  For purposes of this
definition, the term “control” (including the terms “controlling,” “controlled
by” and “under common control with”) means the possession, direct or indirect,
of the power to direct or cause the direction of the management or policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise.

 

“Ancillary Agreements” means, collectively,
the Seller Release, the Purchaser Release, the Deed of Termination, the Employee
Release and the Employee ADEA Release.

“API” means Calanolide A active
pharmaceutical ingredient.

“Bankruptcy Code” means title 11 of the
United States Code, 11 U.S.C. §§ 101, et. seq.

“Calanolide” means: (i) Calanolide A; (ii)
Calanolide B (Costatolide); (iii) API; (iv) Calanolide B (Costatolide) active
pharmaceutical ingredient; (v) all compounds related to, intermediate of or
derived from Calanolide A; (vi) all compounds related to, intermediate of or
derived from Calanolide B (Costatolide); and (vii) the Drug Product.

“Code” means the Internal Revenue Code of
1986.

“Common Stock” means the common stock, par
value $0.01 per share, of the Company.

“Company Plan” means any “employee benefit
plan,” as defined in Section 3(3) of ERISA, and any profit-sharing, bonus,
stock option, stock purchase, stock ownership, pension, retirement, severance,
deferred compensation, excess benefit, supplemental unemployment,
post-retirement medical or life insurance, welfare, incentive, sick leave,
long-term disability, medical, hospitalization, life insurance, other insurance
or employee benefit plan.

“Contract” means any contract, agreement,
arrangement, lease, license, commitment, franchise, warranty, guaranty,
mortgage, note, bond, option, warrant, right or other instrument or consensual
obligation, whether written or oral.

“Drug Product” means the encapsulated form of
Calanolide A.

“Encumbrance” means any charge, claim,
mortgage, servitude, easement, right of way, community or other marital
property interest, covenant, equitable interest, license, lease or other
possessory interest, lien, option, pledge, security interest, preference,
priority, right of first refusal, restriction (other than any restriction on
transferability imposed by federal or state securities Laws) or other
encumbrance of any kind or nature whatsoever (whether absolute or contingent).

“ERISA” means the Employee Retirement Income
Security Act of 1974.

“GAAP” means generally accepted accounting
principles for financial reporting in the United States, as in effect as of the
date of this Agreement.

“Governmental Authority” means any (a)
federal, state, local, municipal, foreign or other government, (b) governmental
or quasi-governmental authority of any nature (including any governmental
agency, branch, department or other entity and any court or other tribunal),
(c) multinational organization or (d) body exercising, or entitled to exercise,
any administrative, executive, judicial, legislative, police, regulatory or
taxing authority or power of any nature.

“Governmental Authorization” means any
approval, consent, ratification, waiver, license, permit, registration or other
authorization issued, granted, given or otherwise made available by or under
the authority of any Governmental Authority or pursuant to any Law.

 2
 

 

“Intellectual Property” means all of the
following anywhere in the world and all legal rights, title or interest in the
following arising under Law, whether or not filed, perfected, registered or
recorded and whether now or later existing, filed, issued or acquired,
including all renewals: (a) all patents and applications for patents and all
related reissues, reexaminations, divisions, renewals, extensions,
provisionals, continuations and continuations in part, including those set
forth in Section 3.13(b) of the Seller Disclosure Schedule; (b) all copyrights,
copyright registrations and copyright applications, copyrightable works and all
other corresponding rights; (c) all mask works, mask work registrations and
mask work applications and all other corresponding rights; (d) all trade dress
and trade names, logos, Internet addresses and domain names, trademarks and
service marks and related registrations and applications, including any intent
to use applications, supplemental registrations and any renewals or extensions,
all other indicia of commercial source or origin and all goodwill associated
with any of the foregoing; (e) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), invention disclosures,
invention notebooks, file histories, know how, technology, technical data,
trade secrets, confidential business information, manufacturing and production
processes and techniques, research and development information, financial,
marketing and business data, pricing and cost information, business and
marketing plans, advertising and promotional materials, customer, distributor,
reseller and supplier lists and information, correspondence, records, and other
documentation, and other proprietary information of every kind, (f) all
computer software (including source, object and executable code), firmware,
development tools, algorithms, files, records, technical drawings and related
documentation, data and manuals); (g) all databases and data collections and
all rights in the same; (h) all rights of paternity, integrity, disclosure, and
withdrawal, and any other rights that may be known or referred to as “moral
rights,” in any of the foregoing; (i) any rights analogous to those set forth
in the preceding clauses and any other proprietary rights relating to
intangible property; (j) all copies and tangible embodiments of any of the
foregoing (in whatever form or medium); (k) all versions, releases, upgrades,
derivatives, enhancements and improvements of any of the foregoing; and (l) all
statutory, contractual and other claims, demands, and causes of action for
royalties, fees, or other income from, or infringement, misappropriation or
violation of, any of the foregoing, and all of the proceeds from the foregoing
that are accrued and unpaid as of, and/or accruing after, the date of this
Agreement.

“Judgment” means any order, injunction,
judgment, decree, ruling, assessment or arbitration award of any Governmental
Authority or arbitrator.

“Law” means any federal, state, local, municipal,
foreign, international, multinational, or other constitution, law, statute,
treaty, rule, regulation, ordinance, code, binding case law or principle of
common law.

“Liability” includes liabilities, debts or
other obligations of any nature, whether known or unknown, absolute, accrued,
contingent, liquidated, unliquidated or otherwise, due or to become due or
otherwise, and whether or not required to be reflected on a balance sheet
prepared in accordance with GAAP.

“Loss” means any loss, Proceeding, Judgment,
damage, fine, penalty, expense (including reasonable attorneys’ or other
professional fees and expenses and court costs), injury, diminution of value,
Liability, Tax, Encumbrance or other cost, expense or adverse effect
whatsoever, whether or not involving a claim by a Person not a party to this
Agreement.

“Person” means an individual or an entity,
including a corporation, limited liability company, general or limited
partnership, trust, association or other business or investment entity, or any Governmental
Authority.

 3
 

 

“Proceeding” means any action, arbitration,
audit, examination, investigation, hearing, litigation or suit (whether civil,
criminal, administrative, judicial or investigative, whether formal or
informal, and whether public or private) commenced, brought, conducted or heard
by or before, or otherwise involving, any Governmental Authority or arbitrator.

“Purchaser Disclosure Schedule” means the
disclosure schedule delivered pursuant to Article 4 by the Purchaser to the
Seller concurrently with the execution and delivery of this Agreement.

“Seller Disclosure Schedule” means the
disclosure schedule delivered pursuant to Article 3 by the Seller to the
Purchaser concurrently with the execution and delivery of this Agreement.

“Seller’s Knowledge” means, with respect to
the Seller, the actual knowledge without investigation of the Seller or of
Michael T. Flavin, Ze-Qi Xu, John L. Flavin, Patrick W. Flavin, R. Richard
Wieland III, Tuah Jenta, Tom Flavin, David Eiznhamer or Suseelan Pookote.

“Shares” means all of the shares of Common
Stock held of record or owned beneficially by the Seller.

“Tax” means (a) any federal, state, local,
foreign and other tax, charge, fee, duty (including customs duty), levy or
assessment, including any income, gross receipts, net proceeds, alternative or
add-on minimum, corporation, ad valorem, turnover, real and personal property
(tangible and intangible), sales, use, franchise, excise, value added, stamp,
leasing, lease, user, transfer, fuel, excess profits, profits, occupational,
premium, interest equalization, windfall profits, severance, license,
registration, payroll, environmental (including taxes under Section 59A of the
Code), capital stock, capital duty, disability, estimated, gains, wealth,
welfare, employee’s income withholding, other withholding, unemployment and
social security or other tax of whatever kind (including any fee, assessment
and other charges in the nature of or in lieu of any tax) that is imposed by
any Governmental Authority, (b) any interest, fines, penalties or additions
resulting from, attributable to, or incurred in connection with any items
described in this paragraph or any related contest or dispute and (c) any items
described in this paragraph that are attributable to another Person but that
the Company is liable to pay by Law, by Contract or otherwise, whether or not
disputed.

Section 1.2             Additional Defined Terms.  For purposes of
this Agreement and the Ancillary Agreements, the following terms have the
meanings specified in the indicated Section of this Agreement:

	
  Defined Term

  	
   

  	
   

  	
   

  	
  Section

  	
   

  	
   

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Award Agreement

  	
   

  	
  3.15(b)

  
	
  Balance Sheet

  	
   

  	
  3.5

  
	
  Bankruptcy
  Petition

  	
   

  	
  Preliminary Statement D

  
	
  Closing

  	
   

  	
  2.3

  
	
  Closing Date

  	
   

  	
  2.3

  
	
  Company

  	
   

  	
  Preliminary Statement A

  
	
  Company
  Intellectual Property

  	
   

  	
  3.13(a)

  
	
  Deed of
  Termination

  	
   

  	
  2.4(a)(vii)

  
	
  Employee Release

  	
   

  	
  2.4(a)(x)

  
	
  Employee ADEA
  Release

  	
   

  	
  2.4(a)(xi)

  
	
  Joint Venture
  Agreement

  	
   

  	
  Preliminary Statement A

  
	
  Loan Agreements

  	
   

  	
  Preliminary Statement B

  
	
  Owned
  Intellectual Property

  	
   

  	
  3.13(a)

  

 

 4
 

 

 

	
  Purchase Price

  	
   

  	
  2.2

  
	
  Purchaser

  	
   

  	
  Preamble

  
	
  Purchaser
  Release

  	
   

  	
  2.4(b)(ii)

  
	
  Purchaser
  Indemnified Party

  	
   

  	
  5.2

  
	
  Sarawak

  	
   

  	
  Preliminary Statement B

  
	
  Securities Act

  	
   

  	
  3.4(b)

  
	
  Seller

  	
   

  	
  Preamble

  
	
  Seller
  Indemnified Party

  	
   

  	
  5.3

  
	
  Seller Release

  	
   

  	
  2.4(a)(iii)

  
	
  Stock Plan

  	
   

  	
  3.15(b)

  
	
  Third Party
  Intellectual Property

  	
   

  	
  3.13(c)

  

 

Section 1.3             Construction.  Any reference in
this Agreement to an “Article,” “Section,” “Exhibit” or “Schedule” refers to
the corresponding Article, Section, Exhibit or Schedule of or to this
Agreement, unless the context indicates otherwise.  The table of contents and the headings of
Articles and Sections are provided for convenience only and are not intended to
affect the construction or interpretation of this Agreement.  All words used in this Agreement should be
construed to be of such gender or number as the circumstances require.  The term “including” means “including without
limitation” and is intended by way of example and not limitation.  The terms “$” and “dollars” shall mean United
States dollars.  Any reference to a
statute refers to the statute, any amendments or successor legislation, and all
regulations promulgated under or implementing the statute, as in effect at the relevant
time.  Any reference to a Contract or
other document as of a given date means the Contract or other document as
amended, supplemented and modified from time to time through such date.

ARTICLE II

THE TRANSACTION

Section 2.1             Purchase and Sale.  In accordance with
the provisions of this Agreement, at the Closing, the Seller will sell and
transfer to the Purchaser, and the Purchaser will purchase and acquire from the
Seller, all of the Shares.

Section 2.2             Purchase Price.  The purchase price
for the Shares (the “Purchase Price”) is $1,000,000.

Section 2.3             Closing.  The closing of the
transactions contemplated by this Agreement (the “Closing”) will take
place at the offices of Baker & McKenzie LLP, One Prudential Plaza, 130
East Randolph Drive, Chicago, Illinois, at 10:00 a.m., local time, upon the
satisfaction or waiver of all of the conditions set forth in Section 2.4, or at
such other place or at such other time or on such other date as the Purchaser
and the Seller may agree upon in writing. 
The date upon which the Closing actually occurs is referred to in this
Agreement as the “Closing Date.”

Section 2.4             Closing
Deliveries.

(a)           At
the Closing, the Seller will deliver or cause to be delivered to the Purchaser:

(i)            certificates representing the
Shares, duly endorsed in blank or accompanied by stock powers duly executed in
blank in form reasonably satisfactory to the Purchaser for transfer;

(ii)           a certificate, dated as of the
Closing Date, executed by a duly authorized officer of the Seller confirming
that the representations and warranties contained in this Agreement are true
and correct in all material respects;

 5
 

 

(iii)          a release substantially in the form of
Exhibit 2.4(a)(iii) executed by the Seller, Holdings, Flavin Ventures,
LLC, Flavin & Associates, Inc. and Molecular Formulations, LLC (the “Seller
Release”);

(iv)          a certification in the form
of Exhibit 2.4(a)(iv) executed by the Seller stating, under penalty of
perjury, the Seller’s U.S. taxpayer identification number and address and that
the Seller is not a “foreign person” as defined in Section 1445 of the Code;

(v)           resignations effective as of the
Closing Date of each director and each officer of the Company other than those
whom the Purchaser has specified in writing at least two business days prior to
the Closing;

(vi)          a receipt for the Purchase Price in
form reasonably satisfactory to the Purchaser;

(vii)         a deed of termination in the form of Exhibit
2.4(a)(vii) (the “Deed of Termination”) executed by the Seller;

(viii)        all books and records in the possession
of the Company at Closing;

(ix)           all Calanolide in the possession of
the Company at Closing;

(x)            a release substantially in the form
of Exhibit 2.4(a)(x) (the “Employee Release”), with an
accompanying receipt in form reasonably satisfactory to the Purchaser, executed
by each of Michael T. Flavin, Ze-Qi Xu, John L. Flavin, Patrick W. Flavin, R.
Richard Wieland III, Tuah Jenta, Tom Flavin, David Eiznhamer and Suseelan
Pookote; and

(xi)           a release substantially in
the form of Exhibit 2.4(a)(xi) (the “Employee ADEA Release”), with an
accompanying receipt in form reasonably satisfactory to the Purchaser, executed by
each of Michael T. Flavin, Ze-Qi Xu, John L. Flavin, Patrick W. Flavin, R.
Richard Wieland III, Tuah Jenta, Tom Flavin, David Eiznhamer and Suseelan
Pookote.    

(b)           At
the Closing, the Purchaser will deliver or cause to be delivered to the Seller:

(i)            the Purchase Price, by wire transfer
of immediately available funds to the accounts as specified by the Seller in
writing prior to the Closing Date;

(ii)           a release substantially in the form
of Exhibit 2.4(b)(ii) executed by the Purchaser, the Company and Sarawak
(the “Purchaser Release”); and

(iii)          the Deed of Termination executed by
the Purchaser.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller represents and warrants to the Purchaser
that except as set forth on the Seller Disclosure Schedule:

Section 3.1             Organization and Good Standing.  The Company is a
corporation duly organized, validly existing and in good standing under the
Laws of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and assets and to conduct
its business as presently conducted.  The
Seller has delivered to the Purchaser copies of the certificate of 

 6
 

 

incorporation
and bylaws of the Company as currently in effect, each of which, to Seller’s
Knowledge, are accurate and complete.

Section 3.2             Authority and Enforceability.

(a)           The
Seller has all requisite power, authority and capacity to execute and deliver
this Agreement and each of the Ancillary Agreements to which it is a party and
to perform its obligations under this Agreement and each Ancillary Agreement to
which the Seller is a party.  The
execution, delivery and performance of this Agreement and such Ancillary
Agreements to which the Seller is a party have been duly authorized by all
necessary action on the part of the Seller. 
This Agreement has been duly executed and delivered by the Seller and
constitutes the legal, valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms.  Upon the execution and delivery by the Seller
of the Ancillary Agreements to which the Seller is a party, such Ancillary
Agreements will constitute the legal, valid and binding obligations of the
Seller, enforceable against the Seller in accordance with their terms.

(b)           Holdings
has all requisite corporate power and authority to execute and deliver this
Agreement and each of the Ancillary Agreements to which it is a party and to
perform its obligations under this Agreement and each Ancillary Agreement to which Holdings is a party.  The execution, delivery and performance of
this Agreement and such Ancillary Agreements to which Holdings is a party have
been duly authorized by all necessary action on the part of Holdings.  This Agreement has been duly executed and
delivered by Holdings and constitutes the legal, valid and binding obligation
of Holdings, enforceable against Holdings in accordance with its terms.  Upon the execution and delivery by Holdings
of the Ancillary Agreements to which Holdings is a party, such Ancillary
Agreements will constitute the legal, valid and binding obligations of
Holdings, enforceable against Holdings in accordance with their terms.

Section 3.3             No Conflict.  Neither the
execution and delivery of this Agreement, nor the consummation or performance
of the transactions contemplated by this Agreement, will:

(a)           directly
or indirectly (with or without notice, lapse of time or both) conflict with,
result in a breach or violation of, constitute a default (or give rise to any
right of termination, cancellation, acceleration, suspension or modification of
any obligation or loss of any benefit) under, constitute a change in control
under, result in any payment becoming due under, result in the imposition of
any Encumbrances on any of the Shares or any of the properties or assets of the
Company under, or otherwise give rise to any right on the part of any Person to
exercise any remedy or obtain any relief under (i) the certificate of
incorporation or bylaws of the Seller, any resolution adopted by the
stockholders of the Seller or the board of directors of the Seller or, to
Seller’s Knowledge, any resolution adopted by the stockholders of the Company
or the board of directors of the Company, (ii) any Governmental Authorization
or Contract to which the Seller is a party or by which the Seller is bound or
to which any of its property or assets is subject or (iii) any Law or Judgment
applicable to the Seller or any of its property or assets;
or

(b)           require
the Seller to obtain any consent, waiver, approval, ratification, permit,
license, Governmental Authorization or other authorization of, give any notice
to, or make any filing or registration with, any Governmental Authority or
other Person.

Section 3.4             Ownership.

(a)           To
Seller’s Knowledge, the authorized capital stock of the Company consists solely
of 3,000 shares of Common Stock, of which 1,800 shares are issued and
outstanding and no shares are held 

 7
 

 

in
treasury.  The Shares are comprised of
900 shares of Common Stock and, to Seller’s Knowledge, represent all of the
issued and outstanding Common Stock that is not held of record and beneficially
owned by the Purchaser.  The Seller is
and on the Closing Date will be the sole record holder and beneficial owner of
all of the Shares, free and clear of all Encumbrances.  Upon the consummation of the Closing, the
Purchaser will be the beneficial owner of the entire equity interest in the
Company, free and clear of all Encumbrances.

(b)           To
Seller’s Knowledge, (i) other than the Shares and the Common Stock held by
Purchaser, there are no equity securities of any class of the Company, or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding, and (ii) there are no options, warrants,
equity securities, calls, rights or other Contracts to which the Company is a
party or by which the Company is bound obligating the Company to issue,
exchange, transfer, deliver or sell, or cause to be issued, exchanged,
transferred, delivered or sold, additional shares of capital stock or other
equity interests of the Company or any security or rights convertible into or
exchangeable or exercisable for any such shares or other equity interests, or
obligating the Company to grant, extend, accelerate the vesting of, otherwise
modify or amend or enter into any such option, warrant, equity security, call,
right, or Contract.  To Seller’s
Knowledge, there are no Contracts to which the Company or the Seller or any
Affiliate of the Company or the Seller is a party to or by which the Company or
the Seller or any Affiliate of the Company or the Seller is bound with respect
to the voting (including voting trusts or proxies), registration under the Securities
Act of 1933 (the “Securities Act”) or any foreign securities Law, or the
sale or transfer (including Contracts imposing transfer restrictions) of any
shares of capital stock or other equity interests of the Company.  To Seller’s Knowledge, no holder of
indebtedness of the Company has any right to convert or exchange such
indebtedness for any equity securities or other securities of the Company.

(c)           To
Seller’s Knowledge, all of the Shares are duly authorized, validly issued,
fully paid, nonassessable, not subject to or issued in violation of any
purchase option, right of first refusal, preemptive right, subscription right
or any similar right and have been issued in compliance with all applicable
Laws.

(d)           To
Seller’s Knowledge, there are no obligations, contingent or otherwise, of the
Company to repurchase, redeem or otherwise acquire any shares of capital stock
of the Company, including the Shares.  To
Seller’s Knowledge, the Company is not subject to any obligation or requirement
to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any Person.

Section 3.5             Financial Statements.  Attached as Section
3.5 of the Seller Disclosure Schedule are the consolidated and consolidating
balance sheets of the Company as of December 30, 2003, December 30, 2004, and
December 31, 2005 (the most recent of which, the “Balance Sheet”), and
the related consolidated and consolidating statements of income.

Section 3.6             Books and Records.  The books and
records in the possession of the Company at Closing and delivered at Closing to
the Purchaser pursuant to Section 2.4(a)(viii) constitute, to Seller’s
Knowledge, all the books of account, minute books, stock record books and other
material records of the Company which have not been delivered to the Purchaser
or its counsel, Baker & McKenzie LLP, prior to the date indicated in the
first sentence of this Agreement.

Section
3.7             Phase 1.  To Seller’s Knowledge, the Company has
completed a series of Phase I clinical trials for Calanolide A in accordance
with FDA rules and regulations and has completed a draft protocol to conduct a
Phase IIa clinical trial entitled “A Phase IIa Study of Calanolide A to
Evaluate the 

 8
 

 

Safety,
Pharmacokinetics and Effects of Calanolide A with Low-Dose Ritonavir on
Surrogate Markers in HIV-Positive Patients with No Previous or Limited
Experience of Antiretroviral Therapy.”

Section
3.8             Calanolide and API.  The Calanolide delivered to the Purchaser
pursuant to Section 2.4(a)(ix) constitutes, to Seller’s Knowledge, all of the
Calanolide in the possession of the Company at Closing.  To Seller’s Knowledge, no Calanolide is held
by any Person not a party to this Agreement other than Calanolide provided to
third parties performing scientific research and/or development services to the
Company.  To Seller’s Knowledge, no
Calanolide is owned by any Person not a party to this Agreement.  The
API delivered to the Purchaser pursuant to Section 2.4(a)(ix) has been and is
stored at minus twenty (-20) degrees Celsius. 
Except for any API not manufactured under Good Manufacturing Practices,
the API delivered to the Purchaser pursuant to Section 2.4(a)(ix) was certified
on April 22, 2002, and, together with other batches of API which have been
fully utilized, was utilized in all Phase 1 testing conducted by or on behalf
of the Company.

Section 3.9             No Undisclosed Liabilities.  Except as set forth
in Section 3.9 of the Seller Disclosure Schedule, to Seller’s Knowledge, the
Company has no material Liability except for Liabilities accrued or expressly
reserved for in line items on the Balance Sheet.

Section 3.10           Absence of Certain Changes and Events.  Since the date of
the Balance Sheet, to Seller’s Knowledge, other than the filing of the
Bankruptcy Petition there has not been any change or event that has had or
could reasonably be expected to have a material adverse effect on the business,
assets, properties, Liabilities, condition (financial or otherwise), operating
results, operations or business prospects of the Company.

Section 3.11           Assets.  Section 3.11 of the Seller Disclosure
Schedule contains, to Seller’s Knowledge, a complete and accurate list of all
tangible assets (other than Calanolide A) having a value in excess of $10,000
owned by the Company or used in the operation of the Company’s business.

Section 3.12           Real Property.

(a)           The Company owns no real property, nor has the Company ever
owned any real property.

(b)           The
Company does not have a leasehold or subleasehold estate or other right to use
or occupy any real property.

Section 3.13           Intellectual Property.

(a)           To
Seller’s Knowledge, the Company owns or otherwise possesses valid and legally
enforceable rights to use all Intellectual Property owned, created, acquired,
licensed to or by or used by the Company at any time prior to and through the
Closing Date (the “Company Intellectual Property”).  To Seller’s Knowledge, the Company is the
sole owner of, and has valid title to, all of the Company Intellectual
Property, other than the Third Party Intellectual Property listed in the Seller
Disclosure Schedule pursuant to Section 3.13(c) (the “Owned Intellectual
Property”).  To Seller’s Knowledge,
immediately after the Closing, the Company will remain the sole owner of, and
will have valid title to, the Owned Intellectual Property, and will continue to
have the full right to use, license and transfer the Company Intellectual
Property in the same manner and on the same terms and conditions that the
Company had immediately prior to the Closing.   
The transaction represented by this Stock Purchase Agreement will have
no adverse effect on the Company’s ownership of the Owned Intellectual Property
or the Company’s right to use the Third Party Intellectual Property.

 

 9

 

(b)           With
respect to the Owned Intellectual Property, to Seller’s Knowledge, Section
3.13(b) of the Seller Disclosure Schedule sets forth a complete and accurate
list of all patents, patent applications, invention disclosures or
descriptions, registered and unregistered trademarks and service marks
(including Internet domain names) and applications for the same, trade names
and copyright registrations and applications, indicating for each, the
applicable jurisdiction, registration number (or application number) and date
issued (or date filed) and date assigned to the Company, and identifies all
Contracts, if any, under which the Company has licensed or otherwise granted
rights in any of the Owned Intellectual Property to any Person.

(c)           To
Seller’s Knowledge, Section 3.13(c) of the Seller Disclosure Schedule sets
forth a complete and accurate list of all Intellectual Property that any Person
not a party to this Agreement has licensed or sublicensed to the Company or
otherwise authorized the Company to use (the “Third Party Intellectual
Property”), including a list of the related Contracts (but excluding
software licensed to the Company under generally available retail shrinkwrap or
clickwrap licenses and used in the Company’s business) including all amendments
thereto.  To Seller’s Knowledge, the
Company has not granted any sublicense or similar right with respect to any
such Third Party Intellectual Property.

(d)           With
the exception of payments due to the National Institute of Health relating to
OTT License L-135-1994/2 described in Section 3.13(c) of the Seller Disclosure
Schedule, to Seller’s Knowledge, the Company Intellectual Property is free of
all payment obligations and other Encumbrances and is not subject to any
Judgments or limitations or restrictions on use or otherwise.  No Person has any rights in the Company  Intellectual Property that could cause any
reversion or renewal of rights in favor of that Person or termination of the
Company’s rights in the Owned Intellectual Property.  To Seller’s Knowledge, there is no
Proceeding, Judgment, Contract or other arrangement that prohibits or restricts
the Company from carrying on its business anywhere in the world or from any use
of the Company Intellectual Property.

(e)           To
Seller’s Knowledge, all patents and registered and unregistered trademarks,
service marks and copyrights included in the Company Intellectual Property are
valid and enforceable under applicable Law for those respective categories of
Intellectual Property, and, to Seller’s Knowledge, there are no facts or
circumstances that could render any of the Company Intellectual Property
invalid or unenforceable.  Section
3.13(e) of the Seller Disclosure Schedule contains accurate and complete list
of all patents, registrations and applications, each as amended to date,
assignments, and all documents and things relating to the prosecution of any
patent applications or the disclosure or description of any inventions,
applicable to  the Owned Intellectual
Property and all other written documentation evidencing ownership and
prosecution of each such item.

(f)            To
Seller’s Knowledge, the Company has not agreed to indemnify, defend or
otherwise hold harmless any other Person with respect to Losses resulting or
arising from the Company Intellectual Property, except under those Contracts
summarized or described in Section 3.13(c) of the Seller Disclosure Schedule.

(g)           To
Seller’s Knowledge, no Person has used, disclosed, infringed or misappropriated
any of the Company Intellectual Property, other than authorized uses and
disclosures in accordance with the Contracts described in Sections 3.13(b) and
3.13(c) of the Seller Disclosure Schedule. 
To Seller’s Knowledge, the Company has not commenced or threatened any
Proceeding, or asserted any allegation or claim, against any Person for
infringement or misappropriation of the Company Intellectual Property or breach
of any Contract involving the Company Intellectual Property.

(h)           To
Seller’s Knowledge, neither the conduct of the business of the Company nor the
Company’s creation, use, license or other transfer of the Company Intellectual
Property infringes or 

 10
 

 

misappropriates
any other Person’s Intellectual Property rights.  To Seller’s Knowledge, the Company has not
received notice of any claim of infringement of any other Person’s intellectual
property rights and there is no pending or threatened Proceeding or any
allegation or claim in which any Person alleges that the Company, its business
or the Company Intellectual Property has violated any Person’s Intellectual
Property rights.  To Seller’s Knowledge,
there are no pending disputes between the Company and any other Person relating
to the Company Intellectual Property, including the rights to use thereof or
the ownership thereof.

(i)            To
Seller’s Knowledge, the Company has taken all commercially reasonable steps
necessary to protect and preserve each item of Company Intellectual Property,
including the trade secrets and other confidential business information
included in the Company Intellectual Property. 
In determining “commercially reasonable steps’ for purposes of this
Section 3.13(i), the parties intend that such phrase be interpreted taking into
account the following facts: (i) the Company has been largely dormant
approximately two years prior to the Closing Date; (ii) as of July 15, 2005 and
effective through the Closing Date, Sarawak exercised its right under the Loan
Agreements to assume control and management of the affairs of the Company and
has appointed Jumastapha bin Lamat as the controlling officer of the Company;
and (iii) the financial resources of the Company.

Section 3.14           Contracts.  Section 3.14 of the
Seller Disclosure Schedule sets forth, to Seller’s Knowledge, an accurate and
complete list of each Contract (or group of related Contracts) to which the Company
is a party, by which the Company is bound or pursuant to which the Company is
an obligor or a beneficiary, which includes aggregate consideration, payable by
the Company in cash or any other form or otherwise owed, or the provision of
services by the Company, having a value in excess of $10,000.

Section 3.15           Employee Benefit Matters.

(a)           To
Seller’s Knowledge, the Company does not sponsor, maintain, contribute to or
have any obligation to contribute to, and since the date of its creation has
never sponsored, maintained, contributed to or had any obligation to contribute
to, any Company Plan.

(b)           Except
as set forth in Section 3.15(b) of the Seller Disclosure Schedule, to Seller’s
Knowledge, the Company has never issued any award of any kind under the Sarawak
MediChem Pharmaceuticals, Inc. Stock Incentive Plan (the “Stock Plan”)
and no award issued under the Stock Plan has ever been exercised or otherwise
resulted in the delivery of Common Stock or cash to any award recipient.  The Company has furnished to the Purchaser,
to Seller’s Knowledge, complete and accurate copies of the Stock Plan and any
award agreements (each an “Award Agreement”) evidencing any awards of
any kind of granted under the Stock Plan.

(c)           To
Seller’s Knowledge, each recipient of an award of whatever kind issued under
the Stock Plan prior to or on the Closing Date has either: (i) terminated “Service”
(as defined in the Stock Plan) with the Company and has not exercised any award
of whatever kind issued to such recipient under the Stock Plan; or (ii) has
agreed to terminate the award at or prior to the Closing by executing an
Employee Release.

Section 3.16           Employment and Labor Matters.  To Seller’s
Knowledge, the following individuals are the only employees or independent
contractors who have both (i) been employed by or have performed services for
the Company at any time and (ii) are currently employed by or perform services
for the Seller or any of its Affiliates: Michael T. Flavin, Ze-Qi Xu, John L.
Flavin, Patrick W. Flavin, R. Richard Wieland III, Tuah Jenta, Tom Flavin,
David Eiznhamer and Suseelan Pookote.  To
Seller’s Knowledge, the Company currently has no employees nor are any
independent contractors currently performing services for the Company, the
Company has not in the past had any employee who 

 11
 

 

is
not executing an Employee ADEA Release and an Employee Release, and, as of the
Closing Date, the Company has no obligations to any former employee or
independent contractor in excess of $5,000.

Section 3.17           Compliance with Laws, Judgments and
Governmental Authorizations.

(a)           Except
as set forth in Section 3.17(a) of the Seller Disclosure Schedule, to Seller’s
Knowledge, the Company has not received at any time since the formation of the
Company any notice or other communication (whether oral or written) from any
Governmental Authority or any other Person regarding any actual, alleged or
potential violation of, or failure to comply with, any Law, Judgment or
Governmental Authorization, or any actual, alleged or potential obligation on
the part of the Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature.

(b)           Section
3.17(b) of the Seller Disclosure Schedule sets forth, to Seller’s Knowledge, an
accurate and complete list of each material Governmental Authorization that is
held by the Company or that otherwise relates to the business of, or any of the
assets owned or used by, the Company.

(c)           Section
3.17(c) of the Seller Disclosure Schedule sets forth, to Seller’s Knowledge, an
accurate and complete list of each Judgment to which the Company, or any of the
assets owned or used by the Company, is or has been subject.

Section 3.18           Legal Proceedings.  Except for the
Bankruptcy Petition, Section 3.18 of the Seller Disclosure Schedule sets forth,
to Seller’s Knowledge, an accurate and complete list of all pending Proceedings
by or against the Company or that otherwise may affect the business of the
Company or any of the properties or assets owned, leased or operated by the
Company.

Section
3.19           Insurance.  Section 3.19 of the Seller Disclosure
Schedule sets forth, to Seller’s Knowledge, an accurate and complete list of
all certificates of insurance, binders for insurance policies and insurance
maintained by the Company, or under which the Company has been the beneficiary
of coverage at any time within the past five years.  Section 3.19 of the Seller Disclosure
Schedule further sets forth, to Seller’s Knowledge, an accurate and complete
list of all claims asserted by the Company pursuant to any such certificate of
insurance, binder or policy since the formation of the Company, and describes
the nature and status of the claims.

Section 3.20           Relationships with Affiliates.  Neither the Seller,
Holdings nor any Affiliate of the Seller, Holdings or the Company is a party to
any Contract with, or has any material claim or right against, the Company.

Section 3.21           Creditors.  To Seller’s
Knowledge, Section 3.21 of the Seller Disclosure Schedule sets forth an
accurate and complete list of all Persons that are owed any material Liability
by the Company at the Closing other than such Liabilities that are accrued or
expressly reserved for in line items on the Balance Sheet, including any
creditor or party in interest that may assert any claim in any Proceeding arising
out of the filing of the Bankruptcy Petition.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser represents and warrants to the Seller
that except as set forth on the Purchaser Disclosure Schedule:

Section 4.1             Organization and Good Standing.  The Purchaser is a
limited liability company duly organized, validly existing and in good standing
under the Laws of its jurisdiction of organization.

 12
 

 

Section 4.2             Authority and Enforceability.  The Purchaser has
all requisite company power and authority to execute and deliver this Agreement
and each of the Ancillary Agreements to which it is a party and to perform its
obligations under this Agreement and each Ancillary Agreement to which the
Purchaser is a party.  The execution,
delivery and performance of this Agreement and such Ancillary Agreements to
which the Purchaser is a party have been duly authorized by all necessary
action on the part of the Purchaser. 
This Agreement has been duly executed and delivered by the Purchaser and
constitutes the legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms.  Upon the execution and delivery by the
Purchaser of the Ancillary Agreements to which the Purchaser is a party, such
Ancillary Agreements will constitute the legal, valid and binding obligations
of the Purchaser, enforceable against the Purchaser in accordance with their
terms.

Section 4.3             No Conflict.  Neither the
execution, delivery and performance of this Agreement by the Purchaser, nor the
consummation by the Purchaser of the transactions contemplated by this
Agreement, will:

(a)           directly
or indirectly (with or without notice, lapse of time or both), conflict with,
result in a breach or violation of, constitute a default (or give rise to any
right of termination, cancellation, acceleration, suspension or modification of
any obligation or loss of any benefit) under, constitute a change in control under, result
in any payment becoming due under, or result in the imposition of any Encumbrance
on any of the properties or assets of the Purchaser under (i) the memorandum or
articles of incorporation of the Purchaser or any resolution adopted by the
stockholders or board of directors of the Purchaser, (ii) any Governmental
Authorization or Contract to which the Purchaser is a party or by which the
Purchaser is bound or to which any of its properties or assets is subject or
(iii) any Law or Judgment applicable to the Purchaser or any of its properties
or assets; or

(b)           require
the Purchaser to obtain any consent, waiver, approval, ratification, permit,
license, Governmental Authorization or other authorization of, give any notice
to, or make any filing or registration with, any Governmental Authority or
other Person.

Section 4.4             Investment Intent.  The Purchaser is
acquiring the Shares for its own account with the present intention of holding
the Shares for investment purposes and not with a view to their distribution or
sale in violation of any state or federal securities laws.

Section 4.5             Intellectual Property.  The Purchaser has
not entered into any Contract that is a license or other Contract under which
the Purchaser has licensed or otherwise granted rights in any of the Company
Intellectual Property to any Person that is not a party to this Agreement.

ARTICLE V

INDEMNIFICATION

Section 5.1             Survival.  All
representations, warranties and covenants contained in this Agreement will
survive the Closing, irrespective of any facts known to any indemnified party
at or prior to the Closing or any investigation at any time made by or on
behalf of any indemnified party.

Section 5.2             Seller Indemnification.  Holdings and the
Seller, jointly and severally, will indemnify and hold harmless the Purchaser,
each of the Purchaser’s Affiliates, and the respective directors, officers,
employees, agents, consultants, advisors, representatives and equity holders of
the Purchaser and each of the Purchaser’s Affiliates (collectively, the “Purchaser
Indemnified Parties”) from and against, and will pay to the Purchaser
Indemnified Parties the monetary value of, any and all Losses incurred or
suffered by the Purchaser Indemnified Parties directly or indirectly arising
out of, relating to 

 13
 

 

or
resulting from any inaccuracy in or breach of any representation or warranty of
the Seller contained in this Agreement or in any certificate, instrument or document delivered by the Seller in connection with this Agreement; provided,
however, that, except for any inaccuracy in or breach of any
representation or warranty set forth in the penultimate sentence of Section
3.4(a), to which the following limitation shall not apply, the aggregate
indemnification liability for Losses pursuant to this Section 5.2 of Holdings
and the Seller collectively shall not exceed the Purchase Price.

Section 5.3             Purchaser Indemnification.  Purchaser will indemnify and hold
harmless Holdings, the Seller and each of their respective Affiliates,
directors, officers, employees, agents, consultants, advisors, representatives
and equity holders (collectively, the “Seller Indemnified Parties”) from
and against, and will pay to the Seller Indemnified Parties the monetary value
of, any and all Losses incurred or suffered by the Seller Indemnified Parties
directly or indirectly arising out of, relating to or resulting from any
inaccuracy in or breach of any representation or warranty of the Purchaser
contained in this Agreement or in any certificate, instrument or document delivered by the Purchaser in connection with this
Agreement; provided, however, that the aggregate indemnification
liability for Losses pursuant to this Section 5.3 of Purchaser shall not exceed
the Purchase Price.

Section 5.4             Indemnification Payments.  Any indemnification
payments required under this Article V will be made within five business
days after the date on which (i) the amount of such payments are determined by
mutual agreement of the parties, or (ii) both such amount and the indemnifying
party’s obligation to pay such amount have been determined by a final Judgment
of a court having jurisdiction over such proceeding as permitted by Section
6.13.

Section 5.5             Exclusive Remedy.  Purchase and Seller
agree that, except for fraud or willful misconduct, following the Closing, the
indemnification provided in this Section 5 shall be the exclusive remedy for
any breach of any representation, warranty, covenant or agreement of the
parties contained in this Agreement.

Section 5.6             No Limitation.  Notwithstanding any
other provision of this Agreement, nothing in this Agreement limits the
Liability of a party to another party for fraud or willful misconduct.

ARTICLE VI

GENERAL PROVISIONS

Section 6.1             Further Assurances.  Subject to the
other express provisions of this Agreement, upon the request of any party to
this Agreement, the other parties will (a) furnish to the requesting party any
additional information, (b) execute and deliver, at their own expense, any
other documents and (c) take any other actions as the requesting party may
reasonably require to more effectively carry out the intent of this Agreement
and the transactions contemplated by this Agreement.

Section 6.2             Notices.  All notices and
other communications under this Agreement must be in writing and are deemed
duly delivered when (a) delivered if delivered personally or by nationally
recognized overnight courier service (costs prepaid), (b) sent by facsimile
with confirmation of transmission by the transmitting equipment (or, the first business day following such transmission if
the date of transmission is not a business day)
or (c) received or rejected by the addressee, if sent by certified mail, return
receipt requested; in each case to the following addresses or facsimile numbers
and marked to the attention of the individual (by name or title) designated
below (or to such other address, facsimile number or individual as a party may
designate by notice to the other parties):

If to the Seller or Holdings:

 14
 

 

Advanced
Life Sciences, Inc.

Attn:  Patrick W. Flavin, Chief Legal Counsel

1440
Davey Road

Woodridge,
Illinois 60517

Fax: (630) 739-6754

with a copy (which will not constitute notice) to:

Winston
& Strawn LLP

Attn:  Daniel J. McGuire

35
West Wacker Drive

Chicago,
Illinois 60601-9703

Fax: (312) 558-5700

If to the Purchaser:

CRAUN
Research Sdn. Bhd.

Attn:  Chief Executive
Officer

Lot
3147,Block 14, Jalan Sultan Tengah,

93055
Kuching, Sarawak,

Malaysia.

Fax: +60-82-447385

with a copy (which will not constitute notice) to:

Baker
& McKenzie LLP

Attn:
Edward S. Harrison

One
Prudential Plaza

130
East Randolph Drive

Chicago,
Illinois 60601

Fax: (312) 698-2198

Section 6.3             Amendment.  This Agreement may
not be amended, supplemented or otherwise modified except in a written document
signed by each party to be bound by the amendment and that identifies itself as
an amendment to this Agreement.

Section 6.4             Waiver and Remedies.  Neither any failure
nor any delay by any party in exercising any right, power or privilege under
this Agreement or any of the documents referred to in this Agreement will
operate as a waiver of such right, power or privilege, and no single or partial
exercise of any such right, power or privilege will preclude any other or
further exercise of such right, power or privilege or the exercise of any other
right, power or privilege.  To the
maximum extent permitted by applicable Law, (a) no claim or right arising out
of this Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of
the claim or right unless in a written document signed by the other parties,
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given, and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of that party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.

Section 6.5             Expenses.  Each party will
bear its respective direct and indirect expenses incurred in connection with
the preparation and negotiation of this Agreement and the consummation of 

 15
 

 

the
transactions contemplated by this Agreement, including all fees and expenses of
its advisors and representatives.

Section 6.6             Entire Agreement.  This Agreement (including the Schedules and Exhibits hereto,
the documents and instruments referred to in this Agreement that are to be
delivered at the Closing, and that certain agreement between the parties
entered into simultaneously with this Agreement) constitutes the entire
agreement among the parties and supersedes any prior understandings, agreements
or representations by or among the parties, or any of them, written or oral,
with respect to the subject matter of this Agreement.

Section 6.7             Assignment and Successors.  This Agreement
binds and benefits the parties and their respective heirs, successors and
assigns.  No party may delegate any
performance of its obligations under this Agreement.  Except to the extent expressly provided in
this Agreement, no provision of this Agreement is intended or will be construed
to confer upon any Person other than the parties to this Agreement and their
respective heirs, successors and permitted assigns any right, remedy or claim
under or by reason of this Agreement.

Section 6.8             Severability.  If any provision of this Agreement is held invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions of this Agreement are not affected or impaired in any way and the
parties agree to negotiate in good faith to replace such invalid, illegal and
unenforceable provision with a valid, legal and enforceable provision that
achieves, to the greatest lawful extent under this Agreement, the economic,
business and other purposes of such invalid, illegal or unenforceable
provision.

Section 6.9             Exhibits and Schedules.  The Exhibits and
Schedules to this Agreement are incorporated herein by reference and made a
part of this Agreement.  The Seller
Disclosure Schedule and the Purchaser Disclosure Schedule are arranged in
sections and paragraphs corresponding to the numbered and lettered sections and
paragraphs of Article 3 and Article 4, as applicable.  The disclosure in any section or paragraph of
the Seller Disclosure Schedule or the Purchaser Disclosure Schedule qualifies
other sections and paragraphs in this Agreement only to the extent it is clear
by appropriate cross-references that a given disclosure is applicable to such
other sections and paragraphs.  The
listing or inclusion of a copy of a document or other item is not adequate to
disclose an exception to any representation or warranty in this Agreement
unless the representation or warranty relates to the existence of the document
or item itself.

Section 6.10           Interpretation.  The language used
in this Agreement is the language chosen by the parties to express their mutual
intent, and no provision of this Agreement will be interpreted for or against
any party because that party or its attorney drafted the provision.

Section
6.11           Governing Law.  This Agreement will be governed by and
construed in accordance with the internal laws of the State of Delaware without
giving effect to any choice or conflict of law provision or rule (whether of
the State of Delaware or any other jurisdiction) that would cause the application
of laws of any other jurisdiction.

Section 6.12           Specific Performance.  The parties agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached.  The parties
accordingly agree that, in addition to any other remedy to which they are
entitled at law or in equity, the parties are entitled to injunctive relief to
prevent breaches of this Agreement and otherwise to enforce specifically the
provisions of this Agreement.  Each party
expressly waives any requirement that any other party obtain any bond or
provide any indemnity in 

 16
 

 

connection
with any action seeking injunctive relief or specific enforcement of the
provisions of this Agreement.

Section 6.13           Jurisdiction and Service of Process.  Any action or
proceeding arising out of or relating to this Agreement or the transactions
contemplated by this Agreement must be brought in the courts of the State of
Delaware, County of New Castle, or, if it has or can acquire jurisdiction, in
the United States District Court for the District of Delaware.  Each of the parties knowingly, voluntarily
and irrevocably submits to the exclusive jurisdiction of each such court in any
such action or proceeding and waives any objection it may now or hereafter have
to venue or to convenience of forum.  Any
party to this Agreement may make service on another party by sending or
delivering a copy of the process to the party to be served at the address and in
the manner provided for the giving of notices in Section 6.2.  Nothing in this Section 6.13, however,
affects the right of any party to serve legal process in any other manner
permitted by law.

Section 6.14           Waiver of Jury Trial.  EACH OF THE PARTIES
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE
ACTIONS OF ANY PARTY TO THIS AGREEMENT IN NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT.

Section 6.15           Counterparts.  The parties may
execute this Agreement in multiple counterparts, each of which constitutes an
original as against the party that signed it, and all of which together
constitute one agreement.  This Agreement
is effective upon delivery of one executed counterpart from each party to the
other parties.  The signatures of all
parties need not appear on the same counterpart.  The delivery of signed counterparts by
facsimile or email transmission that includes a copy of the sending party’s
signature is as effective as signing and delivering the counterpart in person.

[Signature page follows.]

 17
 

 

The parties have executed and delivered this Agreement as of the date
indicated in the first sentence of this Agreement.

	
  

  	
  CRAUN RESEARCH SDN. BHD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Abdullah Chek bin Sahamat

  
	
   

  	
  Name:

  	
  Abdullah Chek bin Sahamat

  
	
   

  	
  Its:

  	
  Chairman

  

 

	
  

  	
  ADVANCED LIFE SCIENCES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael T. Flavin

  
	
   

  	
  Name:

  	
  Michael T. Flavin, Ph.D.

  
	
   

  	
  Its:

  	
  Chairman and Chief Executive Officer

  

 

	
  

  	
  ADVANCED LIFE SCIENCES HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael T. Flavin

  
	
   

  	
  Name:

  	
  Michael T. Flavin, Ph.D.

  
	
   

  	
  Its:

  	
  Chairman and Chief Executive Officer

  

 

 18

 

EXHIBIT
2.4(A)(III)

Seller
Release

[Attached]

 

EXHIBIT
2.4(A)(IV)

FIRPTA
Certificate

[Attached]

 

EXHIBIT
2.4(A)(VII)

Deed of
Termination

[Attached]

 

EXHIBIT
2.4(A)(X)

Employee
Release

[Attached]

 

EXHIBIT
2.4(A)(XI)

Employee
ADEA Release

[Attached]

 

EXHIBIT
2.4(B)(II)

Purchaser
Release

[Attached]Exhibit10.2

AGREEMENT

This Agreement (“Agreement”) is made as of
October 27, 2006, by and among CRAUN Research Sdn. Bhd., a limited liability
company organized under the laws of Malaysia (the “Purchaser”), Advanced
Life Sciences Holdings, Inc., a Delaware corporation (“Holdings”), and
Advanced Life Sciences, Inc., an Illinois corporation and wholly owned
subsidiary of Holdings (the “Seller”).

PRELIMINARY
STATEMENTS

A.            The
parties to this Agreement have simultaneously entered into a Stock Purchase
Agreement (the “Purchase Agreement”).

B.            Capitalized
terms used in this Agreement without definition have the respective meanings
given to them in the Purchase Agreement.

C.            On
July 12, 2006, an involuntary bankruptcy petition under chapter 7 of the
Bankruptcy Code was filed in the United States Bankruptcy Court for the
Northern District of Illinois, Chicago Division by Sarawak as creditor and with
the Company as the alleged debtor.  This
case is administered under Case No. 06-08241 (the “Bankruptcy Case”).

NOW, THEREFORE, intending to be legally bound and in
consideration of the mutual provisions set forth in this Agreement and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:

Section 1                Conditions to
Closing.  The obligations of the
Purchaser and the Seller to consummate the purchase and sale of the Shares and
the other transactions contemplated by the Purchase Agreement, including but
not limited to the performance by the Purchaser and the Seller of their
respective obligations pursuant to Section 2.4 of the Purchase Agreement, is
subject to the satisfaction of each of the
following conditions: (i) the order dismissing the Bankruptcy Case becoming a
final, non-appealable order; (ii) completion of a financial audit of the
Company, to be conducted by an auditor selected in the Purchaser’s sole
discretion and at the Purchaser’s sole expense, which such audit in any event
will be deemed complete for purposes of this section on December 18, 2006, if
not completed sooner; and (iii) each of the Seller’s representations and
warranties set forth in the Purchase Agreement being true and correct in all
material respects (but without regard to any materiality qualifications or
references to material adverse effect contained in any specific representation
or warranty) on and as of the Closing Date as though made on and as of the
Closing Date (except for representations and warranties made as of some other
specified date, in which case, as of such specified date).

Section 2                Deferral of
Closing.  Notwithstanding anything to
the contrary in the Purchase Agreement, the Purchaser, the Seller and Holdings
hereby agree that the Closing shall occur on or within two days after the
satisfaction of each of the conditions set forth in Section 1.

Section 3                Miscellaneous.  Any party may terminate this Agreement and
the Purchase Agreement by providing written notice to the other parties if the
Closing has not occurred on or before December 21, 2006.  Notwithstanding the terms or provisions of
the Purchase Agreement, the Purchaser, the Seller and Holdings hereby agree
that in the event of a conflict between the terms and provisions of this
Agreement and the terms and provisions of the Purchase Agreement, the terms and
provisions of this Agreement shall prevail. 
The Purchaser, the Seller and Holdings hereby acknowledge and agree that
this Agreement constitutes an integral part of the Purchase Agreement.

 
  

The parties have executed and delivered this Agreement as of the date
indicated in the first sentence of this Agreement.

	
  

  	
  CRAUN RESEARCH SDN. BHD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Abdullah Chek bin Sahamat

  
	
   

  	
  Name:

  	
  Abdullah Chek bin Sahamat

  
	
   

  	
  Its:

  	
  Chairman

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ADVANCED LIFE SCIENCES,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael T. Flavin

  
	
   

  	
  Name:

  	
  Michael T. Flavin, Ph.D.

  
	
   

  	
  Its:

  	
  Chairman and Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ADVANCED LIFE SCIENCES
  HOLDINGS, INC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael T. Flavin

  
	
   

  	
  Name:

  	
  Michael T. Flavin, Ph.D.

  
	
   

  	
  Its:

  	
  Chairman and Chief
  Executive Officer

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