**Exhibit 10.3**

 

**COMMERCIALPLEDGE AGREEMENT**

 
| Borrower: |   | Advanced Life  Sciences, Inc.          |   | Lender: |   | THE LEADERS BANK           |
|-----------|--------|---------------------------------------------|--------|---------|--------|----------------------------|
|      |   | 1440 Davey Road                             |   |    |   | 2001 YORK ROAD, SUITE  150 |
|      |   | Woodridge, IL 60517                         |   |    |   | OAK BROOK, IL 60523        |
|      |   |                                        |   |    |   |                       |
| Grantor:  |   | Advanced Life Sciences  Holdings, Inc. |   |    |   |                       |
|      |   | 1440 Davey Road                             |   |    |   |                       |
|      |   | Woodridge, IL 60517                         |   |    |   |                       |

 

**THIS COMMERCIAL PLEDGE AGREEMENTdated October 23, 2008, is made and executed by and among Advanced LifeSciences Holdings, Inc., a Delaware corporation (“Grantor”), Advanced LifeSciences, Inc., an Illinois corporation (“Borrower”), and THE LEADERS BANK(“Lender”).  This Agreement is enteredinto pursuant to that certain Amended and Restated Business Loan Agreement,dated as of even date herewith, by and between the Borrower and the Lender(“Loan Agreement”), whereby the Lender has agreed to lend Ten Million and00/100 Dollars to the Borrower subject to the terms and conditions of the LoanAgreement.**

 

**GRANT OF SECURITY INTEREST.  For valuable consideration, Grantor grants toLender a security interest in the Collateral to secure the Indebtedness andagrees that Lender shall have the rights stated in this Agreement with respectto the Collateral in addition to all other rights which Lender may have by law.**

 

**COLLATERAL DESCRIPTION.**  The word “Collateral” as used in thisAgreement means all of Grantor’s property (however owned if more than one), inthe possession of Lender (or in the possession of a third party subject to thecontrol of Lender), whether existing now or later and whether tangible or intangiblein character, including without limitation, the following:

 

**1,000,000shares of common stock and 7,500,000 shares of preferred stock of Advanced LifeSciences, Inc., an Illinois corporation, together with any and all otherstock or interest that Grantor may own or hold in Advanced Life Sciences, Inc.,now or in the future.**

 

In addition, the word“Collateral” includes all of Grantor’s property (however owned), in thepossession of Lender (or in the possession of a third party subject to thecontrol of Lender), whether now or hereafter existing and whether tangible orintangible in character, including, without limitation, each of the following:

 

(A) All property towhich Lender acquires title or documents of title.

 

(B) All propertyassigned to Lender.

 

(C) All promissorynotes, bills of exchange, stock certificates, bonds, savings passbooks, timecertificates of deposit, insurance policies, and all other Instruments andevidences of an obligation.

 

(D) All recordsrelating to any of the property described in this COLLATERAL DESCRIPTIONsection, whether in the form of a writing, microfilm, microfiche, or electronicmedia.

 

(E) All Income andProceeds (including dividends) from the Collateral as defined herein.

 

**GRANTOR’S REPRESENTATIONS ANDWARRANTIES.**  Grantorwarrants that: (A) this Agreement is executed at Borrower’s request andnot at the request of Lender; (B) Grantor has the full right, power andauthority to enter into this Agreement and to pledge the Collateral to Lender; (C) Grantorhas established adequate means of obtaining from Borrower on a continuing basisinformation about Borrower’s financial condition; and (D) Lender has madeno representation to Grantor about Borrower or Borrower’s creditworthiness.

 

**GRANTOR’S WAIVERS.**  Grantor waives all requirements ofpresentment, protest, demand, and notice of 

 

----

 

dishonor or non-paymentto Borrower or Grantor, or any other party to the Indebtedness or theCollateral.  Lender may do any of thefollowing with respect to any obligation of Borrower, without first obtainingthe consent of Grantor: (A) grant any extension of time for any payment, (B) grantany renewal, (C) permit any modification of payment terms or other terms,or (D) exchange or release any Collateral or other security.  No such act or failure to act shall affectLender’s rights against Grantor or the Collateral.

 

**RIGHT OF SETOFF.**  To the extent permitted by applicable law,Lender reserves a right of setoff in all Grantor’s accounts with Lender(whether checking, savings, or some other account).  This includes all accounts Grantor holdsjointly with someone else and all accounts Grantor may open in the future; provided,however, this does not include any IRA or Keogh accounts, or any trustaccounts for which setoff would be prohibited by law.  Grantor authorizes Lender, to the extentpermitted by applicable law, to charge or setoff all sums owing on theIndebtedness against any and all such accounts, and, at Lender’s option, toadministratively freeze all such accounts to allow Lender to protect Lender’scharge and setoff rights provided in this RIGHT OF SETOFF section.

 

**REPRESENTATIONS AND WARRANTIESWITH RESPECT TO THE COLLATERAL.**  Grantor represents and warrants to Lenderthat:

 

**Ownership.**  Grantor is the lawful owner of the Collateralfree and clear of all security interests, liens, encumbrances and claims ofothers except as disclosed to and accepted by Lender in writing prior toexecution of this Agreement.  Grantorowns one hundred percent (100%) of the equity interests of the Borrower, andthe Borrower has not issued any additional capital stock, including warrantsand options to purchase stock, to any other person or entity.

 

**Right toPledge.**  Grantor hasthe full right, power and authority to enter into this Agreement and to pledgethe Collateral.

 

**Authority;Binding Effect.** Grantor has the full right, power and authority to enter into thisAgreement and to grant a security interest in the Collateral to Lender.  This Agreement is binding upon Grantor aswell as Grantor’s successors and assigns, and is legally enforceable inaccordance with its terms.  The foregoingrepresentations and warranties, and all other representations and warrantiescontained in this Agreement, are and shall be continuing in nature and shallremain in full force and effect until such time as this Agreement is terminatedor cancelled as provided herein.

 

**NoFurther Assignment.** Grantor has not, and shall not, sell, assign, transfer, encumber orotherwise dispose of any of Grantor’s rights in the Collateral except asprovided in this Agreement.

 

**NoDefaults.** There are nodefaults existing under the Collateral, and there are no offsets orcounterclaims to the same.  Grantor willstrictly and promptly perform each of the terms, conditions, covenants andagreements, if any, contained in the Collateral which are to be performed byGrantor.

 

**NoViolation.**  Theexecution and delivery of this Agreement will not violate any law or agreementgoverning Grantor or to which Grantor is a party, and its membership agreementdoes not prohibit any term or condition of this Agreement.

 

**FinancingStatements.**  Grantorauthorizes Lender to file a UCC financing statement, or alternatively, a copyof this Agreement to perfect Lender’s security interest.  At Lender’s request, Grantor additionallyagrees to sign all other documents that are necessary to perfect, protect, andcontinue Lender’s security interest in the Property.  Grantor will pay all filing fees, titletransfer fees, and other fees and costs involved unless prohibited by law orunless Lender is required by law to pay such fees and costs.  Grantor irrevocably appoints Lender toexecute documents necessary to transfer title if there is a default.  Lender may file a copy of this Agreement as afinancing statement.  If Grantor changesGrantor’s name or address, or the name or address of any person granting asecurity interest under this Agreement changes, Grantor will promptly notifythe Lender of such change.

 

**LENDER’S RIGHTS AND OBLIGATIONSWITH RESPECT TO THE COLLATERAL.**  Lender may hold the Collateral until allindebtedness has been paid and satisfied. Thereafter, Lender may deliver the Collateral to 

 

2

----

 

Grantor or to any otherowner of the Collateral.  Lender shallhave the following rights in addition to all other rights Lender may have bylaw:

 

**Maintenanceand Protection of Collateral.** Lender may, but shall not be obligated to, take such steps as it deemsnecessary or desirable to protect, maintain, insure, store, or care for theCollateral, including paying any liens or claims against the Collateral.  This may include such things as hiring otherpeople, such as attorneys, appraisers or other experts.  Lender may charge Grantor for any costincurred in so doing.  When applicablelaw provides more than one method of perfection of Lender’s security interest,Lender may choose the method(s) to be used.  If the Collateral consists of stock, bonds orother Investment Property for which no certificate has been issued, Grantoragrees, at Lender’s request, either to request issuance of an appropriatecertificate or to give instructions on Lender’s forms to the issuer, transferagent, mutual fund company, or broker, as the case may be, to record on itsbooks or records Lender’s security interest in the Collateral.  Grantor also agrees to execute any additionaldocuments, including but not limited to, a control agreement or any otherdocuments necessary to perfect Lender’s security interest as Lender may desire.

 

**Incomeand Proceeds from the Collateral.**  Lender may receive all Income and Proceeds(including dividends) and add it to the Collateral.  Grantor agrees to deliver to Lenderimmediately upon receipt, in the exact form received and without comminglingwith other property, all Income and Proceeds which may be received by, paid, ordelivered to Grantor or for Grantor’s account, whether as an addition to, indischarge of, in substitution of, or in exchange for any of the Collateral.

 

**Applicationof Cash.**  At Lender’soption, Lender may apply any cash, whether included in the Collateral orreceived as Income and Proceeds or through liquidation, sale, or retirement, ofthe Collateral, to the satisfaction of the indebtedness or such portion thereofas Lender shall choose, whether or not matured.

 

**Transactionswith Others.**  Lendermay (A) extend time for payment or other performance, (B) grant arenewal or change in terms or conditions, or (C) compromise, compound orrelease any obligation, with anyone or more Obligors, endorsers, or guarantorsof the indebtedness as Lender deems advisable, without obtaining the priorwritten consent of Grantor, and no such act or failure to act shall affectLender’s rights against Grantor or the Collateral.

 

**AllCollateral Secures Indebtedness.**  All Collateral shall be security for theindebtedness, whether the Collateral is located at one or more offices orbranches of Lender.  This will be thecase whether or not the office or branch where Borrower obtained Borrower’sloan knows about the Collateral or relies upon the Collateral as security.

 

**Collectionof Collateral.**  Lender,at Lender’s option, may, but need not, collect the Income and Proceeds directlyfrom the Obligors.  Grantor authorizesand directs the Obligors, if Lender decides to collect the Income and Proceeds,to pay and deliver to Lender all Income and Proceeds from the Collateral and toaccept Lender’s receipt for the payments.

 

**Power ofAttorney.**  Grantorirrevocably appoints Lender as Grantor’s attorney-in-fact, with full power ofsubstitution, (A) to demand, collect, receive, receipt for, sue andrecover all Income and Proceeds and other sums of money and other propertywhich may now or hereafter become due, owing or payable from the Obligors inaccordance with the terms of the Collateral; (B) to execute, sign andendorse any and all instruments, receipts, checks, drafts and warrants issuedin payment for the Collateral; (C) to settle or compromise any and allclaims arising under the Collateral, and in the place and stead of Grantor,execute and deliver Grantor’s release and acquittance for Grantor; (D) tofile any claim or claims or to take any action or institute or take part in anyproceedings, either in Lender’s own name or in the name of Grantor, orotherwise, which in the discretion of Lender may seem to be necessary oradvisable; and (E) to execute in Grantor’s name and to deliver to theObligors on Grantor’s behalf, at the time and in the manner specified by theCollateral, any necessary instruments or documents.

 

**Perfectionof Security Interest. **UponLender’s request, Grantor will deliver to Lender any and all of the documentsevidencing or constituting the Collateral. When applicable law provides more than one method 

 

3

----

 

of perfection of Lender’ssecurity interest, Lender may choose the method(s) to be used.  Upon Lender’s request, Grantor will sign anddeliver any writings necessary to perfect Lender’s security interest.  If any of the Collateral consists ofsecurities for which no certificate has been issued, Grantor agrees, atLender’s option, either to request issuance of an appropriate certificate or toexecute appropriate instructions on Lender’s forms instructing the issuer,transfer agent, mutual fund company, or broker, as the case may be, to recordon its books or records, by book-entry or otherwise, Lender’s security interestin the Collateral.  Grantor herebyappoints Lender as Grantor’s irrevocable attorney-in-fact for the purpose of executingany documents necessary to perfect, amend, or to continue the security interestgranted in this Agreement or to demand termination of filings of other securedparties.  This is a continuing SecurityAgreement and will continue in effect even though all or any part of theIndebtedness is paid in full and even though for a period of time Borrower maynot be indebted to Lender.

 

**LENDER’S EXPENDITURES. **If any action or proceedingis commenced that would materially affect Lender’s interest in the Collateralor if Grantor fails to comply with any provision of this Agreement or anyRelated Documents, including but not limited to Grantor’s failure to dischargeor pay when due any amounts Grantor is required to discharge or pay under thisAgreement or any Related Documents, Lender on Grantor’s behalf may (but shallnot be obligated to) take any action that Lender deems appropriate, includingbut not limited to discharging or paying all taxes, liens, security interests,encumbrances and other claims, at any time levied or placed on the Collateral andpaying all costs for insuring, maintaining and preserving the Collateral.  All such expenditures incurred or paid byLender for such purposes will then bear interest at the rate charged under theNote from the date incurred or paid by Lender to the date of repayment byGrantor.  All such expenses will become apart of the Indebtedness and, at Lender’s option, will (A) be payable ondemand; (B) be added to the balance of the Note and be apportioned amongand be payable with any installment payments to become due during either (1) theterm of any applicable insurance policy or (2) the remaining term of theNote; or (C) be treated as a balloon payment which will be due and payableat the Note’s maturity.  The Agreementalso will secure payment of these amounts. Such rights shall be in addition to all other rights and remedies towhich Lender may be entitled upon Default.

 

**LIMITATIONS ON OBLIGATIONS OFLENDER. **Lender shalluse ordinary reasonable care in the physical preservation and custody of theCollateral in Lender’s possession, but shall have no other obligation toprotect the Collateral or its value.  Inparticular, but without limitation, Lender shall have no responsibility for (A) anydepreciation in value of the Collateral or for the collection or protection ofany Income and Proceeds from the Collateral, (B) preservation of rightsagainst parties to the Collateral or against third persons, (C) ascertainingany maturities, calls, conversions, exchanges, offers, tenders, or similarmatters relating to any of the Collateral, or (D) informing Grantor aboutany of the above, whether or not Lender has or is deemed to have knowledge ofsuch matters.  Except as provided above,Lender shall have no liability for depreciation or deterioration of the Collateral.

 

**REINSTATEMENT OF SECURITYINTEREST. **If paymentis made by Borrower, whether voluntarily or otherwise, or by guarantor or byany third party, on the Indebtedness and thereafter Lender is forced to remitthe amount of that payment (A) to Borrower’s trustee in bankruptcy or toany similar person under any federal or state bankruptcy law or law for therelief of debtors, (B) by reason of any judgment, decree or order of anycourt or administrative body having jurisdiction over Lender or any of Lender’sproperty, or (C) by reason of any settlement or compromise of any claimmade by Lender with any claimant (including without limitation, Borrower), theIndebtedness shall be considered unpaid for the purpose of enforcement of thisAgreement and this Agreement shall continue to be effective or shall bereinstated, as the case may be, notwithstanding any cancellation of thisAgreement or of any note or other instrument or agreement evidencing theIndebtedness and the Collateral will continue to secure the amount repaid orrecovered to the same extent as if that amount never had been originallyreceived by Lender, and Grantor shall be bound by any judgment, decree, order,settlement or compromise relating to the Indebtedness or to this Agreement.

 

**DEFAULT. **Each of the following shallconstitute an Event of Default under this Agreement:

 

**PaymentDefault. **Borrowerfalls to make any payment when due under the Indebtedness.

 

**NoteDefault. **Theoccurrence of an Event of Default under the Note.

 

**LoanAgreement Default. **Theoccurrence of an Event of Default under the Loan Agreement or any other 

 

4

----

 

Loan Document (as definedin the Loan Agreement).

 

**OtherDefaults. **Borrower orGrantor fails to comply with or to perform any other term, obligation, covenantor condition contained in this Agreement or in any of the Related Documents orto comply with or to perform any term, obligation, covenant or conditioncontained in any other agreement between Lender and Borrower or Grantor.

 

**DefaultIn Favor of Third Parties. **ShouldBorrower, Grantor or any guarantor, endorser, surety, or accommodation party ofany of the Indebtedness default under any Loan, extension of credit, securityagreement, purchase or sales agreement, or any other agreement, in favor of anyother creditor or person that may materially affect any of Borrower’s propertyor Borrower’s or any Grantor’s ability to repay the Indebtedness or performtheir respective obligations under this Agreement or any of the Related Documents.

 

**Falsestatements. **Anywarranty, representation or statement made or furnished to Lender by Borroweror Grantor or on Borrower’s or Grantor’s behalf under this Agreement or theRelated Documents is false or misleading in any material respect, either now orat the time made or furnished or becomes false or misleading at any timethereafter.

 

**DefectiveCollateralization. **ThisAgreement or any of the Related Documents ceases to be in full force and effect(including failure of any collateral document to create a valid and perfectedsecurity interest or lien) at any time and for any reason.

 

**Insolvency. **The dissolution ortermination of Borrower’s or Grantor’s existence as a going business, theInsolvency of Borrower or Grantor, the appointment of a receiver for any partof Borrower’s or Grantor’s property, any assignment for the benefit ofcreditors, any type of creditor workout, or the commencement of any proceedingunder any bankruptcy or insolvency laws by or against Borrower or Grantor.

 

**Creditoror Forfeiture Proceedings. **Commencementof foreclosure or forfeiture proceedings, whether by judicial proceeding,self-help, repossession or any other method, by any creditor of Borrower orGrantor or by any governmental agency against any collateral securing theIndebtedness.  This includes garnishmentof any of Borrower’s or Grantor’s accounts, including deposit accounts, withLender.  However, this Event of Defaultshall not apply if (A) there is a good faith dispute by Borrower orGrantor as to the validity or reasonableness of the claim which is the basis ofthe creditor or forfeiture proceeding, and (B) if Borrower or Grantorgives Lender written notice of the creditor or forfeiture proceeding anddeposits, with Lender, monies or a surety bond for the creditor or forfeitureproceeding in an amount determined by Lender, in its sale discretion, as beingan adequate reserve or bond for the dispute.

 

**InsufficientMarket Value of Securities. **[IntentionallyOmitted]

 

**EventsAffecting Guarantor. **Anyof the preceding events occurs with respect to any guarantor, endorser, surety,or accommodation party of any of the Indebtedness or guarantor, endorser,surety, or accommodation party dies or becomes incompetent or revokes ordisputes the validity of, or liability under, any Guaranty of the Indebtedness.

 

**AdverseChange. **A materialadverse change occurs in Borrower’s or Grantor’s financial condition, or Lenderbelieves the prospect of payment or performance of the Indebtedness isimpaired.

 

**Insecurity.  **Lender, in good faith,believes itself insecure.

 

**RIGHTS AND REMEDIES ONDEFAULT. **If an Eventof Default occurs under this Agreement, at any time thereafter, Lender mayexercise anyone or more of the following rights and remedies:

 

**AccelerateIndebtedness. **Declareall Indebtedness, including any prepayment penalty which Borrower would berequired to pay, immediately due and payable, without notice of any kind toBorrower or Grantor.

 

5

----

 

**Collectthe Collateral. **Collectany of the Collateral and, at Lender’s option and to the extent permitted byapplicable law, retain possession of the Collateral while suing on theIndebtedness.

 

**Sell theCollateral. **Sell theCollateral, at Lender’s discretion, as a unit or in parcels, at one or morepublic or private sales.  Unless theCollateral is perishable or threatens to decline speedily in value or is of atype customarily sold on a recognized market, Lender shall give or mail toGrantor, and other persons as required by law, notice at least ten (10) daysin advance of the time and place of any public sale, or of the time after whichany private sale may be made; provided, however, no notice needbe provided to any person who, after an Event of Default occurs, enters intoand authenticates an agreement waiving that person’s right to notification ofsale.  Grantor agrees that anyrequirement of reasonable notice as to Grantor is satisfied if Lender mallsnotice by ordinary mall addressed to Grantor at the last address Grantor hasgiven Lender in writing.  If a publicsale is held, there shall be sufficient compliance with all requirements ofnotice to the public by a single publication in any newspaper of generalcirculation in the county where the Collateral is located, setting forth thetime and place of sale and a brief description of the property to be sold.  Lender may be a purchaser at any public sale.

 

**SellSecurities. **Sell anysecurities included in the Collateral in a manner consistent with applicablefederal and state securities laws.  If,because of restrictions under such laws, Lender is unable or believes it isunable to sell the securities in an open market transaction, Grantor agreesthat (A) Lender will have no obligation to delay sale until the securitiescan be registered, and (B) Lender may make a private sale to one or morepersons or to a restricted group of persons, even though such sale may resultin a price that is less favorable than might be obtained in an open markettransaction.  Such a sale will be consideredcommercially reasonable.  If anysecurities held as Collateral are “restricted securities” as defined in the Rules ofthe Securities and Exchange Commission (such as Regulation D or Rule 144)or the rules of state securities departments under state “Blue Sky” laws,or if Grantor or any other owner of the Collateral is an affiliate of theissuer of the securities, Grantor agrees that neither Grantor, nor any memberof Grantor’s family, nor any other person signing this Agreement will sell ordispose of any securities of such Issuer without obtaining Lender’s priorwritten consent.

 

**Rightsand Remedies with Respect to Investment Property, Financial Assets and RelatedCollateral. **Inaddition to other rights and remedies granted under this Agreement and underapplicable law, Lender may exercise any or all of the following rights andremedies: (A) register with any issuer or broker or other securitiesintermediary any of the Collateral consisting of investment property orfinancial assets (collectively, “Investment Property”) in Lender’s sole name orin the name of Lender’s broker, agent or nominee; (B) cause any issuer,broker or other securities intermediary to deliver to Lender any of theCollateral consisting of securities or Investment Property capable of beingdelivered; (C) enter into a control agreement or power of attorney withany issuer or securities intermediary with respect to any Collateral consistingof investment property, on such terms as Lender may deem appropriate, in itssole discretion, including without limitation, an agreement granting to Lenderany of the rights provided hereunder without further notice to or consent byGrantor; (D) execute any such control agreement on Grantor’s behalf and inGrantor’s name, and Grantor hereby irrevocably appoints Lender as agent andattorney-in-fact, coupled with an interest, for the purpose of executing suchcontrol agreement on Grantor’s behalf; (E) exercise any and all rights ofLender under any such control agreement or power of attorney; (F) exerciseany voting, conversion, registration, purchase, option, or other rights withrespect to any Collateral; (G) collect, with or without legal action, andissue receipts concerning any notes, checks, drafts, remittances ordistributions that are paid or payable with respect to any Collateralconsisting of Investment Property.  Anycontrol agreement entered with respect to any Investment Property shall containthe following provisions:

 

(1)   At Lender’s discretion, Lendershall be authorized to instruct the issuer, broker or other securitiesintermediary to take or to refrain from taking such actions with respect to theInvestment Property as Lender may instruct, without further notice to orconsent by Grantor.  Such actions mayinclude without limitation the issuance of entitlement orders, accountinstructions, general trading or buy or sell orders, transfer and redemptionorders, and stop loss orders.

 

6

----

 

(2)   Lender shall be furtherentitled to instruct the issuer, broker or securities intermediary to sell orto liquidate any Investment Property, or to pay the cash surrender or accounttermination value with respect to any and all Investment Property, and todeliver all such payments and liquidation proceeds to Lender.

 

Additionally, any suchcontrol agreement shall contain such authorizations as are necessary to placeLender in “control” of such investment collateral, as contemplated under theprovisions of the Uniform Commercial Code of the State of Illinois (the “UCC”),and shall fully authorize Lender to issue “entitlement orders” concerning thetransfer, redemption, liquidation or disposition of investment collateral, inconformance with the provisions of the UCC.

 

**Foreclosure. **Maintain a judicial suitfor foreclosure and sale of the Collateral.

 

**TransferTitle. **Effect transferof title upon sale of all or part of the Collateral.  For this purpose, Grantor irrevocablyappoints Lender as Grantor’s attorney-in-fact to execute endorsements,assignments and instruments in the name of Grantor and each of them (if morethan one) as shall be necessary or reasonable.

 

**OtherRights and Remedies. **Haveand exercise any or all of the rights and remedies of a secured creditor underthe provisions of the UCC, at law, in equity, or otherwise.

 

**Applicationof Proceeds. **Apply anycash which is part of the Collateral, or which is received from the collectionor sale of the Collateral, to reimbursement of any expenses, including anycosts for registration of securities, commissions incurred in connection with asale, attorneys’ fees and court costs, whether or not there is a lawsuit andincluding any fees on appeal, incurred by Lender in connection with thecollection and sale of such Collateral and to the payment of the indebtednessof Borrower to Lender, with any excess funds to be paid to Grantor as theinterests of Grantor may appear. Borrower agrees, to the extent permitted by law, to pay any deficiencyafter application of the proceeds of the Collateral to the indebtedness.

 

**Electionof Remedies. **Except asmay be prohibited by applicable law, all of Lender’s rights and remedies,whether evidenced by this Agreement, the Related Documents, or by any otherwriting, shall be cumulative and may be exercised singularly or concurrently.  Election by Lender to pursue any remedy shallnot exclude pursuit of any other remedy, and an election to make expendituresor to take action to perform an obligation of Grantor under this Agreement,after Grantor’s failure to perform, shall not affect Lender’s right to declarea default and exercise its remedies.

 

**MISCELLANEOUS PROVISIONS. **The following miscellaneousprovisions are a part of this Agreement:

 

**Amendments. **This Agreement, togetherwith any Related Documents, constitutes the entire understanding and agreementof the parties as to the matters set forth in this Agreement.  No alteration of or amendment to thisAgreement shall be effective unless given in writing and signed by the party orparties sought to be charged or bound by the alteration or amendment.

 

**Attorneys’Fees; Expenses. **Grantoragrees to pay upon demand all of Lender’s costs and expenses, IncludingLender’s attorneys’ fees and Lender’s legal expenses, incurred in connectionwith the enforcement of this Agreement upon any Event of Default.  Lender may hire or pay someone else to helpenforce this Agreement, and Grantor shall pay the costs and expenses of suchenforcement.  Costs and expenses includeLender’s attorneys’ fees and legal expenses whether or not there is a lawsuit,including attorneys’ fees and legal expenses for bankruptcy proceedings(including efforts to modify or vacate any automatic stay or injunction),appeals, and any anticipated post-judgment collection services.  Grantor also shall pay all court costs andsuch additional fees as may be directed by the court.

 

**CaptionHeadings. **Captionheadings in this Agreement are for convenience purposes only and are not to beused to interpret or define the provisions of this Agreement.

 

7

----

 

**GoverningLaw. **This Agreementwill be governed by federal applicable to Lender and, to the extent notpreempted by federal law, the laws of the State of Illinois without regard toits conflicts of law provisions.  ThisAgreement has been accepted by Lender in the State of Illinois.

 

**Choice ofVenue. **If there is alawsuit, Grantor agrees upon Lender’s request to submit to the jurisdiction ofthe courts of DuPage County, State of Illinois.

 

**Joint andSeveral Liability. **Allobligations of Borrower and Grantor under this Agreement shall be joint andseveral, and all references to Grantor shall mean each and every Grantor, andall references to Borrower shall mean each and every Borrower.  This means that each Borrower and Grantorsigning below is responsible for all obligations in this Agreement.  Where any one or more of the parties is acorporation, partnership, limited liability company or similar entity, it isnot necessary for Lender to inquire into the powers of any of the officers,directors, partners, members, or other agents acting or purporting to act onthe entity’s behalf, and any obligations made or created in reliance upon theprofessed exercise of such powers shall be guaranteed under this Agreement.

 

**No Waiverby Lender. **Lendershall not be deemed to have waived any rights under this Agreement unless suchwaiver is given in writing and signed by Lender.  No delay or omission on the part of Lender inexercising any right shall operate as a waiver of such right or any other right.  A waiver by Lender of a provision of thisAgreement shall not prejudice or constitute a waiver of Lender’s rightotherwise to demand strict compliance with that provision or any otherprovision of this Agreement.  No priorwaiver by Lender, nor any course of dealing between Lender and Grantor, shallconstitute a waiver of any of Lender’s rights or of any of Grantor’sobligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, thegranting of such consent by Lender in any instance shall not constitutecontinuing consent to subsequent instances where such consent is required andin all cases such consent may be granted or withheld in the sole discretion ofLender.

 

**Notices. **Any notice required to begiven under this Agreement shall be given in writing, and shall be effectivewhen actually delivered, when actually received by facsimile (unless otherwiserequired by law), when deposited with a nationally recognized overnightcourier, or, if mailed, when deposited in the United States man, as firstclass, certified or registered mail postage prepaid, directed to the addressesshown near the beginning of this Agreement. Any party may change its address for notices under this Agreement bygiving formal written notice to the other parties, specifying that the purposeof the notice is to change the party’s address. For notice purposes, Grantor agrees to keep Lender informed at all timesof Grantor’s currant address.  Unlessotherwise provided or required by law, if there are more than one Grantor, anynotice given by lender to any Grantor is deemed to be notice given to allGrantors.

 

**Severability. **If a court of competentjurisdiction finds any provision of this Agreement to be illegal, invalid, orunenforceable as to any circumstance, that finding shall not make the offendingprovision illegal, invalid, or unenforceable as to any other circumstance.  If feasible, the offending provision shall beconsidered modified so that it becomes legal, valid and enforceable.  If the offending provision cannot be somodified, it shall be considered deleted from this Agreement.  Unless otherwise required by law, theillegality, invalidity, or unenforceability of any provision of this Agreementshall not affect the legality, validity or enforceability of any otherprovision of this Agreement.

 

**Successorsand Assigns. **Subjectto any limitations stated in this Agreement on transfer of Grantor’s interest,this Agreement shall be binding upon and inure to the benefit of the parties,their successors and assigns.  Ifownership of the Collateral becomes vested in a person other than Grantor,Lender, without notice to Grantor, may deal with Grantor’s successors withreference to this Agreement and the indebtedness by way of forbearance orextension without releasing Grantor from the obligations of this Agreement orliability under the indebtedness.

 

**Time Isof the Essence. **Timeis of the essence in the performance of this Agreement.

 

**WaiveJury. **All parties tothis Agreement hereby waive the right to any jury trial in any action,proceeding, or counterclaim brought by any party against any other party.

 

8

----

 

**DEFINITIONS. **The following capitalizedwords and terms shall have the following meanings when used in thisAgreement.  Unless specifically stated tothe contrary, all references to dollar amounts shall mean amounts in lawfulmoney of the United States of America. Words and terms used in the singular shall include the plural, and the pluralshall include the singular, as the context may require.  Words and terms not otherwise defined in thisAgreement shall have the meanings attributed to such terms in the UCC:

 

**Agreement. **The word “Agreement” meansthis Commercial Pledge Agreement, as this Commercial Pledge Agreement may beamended or modified from time to time, together with all exhibits andschedule’s attached to this Commercial Pledge Agreement from time to time.

 

**Borrower. **The word “Borrower” meansAdvanced Life Sciences, Inc. and includes all co-signers and co-makerssigning the Note and all their successors and assigns.

 

**Collateral: **The word “Collateral” meansall of Grantor’s right, title and interest in and to all the Collateral asdescribed in the Collateral Description section of this Agreement.

 

**Default: **The word “Default” meansthe Default set forth in the DEFAULT section of this Agreement.

 

**Event ofDefault: **The words“Event of Default” mean any of the events of default set forth in thisAgreement in the DEFAULT section of this Agreement.

 

**Grantor. **The word “Grantor” meansAdvanced Life Sciences Holdings, Inc.

 

**Guaranty. **The word “Guaranty” meansthe guaranty from any guarantor, endorser, surety, or accommodation party toLender, including without limitation a guaranty of all or part of the Note.

 

**Incomeand Proceeds. **Thewords “Income and Proceeds” mean all present and future income, proceeds,earnings, increases, and substitutions from or for the Collateral of every kindand nature, including without limitation all payments, interest, profits,distributions, benefits, rights, options, warrants, dividends, stock dividends,stock splits, stock rights, regulatory dividends, subscriptions, monies, claimsfor money due and to become due, proceeds of any insurance on the Collateral,shares of stock of different par value or no par value issued in substitutionor exchange for shares included in the Collateral, and all other propertyGrantor is entitled to receive on account of such Collateral, includingaccounts, documents, instruments, chattel paper, and general intangibles.

 

**Indebtedness. **The word “Indebtedness”means the indebtedness evidenced by the Note or Related Documents, includingall principal and interest together with all other indebtedness and costs andexpenses for which Borrower is responsible under this Agreement or under any ofthe Related Documents.

 

**Lender. **The word “Lender” means THELEADERS BANK, Its successors and assigns.

 

**Note. **The word “Note” means thatcertain Amended and Restated Note, dated as of even date herewith, executed byBorrower in favor of the Lender in the principal amount of Ten Million and00/100 Dollars ($10,000,000.00), together with all renewals of, extensions of,modifications of, refinancings of, consolidations of, and substitutions for theNote.

 

**Obligor. **The word “Obligor” means,without limitation, any and all persons obligated to pay money or to performsome other act under the Collateral.

 

**Property. **The word “Property” meansall of Grantor’s right, title and interest in and to all the property asdescribed in the COLLATERAL DESCRIPTION section of this Agreement.

 

**RelatedDocuments. **The words“Related Documents” mean all promissory notes, credit agreements, loanagreements, environmental agreements, guaranties, security agreements,mortgages, deeds of trust, security deeds, collateral mortgages, and all otherinstruments, agreements and documents, whether now or 

 

9

----

 

hereafter existing,executed In connection with the Indebtedness.

 

**UCC.**  The word “UCC” means the Uniform CommercialCode of the State of Illinois, as amended.

 

**[SIGNATUREPAGE FOLLOWS]**

 

10

----

 

BORROWER AND GRANTOR HAVEREAD AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL PLEDGE AGREEMENT ANDAGREE TO ITS TERMS.

 

IN WITNESS WHEREOF, theParties hereto have caused this Agreement to be executed by their respectiveauthorized officers as of the date first written above.

 

 
| GRANTOR:                               |                                   |
|----------------------------------------|----------------------------------------|
|                                   |                                   |
| ADVANCED LIFE SCIENCES  HOLDINGS, INC. |                                   |
|                                   |                                   |
| By:                                    | /s/  John L. Flavin                    |   |
|                                   | John  L. Flavin, President             |   |
|                                   |                                   |
| BORROWER:                              |                                   |
|                                   |                                   |
| ADVANCED LIFE SCIENCES,  INC.          |                                   |
|                                   |                                   |
| By:                                    | /s/  John L. Flavin                    |   |
|                                   | John  L. Flavin, President             |   |
|                                   |                                   |
| LENDER:                                |                                   |
|                                   |                                   |
| THE LEADERS BANK                       |                                   |
|                                   |                                   |
| By:                                    | /s/  John Prosia                       |   |
|                                   | John  Prosia, Executive Vice President |   |

 

----