WARRANT

 

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                                                                     Exhibit 4.2

 

THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN

REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OFFERED FOR

SALE UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS

OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

 

Dated: December 21, 2004

 

                                     WARRANT

 

                    To Purchase 3,750 Shares of Common Stock

                    of ADVANCED LIFE SCIENCES HOLDINGS, INC.

 

Expiring December 21, 2009

 

     THIS TO CERTIFY THAT, for value received, LEADERS BANK or any registered

assigns ("HOLDER") is entitled to purchase from ADVANCED LIFE SCIENCES HOLDINGS,

INC., a Delaware corporation (the "COMPANY"), at any time or from time to time

after 9:00 a.m., Chicago time, on the date hereof and prior to 5:00 p.m.,

Chicago time, on December 21, 2009, at the place where the Warrant Agency is

located, at the Exercise Price, the number of shares of Common Stock, par value

$.01 per share, of the Company (the "COMMON STOCK") shown above, subject to

adjustment as provided in Articles IV and V hereof, and upon the terms and

conditions hereinafter provided, and is entitled also to exercise the other

appurtenant rights, powers and privileges hereinafter described.

 

     This Warrant is one of one or more warrants (the "WARRANTS") of the same

form and having the same terms as this Warrant, entitling the holders initially

to purchase up to an aggregate of 3,750 shares of Common Stock. The Warrants

have been issued by the Company pursuant to the Business Loan Agreement dated as

of December 21, 2004 (as amended from time to time, the "LOAN AGREEMENT")

between the Company and Holder, in consideration of a loan to the Company by the

Holder. The Holder is entitled to certain benefits as set forth therein. The

Company shall keep a copy of the Loan Agreement, and any amendments thereto, at

the Warrant Agency, and shall furnish, without charge, copies thereof to the

Holder upon request.

 

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

 

                                    ARTICLE I

 

                              EXERCISE OF WARRANTS

 

     1.1.    METHOD OF EXERCISE. To exercise this Warrant in whole or in part,

the Holder shall deliver on any Business Day to the Company at the Warrant

Agency (a) this Warrant, (b) a written notice of the Holder's election to

exercise this Warrant, which notice shall specify the number of shares of Common

Stock to be purchased (which shall be a whole number of shares if for less than

 

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all the shares then issuable hereunder), the denominations of the share

certificate or certificates desired and the name or names in which such

certificates are to be registered, and (c) payment of the Exercise Price with

respect to such shares. Such payment may be made by cash, certified or bank

cashier's check or wire transfer in an amount equal to the product of (i) the

Exercise Price times (ii) the number of Warrant Shares as to which this Warrant

is being exercised.

 

     The Company shall, as promptly as practicable and in any event within seven

days after receipt of such notice and payment, execute and deliver or cause to

be executed and delivered, in accordance with such notice, a certificate or

certificates representing the aggregate number of shares of Common Stock

specified in said notice together with cash in lieu of any fractions of a share

as provided in Section 1.3. The share certificate or certificates so delivered

shall be in such denominations as may be specified in such notice, and shall be

issued in the name of the Holder or such other name or names as shall be

designated in such notice. This Warrant shall be deemed to have been exercised

and such certificate or certificates shall be deemed to have been issued, and

such Holder or any other Person so designated to be named therein shall be

deemed for all purposes to have become a holder of record of shares, as of the

date the aforementioned notice and payment is received by the Company. If this

Warrant shall have been exercised only in part, the Company shall, at the time

of delivery of such certificate or certificates, deliver to the Holder a new

Warrant evidencing the right to purchase the remaining shares of Common Stock

called for by this Warrant, which new Warrant shall in all other respects be

identical with this Warrant, or, at the request of the Holder, appropriate

notation may be made on this Warrant which shall then be returned to the Holder.

The Company shall pay all expenses, taxes and other charges payable in

connection with the preparation, issuance and delivery of share certificates and

new Warrants, except that, if share certificates or new Warrants shall be

registered in a name or names other than the name of the Holder, funds

sufficient to pay all transfer taxes payable as a result of such transfer shall

be paid by the Holder at the time of delivery of the aforementioned notice of

exercise or promptly upon receipt of a written request of the Company for

payment.

 

     1.2.    SHARES TO BE FULLY PAID AND NONASSESSABLE. All shares of Common

Stock issued upon the exercise of this Warrant shall be validly issued, fully

paid and nonassessable.

 

     1.3.    NO FRACTIONAL SHARES REQUIRED TO BE ISSUED. The Company shall not be

required to issue fractions of shares of Common Stock upon exercise of this

Warrant. If any fraction of a share would, but for this Section, be issuable

upon final exercise of this Warrant, in lieu of such fractional share, the

Company shall pay to the Holder in cash an amount equal to the same fraction of

the Fair Market Value of the Company per share of outstanding Common Stock on

the Business Day immediately prior to the date of such exercise.

 

     1.4.    LEGEND. Each certificate for shares of Common Stock issued upon

exercise of this Warrant, unless at the time of exercise such shares are

registered under the Securities Act, shall bear the following legend:

 

          "This security has not been registered under the Securities Act of

     1933 and may not be sold or offered for sale unless registered under said

     Act and any applicable state securities laws or unless an exemption from

     such registration is available."

 

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     Any certificate issued at any time in exchange or substitution for any

certificate bearing such legend (except a new certificate issued upon completion

of a public offering pursuant to a registration statement under the Securities

Act) shall also bear such legend unless, in the opinion of counsel selected by

the Holder of such certificate (who may be an employee of such holder) and

reasonably acceptable to the Company, the securities represented thereby need no

longer be subject to restrictions on resale under the Securities Act.

 

     1.5.    RESERVATION. The Company has duly reserved, and will keep available

for issuance upon exercise of the Warrants, the total number of Warrant Shares

deliverable from time to time upon exercise of all Warrants from time to time

outstanding. The Company will not take any actions during the term of this

Warrant that would result in any adjustment of the number of shares of Common

Stock issuable upon the exercise of the Warrant if (i) the total number of

shares of Common Stock issuable after such action upon exercise of this Warrant,

(ii) all shares of Common Stock issued and outstanding and (iii) all shares then

issuable (y) upon the exercise of all Options and (z) upon the conversion or

exchange of all Convertible Securities, would exceed the total number of shares

of Common Stock then authorized for issuance by the Company. The Company will

not change the Common Stock from par value $.01 per share to any higher par

value which exceeds the Exercise Price then in effect, and will reduce the par

value of the Common Stock upon any event described in Article IV that provides

for an increase in the number of shares of Common Stock subject to purchase upon

exercise of this Warrant, in inverse proportion to and effective at the same

time as such number of shares is increased. As of the date hereof, the Company

had outstanding (i) 2,642,904 shares of Common Stock, (ii) 156,450 Options to

purchase Common Stock, and no other shares of capital stock or any securities

convertible into or exchangeable for shares of capital stock or any rights,

options or warrants to purchase any shares of capital stock or any securities

convertible into or exchangeable for shares of capital stock. Neither the

issuance of this Warrant nor the issuance of Warrant Shares upon exercise of

this Warrant violates or conflicts with the Company's certificate of

incorporation or bylaws or any agreement to which the Company is a party.

 

                                   ARTICLE II

 

                                  WARRANT AGENCY;

                 TRANSFER, EXCHANGE AND REPLACEMENT OF WARRANTS

 

     2.1.    WARRANT AGENCY. As long as any Warrant remains outstanding, the

Company shall perform the obligations of and be the warrant agency with respect

to the Warrants (the "WARRANT AGENCY") at its address set forth in the Loan

Agreement or at such other address as the Company shall specify by notice to all

Warrantholders.

 

     2.2.    OWNERSHIP OF WARRANT. The Company may deem and treat the person in

whose name this Warrant is registered as the holder and owner hereof

(notwithstanding any notations of ownership or writing hereon made by any person

other than the Company) for all purposes and shall not be affected by any notice

to the contrary, until due presentment of this Warrant for registration of

transfer as provided in this Article II.

 

     2.3.    TRANSFER OF WARRANT. The Company agrees to maintain at the Warrant

Agency books for the registration of transfers of the Warrants, and transfer of

this Warrant and all rights

 

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hereunder shall be registered, in whole or in part, on such books, upon

surrender of this Warrant at the Warrant Agency, together with a written

assignment of this Warrant duly executed by the Holder or its duly authorized

agent or attorney, with (if the Holder is a natural person) signatures

guaranteed by a bank or trust company or a broker or dealer registered with the

NASDAQ, and funds sufficient to pay any transfer taxes payable upon such

transfer. Upon surrender and, if required, such payment, the Company shall

execute and deliver a new Warrant or Warrants in the name of the assignee or

assignees and in the denominations specified in the instrument of assignment

(which shall be whole numbers of shares only) and shall issue to the assignor a

new Warrant evidencing the portion of this Warrant not so assigned, and this

Warrant shall promptly be canceled.

 

     2.4.    DIVISION OR COMBINATION OF WARRANTS. This Warrant may be divided or

combined with other Warrants upon presentment hereof and of any Warrant or

Warrants with which this Warrant is to be combined at the Warrant Agency,

together with a written notice specifying the names and denominations (which

shall be whole numbers of shares only) in which the new Warrant or Warrants are

to be issued, signed by the holders hereof and thereof or their respective duly

authorized agents or attorneys. Subject to compliance with Section 2.3 as to any

transfer or assignment which may be involved in the division or combination, the

Company shall execute and deliver a new Warrant or Warrants in exchange for the

Warrant or Warrants to be divided or combined in accordance with such notice.

 

     2.5.    LOSS, THEFT, DESTRUCTION OF WARRANT CERTIFICATES. Upon receipt of

evidence satisfactory to the Company of the ownership of and the loss, theft,

destruction or mutilation of any Warrant and, in the case of any such loss,

theft or destruction, upon receipt of indemnity or security satisfactory to the

Company (it being understood and agreed that if the holder of such Warrant is

Leaders Bank Entity, then a written agreement of indemnity given by Leaders Bank

alone shall be satisfactory to the Company and no further security shall be

required) or, in the case of any such mutilation, upon surrender and

cancellation of such Warrant, the Company will make and deliver, in lieu of such

lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and

representing the right to purchase the same aggregate number of shares of Common

Stock.

 

     2.6.    EXPENSES OF DELIVERY OF WARRANTS. The Company shall pay all

expenses, taxes (other than transfer taxes) and other charges payable in

connection with the preparation, issuance and delivery of Warrants hereunder.

 

                                    ARTICLE III

 

                                 CERTAIN RIGHTS

 

     3.1.    DETERMINATION OF FAIR MARKET VALUE. Each determination of Fair

Market Value hereunder shall be made in good faith by the Company. Upon each

determination of Fair Market Value by the Company hereunder, the Company shall

promptly give notice thereof to all Warrantholders, setting forth in reasonable

detail the calculation of such Fair Market Value and the method and basis of

determination thereof (the "COMPANY DETERMINATION").

 

     3.2.    FINANCIAL STATEMENTS AND OTHER INFORMATION. Promptly upon

transmission thereof, the Company will deliver to the Holder copies of any and

all financial statements, proxy

 

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statements, notices and other reports as it may send to its public stockholders

and copies of all registration statements and all reports which it files with

the Securities and Exchange Commission (or any governmental body or agency

succeeding to its functions).

 

                                   ARTICLE IV

 

                             ANTIDILUTION PROVISIONS

 

     4.1.    GENERAL. The Exercise Price and the number of shares of Common Stock

(or other securities or property) issuable upon exercise of this Warrant shall

be subject to adjustment from time to time upon the occurrence of certain events

as provided in this Article IV; PROVIDED that notwithstanding anything to the

contrary herein, the Exercise Price shall not be less than the par value of the

Common Stock, as such par value is reduced from time to time in accordance with

Section 1.5.

 

     4.2.    COMMON STOCK REORGANIZATION. If the Company shall subdivide its

outstanding shares of Common Stock (or any class thereof) into a greater number

of shares or consolidate its outstanding shares of Common Stock (or any class

thereof) into a smaller number of shares (any such event being called a "COMMON

STOCK REORGANIZATION"), then (a) the Exercise Price shall be adjusted, effective

immediately after the effective date of such Common Stock Reorganization, to a

price determined by multiplying the Exercise Price in effect immediately prior

to such effective date by a fraction, the numerator of which shall be the number

of shares of Common Stock outstanding on such effective date before giving

effect to such Common Stock Reorganization and the denominator of which shall be

the number of shares of Common Stock outstanding after giving effect to such

Common Stock Reorganization, and (b) the number of shares of Common Stock

subject to purchase upon exercise of this Warrant shall be adjusted, effective

at such time, to a number determined by multiplying the number of shares of

Common Stock subject to purchase immediately before such Common Stock

Reorganization by a fraction, the numerator of which shall be the number of

shares of Common Stock outstanding after giving effect to such Common Stock

Reorganization and the denominator of which shall be the number of shares of

Common Stock outstanding immediately before such Common Stock Reorganization.

 

     4.3.    COMMON STOCK DISTRIBUTION. (a) If the Company shall issue, sell or

otherwise distribute any shares of Common Stock, other than pursuant to this

Agreement or a Common Stock Reorganization (which is governed by Section 4.2

hereof) (any such event, including any event described in paragraphs (b) and (c)

below, being herein called a "COMMON STOCK DISTRIBUTION"), for a consideration

per share less than the Fair Market Value of the Company per share of

outstanding Common Stock on a Fully Diluted Basis on the date of such Common

Stock Distribution (before giving effect to such Common Stock Distribution),

then, effective upon such Common Stock Distribution, the Exercise Price shall be

reduced, if such consideration per share shall be less than such Fair Market

Value per share, to the lowest of the prices (calculated to the nearest one

thousandth of one cent) determined as provided in clauses (i), (ii) and (iii)

below:

 

            (i)    if the Company shall receive any consideration for the Common

     Stock issued, sold or distributed, in such Common Stock Distribution, the

     consideration per share of Common Stock received by the Company upon such

     issue, sale or distribution;

 

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            (ii)   by dividing (A) an amount equal to the sum of (1) the number

     of shares of Common Stock outstanding immediately prior to such Common

     Stock Distribution multiplied by the then existing Exercise Price, PLUS (2)

     the consideration, if any, received by the Company upon such Common Stock

     Distribution by (B) the total number of shares of Common Stock outstanding

     immediately after such Common Stock Distribution; and

 

            (iii) by multiplying the Exercise Price in effect immediately prior

     to such Common Stock Distribution by a fraction, the numerator of which

     shall be the sum of (A) the number of shares of Common Stock outstanding

     immediately prior to such Common Stock Distribution multiplied by such Fair

     Market Value per share on the date of such Common Stock Distribution, PLUS

     (B) the consideration, if any, received by the Company upon such Common

     Stock Distribution, and the denominator of which shall be the product of

     (1) the total number of shares of Common Stock outstanding immediately

     after such Common Stock Distribution multiplied by (2) such Fair Market

     Value per share on the date of such Common Stock Distribution.

 

     If any Common Stock Distribution shall require an adjustment to the

Exercise Price pursuant to the foregoing provisions of this paragraph (a),

including by operation of paragraph (b) or (c) below, then, effective at the

time such adjustment is made, the number of shares of Common Stock subject to

purchase upon exercise of this Warrant shall be increased to a number determined

by multiplying the number of shares of Common Stock subject to purchase

immediately before such Common Stock Distribution by a fraction, the numerator

of which shall be the number of shares of Common Stock outstanding immediately

after giving effect to such Common Stock Distribution and the denominator of

which shall be the sum of the number of shares outstanding immediately before

giving effect to such Common Stock Distribution (both calculated on a Fully

Diluted Basis) PLUS the number of shares of Common Stock which the aggregate

consideration received by the Company with respect to such Common Stock

Distribution would purchase at the Fair Market Value of the Company per share of

outstanding Common Stock on a Fully Diluted Basis on the date of such Common

Stock Distribution (before giving effect to such Common Stock Distribution). In

computing adjustments under this paragraph, fractional interests in Common Stock

shall be taken into account to the nearest one-thousandth of a share.

 

     The provisions of this paragraph (a), including by operation of paragraph

(b) or (c) below, shall not operate to increase the Exercise Price or reduce the

number of shares of Common Stock subject to purchase upon exercise of this

Warrant.

 

            (b)    If the Company shall issue, sell, distribute or otherwise

grant in any manner (including by assumption) any rights to subscribe for or to

purchase, or any warrants or options for the purchase of Common Stock or any

stock or securities convertible into or exchangeable for Common Stock (such

rights, warrants or options being herein called "OPTIONS" and such convertible

or exchangeable stock or securities being herein called "CONVERTIBLE

SECURITIES"), whether or not such Options or the rights to convert or exchange

any such Convertible Securities in respect of such Options are immediately

exercisable, and the price per share for which Common Stock is issuable upon the

exercise of such Options or upon conversion or exchange of such Convertible

Securities in respect of such Options (determined by dividing (i) the aggregate

amount, i