**EXHIBIT 10.2**

 

**Second Amended and Restated**

**Employment Agreement**

 

THIS EMPLOYMENT AGREEMENT(this “Agreement”) made effective as of the 13th day of November 2007 (the “EffectiveDate”), by and between Advanced Life Sciences, Inc., an Illinois corporation(the “Company”), and John L. Flavin (the “Executive”).

 

WHEREAS, the Company andthe Executive previously entered into an employment contract (the “OriginalEmployment Contract”); and

 

WHEREAS, the Company andthe Executive entered into an Amended and Restated Employment Agreement,effective November 7, 2006 (the “First Amended and Restated EmploymentAgreement); and

 

WHEREAS, the Company andthe Executive desire to enter into this Second Amended and Restated Agreement,effective as of the Effective Date, to amend and restate the First Amended andRestated Employment Agreement; and

 

WHEREAS, the Company desires to employ the Executive in accordance withthe terms and conditions hereinafter set forth and the Executive desires to beso employed; and

 

WHEREAS, theCompany has agreed with the Executive that this Agreement shall set forth theterms and conditions of the Executive’s employment with the Company;

 

NOW, THEREFORE, inconsideration of the mutual covenants contained herein, the Company and theExecutive agree as follows:

 

1.             Term. Theemployment of the Executive by the Company pursuant to this Agreement shallbegin as of the Effective Date and shall expire on the third anniversary of theEffective Date (the “Term”), unless extended, as set forth below, or otherwiseterminated pursuant to the provisions of this Agreement; provided, however,that commencing on the third anniversary of the Effective Date and on eachanniversary thereafter, the Term of this Agreement shall automatically beextended for one additional year unless, not later than 90 days prior to suchanniversary, the Executive or the Company shall have given notice in writingthat he or it does not wish to extend this Agreement.

 

2.             Position andDuties. The Executive shall serve as the President****ofthe Company, and shall have such responsibilities, duties and authority as areassigned by the Chief Executive Officer and are customarily associated withsuch position, including but not limited to, those he may have as of theEffective Date. The Executive shall devote such time to the performance of hisduties as is necessary to satisfactorily perform his responsibilities andduties.

 

3.             Place ofPerformance. In connection with the Executive’s employment by the Company,the Executive shall be based at the principal executive offices of the Companycurrently in Woodridge, Illinois, except for required travel on the Company’sbusiness.

 

4.             Compensation andRelated Matters. During the Term of the Executive’s employment, ascompensation and consideration for the performance by the Executive of theExecutive’s duties, responsibilities and covenants pursuant to this Agreement,the Company shall pay the Executive and the Executive agrees to accept in fullpayment for such performance the amounts and benefits set forth below.

 

(a)           Salary. TheCompany shall pay to the Executive an annual base salary of $253,000 (“BaseSalary”), payable in substantially equal installments no less frequently thanmonthly in accordance with the Company’s applicable payroll practices. TheCompensation Committee of the Board of Directors of the Company (the “CompensationCommittee”) shall review the Base Salary annually, at a minimum, or at suchother time as it deems a review necessary and may increase the Base Salary on aprospective basis. Any such salary adjustment shall then be considered BaseSalary for the purposes of this Agreement. The Executive’s Base Salary shallnot be reduced after any increase, without the Executive’s consent.

 

(b)           Bonus. TheExecutive shall be eligible to participate throughout the Term in the Company’sannual bonus plan or any similar or successor bonus plan (“Bonus Plan”) inaccordance with the Company’s

 

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compensation practicesand the terms and provisions of the Bonus Plan. Each year, the Executive may beeligible to receive a targetperformance bonus of thirty percent (30%) of Base Salary. The amount of theExecutive’s target performance bonus shall be reviewed annually and may beincreased by the Compensation Committee.

 

(c)           StockIncentive Plan. The Executive shall be eligible to receive additionalawards of the Company’s common stock under the Company’s Stock Incentive Planor under any other equity plan of the Company as determined by the CompensationCommittee in its discretion.

 

(d)           Other Benefits andPerquisites. During the Term of the Executive’s employment hereunder:

 

(i)  Benefit Plans. The Executive shall be entitled toparticipate in or receive benefits under any employee pension or welfare benefitplan or arrangement made available by the Company at any time during hisemployment hereunder to its employees (collectively the “Benefit Plans”),including without limitation each qualified retirement plan, life insurance andaccident plan, medical, dental insurance plans, and disability plan, subject toand on a basis consistent with the terms, conditions and overall administrationof such plans and arrangements, as they may be amended from time to time.

 

(ii)Vacation. The Executive shall be entitled to not less than 20****days of paid vacation in each calendar year, in accordancewith the Company’s vacation policy.

 

(iii)          Expense Reimbursement.The Executive shall be entitled to receive reimbursement for all reasonablebusiness, travel or other out-of-pocket expenses incurred by the Executive infulfilling the Executive’s duties and responsibilities hereunder, provided thatsuch expenses are incurred and accounted for in accordance with the policiesand procedures established by the Company.

 

5.             Termination.

 

(a)           TheExecutive’s employment hereunder may be terminated under the followingcircumstances:

 

(i)            The death of theExecutive;

 

(ii)           By the Company for “Cause”,which shall mean any of the following:, as determined by the Board in itsdiscretion:  (A) conviction of or plea ofguilty or *nolo contendere* to anycriminal violation involving dishonesty or fraud; (B) engagement in conductthat is injurious to the Company; (C) engagement in any act of dishonesty ormisconduct that results in damage to the Company or its business or reputationor that the Board determines to adversely affect the value, reliability orperformance of the Executive to the Company; (D) refusal or failure tosubstantially comply with the Company’s human resources rules, policies,directions and/or restrictions relating to harassment and/or discrimination, orwith compliance or risk management rules, policies, directions and/orrestrictions; (E) unauthorized use or disclosure of Confidential Information(as defined below) or other trade secrets of the Company; (F) loss of anylicense or registration that is necessary for the Executive to perform hisduties to the Company, or commission of any act that could result in the legaldisqualification of the Executive from being employed by the Company or any ofits affiliates; (G) failure to cooperate with the Company or any of itsaffiliates in any internal investigation or administrative, regulatory orjudicial proceeding; or (H) continuous failure by the Executive to perform hisduties to the Company (which may include any sustained and unexcused absence ofthe Executive from the performance of such duties, which absence has not beencertified in writing as due to physical or mental illness or disability), aftera written demand for performance has been delivered to the Executiveidentifying the manner in which the Executive has failed to substantiallyperform such duties. The application of any part of the definition of Cause setforth in clauses (A) through (H) above to the Executive shall not preclude orprevent the reliance by the Company or the Board on any other part of thedefinition that also may be applicable. In addition, the Executive’s employmentshall be deemed to have terminated for Cause if, after the Executive’semployment has terminated, facts and circumstances are discovered that wouldhave justified a termination for Cause.

 

(iii)          By mutual agreementbetween the Company and the Executive; or

 

(iv)          By the Executive or theCompany for any reason other than as stated in Sections 5(a)(i) through5(a)(iii) above, upon providing a Notice of Termination (as defined in Section5(b)).

 

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(b)           Notice ofTermination. Any termination of the Executive’s employment by the Companyor by the Executive (other than a termination pursuant to Section 5(a)(i)above) shall be communicated by written Notice of Termination to the otherparty hereto in accordance with Section 10. For purposes of this Agreement, a “Noticeof Termination” shall mean a notice that shall indicate the specifictermination provision in this Agreement relied upon and shall set forth inreasonable detail the facts and circumstances claimed to provide a basis fortermination of the Executive’s employment under the provision so indicated.

 

(c)           “Date of Termination”shall mean (i) if the Executive’s employment is terminated pursuant to Section5(a)(i) above, the date of his death; (ii) if the Executive’s employment isterminated pursuant to Section 5(a)(ii) or 5(a)(iv) above, the date such Noticeof Termination is given (or such later date as provided therein); (iii) if theExecutive’s employment is terminated pursuant to Section 5(a)(iii) above, thedate mutually agreed to by the parties; (iv) the date the Term of thisAgreement expires, if either the Company or the Executive provides notice inaccordance with Section 1; or (v) if the Executive terminates his employmentand fails to provide written notice to the Company of such termination, thedate of such termination.

 

6.             Compensation UponTermination.

 

(a)           The following paymentsshall be made upon the Executive’s termination of employment for anyreason:  (i) earned but unpaid BaseSalary through the Executive’s Date of Termination; (ii) any accrued but unpaidvacation; (iii) unreimbursed business expenses owed pursuant to Section4(d)(iii); (iv) any outstanding notes payable to the Executive along with theinterest due; and (v) any amounts payable under any of the Company’s Bonus Planand Benefit Plans in accordance with the terms of those plans. All amountsunder clauses (i) through (v) shall be paid in a lump sum on the Executive’sDate of Termination or as soon as administratively practicable thereafter.

 

 (b)          In the event that the Executive’s employmentis terminated pursuant to Sections 5(a)(i) or 5(a)(ii), or by the Executive forany reason****pursuant to Section5(a)(iv), above, the Company shall have no further obligation to the Executiveunder this Agreement, other than the payments in Section 6(a).

 

(c)           If the Executive’s employmentis terminated by the parties pursuant to Section 5(a)(iii) above, the Executiveshall be entitled to receive the compensation the parties specify in anywritten agreement that the Company and the Executive execute regarding theExecutive’s termination.

 

(d)           In addition to thepayments made under Section 6(a), if the Executive’s employment is terminatedby the Company without Cause pursuant to Section 5(a)(iv) above, andconditioned upon the Executive’s execution of a valid and legally enforceablerelease of claims against the Company, the Company shall, for a period oftwelve (12) months following the Date of Termination (the “Severance Period”):  (i) provide to the Executive salarycontinuation paid in accordance with the Company’s applicable payrollpractices, at the Executive’s Base Salary rate in effect as of the Date ofTermination and (ii) continue the Executive’s coverage under the Company’shealth medical, dental, vision, disability, and life and accident benefitplans, in which the Executive participated immediately prior to the Date ofTermination, provided, however, that if the Company cannot continue suchcoverage, the Company shall provide or arrange to provide, at its expense,similar coverage to the Executive and if such coverage cannot be arranged, theCompany will provide a cash equivalent payment to the Executive. In addition,no later than two and one-half (21⁄2) months following the end of the year inwhich the Executive’s employment is terminated, the Company shall pay theExecutive in a lump sum an amount equal to the Executive’s target performancebonus multiplied by a fraction, the numerator of which is the number of days inthe calendar year in which the Executive’s employment is terminated through theDate of Termination and the denominator of which is 365. Notwithstanding theforgoing, vacation days shall not accrue during the Severance Period.

 

(e)           The Executive shall notbe required to mitigate the amount of any payment provided for in this Section6 by seeking other employment or otherwise, nor shall the amount of any paymentor benefit provided for in this Section 6 be reduced by any compensation earnedby the Executive as the result of employment by another employer, by retirementbenefits, by offset against any amount claimed to be owed by the Executive tothe Company, or otherwise.

 

(f)            The obligations of theCompany to make payments and provide benefits under this Section 6 shallsurvive the termination of this Agreement.

 

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(g)           If the Executive’semployment is terminated by the parties pursuant to Section 5(a)(iii) orSection 5(a)(iv) above, the Executive shall remain a Director of Advanced LifeSciences Holdings, Inc. (“ADLS”) for as long as the Executive is a beneficialowner of any class of stock in ADLS.

 

7.             Change in Control. Upona Change in Control (as defined below), all outstanding stock options and otherequity awards under the Company’s Stock Incentive Plan or other similar orsuccessor plan held by the Executive will immediately become fully vested andexercisable.

 

(a)           Payments and BenefitsUpon Employment Termination Upon a Change in Control. If, within twenty four(24) months after a Change in Control, the Executive’s employment is terminatedby the Company other than for Cause or if the Executive terminates employmentfor Good Reason (as defined below), the Company shall provide the followingpayments and benefits to the Executive, in lieu of those payments and benefitsprovided under Sections 6(d), but in addition to the amounts payable underSection 6(a):

 

(i)            The Company shall paythe Executive a lump sum cash amount equal to (2) times the sum of (A) theExecutive’s annual Base Salary as in effect on the date of the Executive’stermination of employment and (B) the Executive’s target performance bonusamount as in effect as in effect for the fiscal year in which the Executive’semployment is terminated:

 

(Base Salary +Target Performance Bonus)   x   2  =   lump sum cash amount

 

(ii)           The Company shallcontinue the Executive’s coverage under the Company’s health medical, dental,vision, disability, and life and accident insurance benefit plans in which theExecutive participated immediately prior to the Executive’s termination ofemployment for a period of twenty four (24) months, provided, however, that ifthe Company cannot continue such coverage, the Company shall provide or arrangeto provide, at its expense, similar coverage to the Executive and if suchcoverage cannot be arranged, the Company will provide a cash equivalent paymentto the Executive.

 

(b)           Timing of Payment. Allpayments under Section 7(a)(i) shall be made in a lump sum cash payment as soonas practicable, but in no event more than 10 days after the Executive’stermination of employment.

 

(c)           Definitions. Forpurposes of this Agreement, the following terms shall have the followingdefinitions:

 

(i)  “Change in Control” means the occurrenceof any one or more of the following:

 

(A)          any“person” (as such term is defined in Section 3(a)(9) of the Securities ExchangeAct of 1934, as amended (the “Exchange Act”) and as used in Sections 13(d)(3)and 14(d)(2) of the Exchange Act), including a “group” (as defined in Section13(d)(3) of the Exchange Act), other than (I) the Company, (II) anywholly-owned subsidiary of the Company, (III) any employee benefit plan (orrelated trust) sponsored or maintained by the Company or any of its affiliates,or (IV) a “Permitted Holder” (as defined below), becomes a “beneficial owner”(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, ofsecurities of the Company having fifty percent (50%) or more of the combinedvoting power of the then-outstanding securities of the Company that may be castfor the election of directors of the Company (other than as a result of anissuance of securities initiated by the Company in the ordinary course ofbusiness) (the “Company Voting Securities”); provided, however, that the eventdescribed in this Section 7(c)(i) shall not be deemed to be a Change in Controlby virtue of any underwriter temporarily holding securities pursuant to anoffering of such securities;

 

(B)           individuals who, as of the date of thisAgreement, constitute the Board (the “Incumbent Directors”), together with anynew director(s) whose election or nomination for election by the Company’sstockholders subsequent to the date hereof was approved by a vote of at leasttwo-thirds (2/3) of the directors then still in office who either wereIncumbent Directors or whose election or nomination for election was previouslyso approved, cease for any reason to constitute a majority thereof;

 

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(C)           the consummation by the Company of areorganization, merger or consolidation, or sale or other disposition of all orsubstantially all of the assets of the Company (a “Business Combination”), ineach case, unless immediately following such Business Combination:  (A) holders of the securities of the Companyentitled to vote generally in the election of directors of the Companyimmediately prior to such Business Combination own or hold, in substantiallythe same proportions as their ownership immediately prior to such BusinessCombination, more than 50% of the combined voting power of then outstandingvoting securities entitled to vote generally in the election of directors of(x) the entity resulting from such Business Combination, or (y) if applicable,the entity that as a result of such Business Combination owns the Company orall or substantially all of the Company’s assets either directly or through oneor more subsidiaries; or

 

(D)          the stockholders of the Company approve aplan of complete liquidation or dissolution of the Company.

 

Notwithstanding the foregoing, a Change inControl shall not be deemed to occur solely because any person acquiresbeneficial ownership of more than fifty percent (50%) of the Company VotingSecurities as a result of the acquisition of Company Voting Securities by theCompany which reduces the number of Company Voting Securities outstanding; provided,however, that if after such acquisition by the Company such person becomes thebeneficial owner of additional Company Voting Securities that increases thepercentage of outstanding Company Voting Securities beneficially owned by suchperson, a Change in Control transaction shall then occur.

 

Further notwithstanding the foregoing, unlessa majority of the Incumbent Directors determines otherwise, no Change inControl shall be deemed to have occurred with respect to the Executive if theChange in Control results from actions or events in which the Executive is aparticipant in a capacity other than solely as an officer, employee or directorof the Company or any of its affiliates.

 

(ii)           “Permitted Holders” means (A) Michael T.Flavin (the “Principal”), (B) the spouse or any immediate family member of thePrincipal and any child or spouse of any spouse or immediate family member ofthe Principal, (C) a trust, corporation, partnership or other entity, thebeneficiaries, stockholders, partners, owners or persons beneficially holding,directly or indirectly, a controlling interest of which consists of thePrincipal and/or such other persons referred to in the immediately precedingclause (B), or (D) the trustees of any trust referred to in clause (D).

 

(iii)          “Good Reason” means any of the followingconditions, without the Executive’s consent, (A) a material diminution in theExecutive’s Base Salary, (B) a material diminution in the Executive’sauthority, duties, or responsibilities, (C) a material diminution in theauthority, duties, or responsibilities of the supervisor to whom the Executiveis required to report, including a requirement that the Executive report to acorporate officer or employee instead of reporting directly to the Board (orother similar governing body), (D) a material diminution in the budget overwhich the Executive retains authority, (E) a material change in the geographiclocation at which the Executive must perform services, and (F) any other actionor inaction that constitutes a material breach by the Company of this Agreement.If one or more of the above conditions exists, the Executive must providenotice to the Company within ninety (90) days of the initial existence of thecondition. Upon such notice, the Company shall have a period of thirty (30)days during which it may remedy the condition.

 

(d)           Treatment of ParachutePayments.

 

(i)            Notwithstanding anyother provisions of this Agreement, and except as set forth below, in the eventthat any payment or benefit received or to be received by the Executive inconnection with a Change in Control or the termination of the Executive’semployment (whether pursuant to the terms of this Agreement or any other plan,arrangement or agreement with the Company, any person whose actions result in aChange in Control or any person affiliated with the Company or such person)(all such payments and benefits, including payments under Section 7(a) above,being hereinafter called “Total Payments”) is determined to be an “excessparachute payment” pursuant to Section 280G of the Internal Revenue Code of1986, as amended (the “Code”), or any successor or

 

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substitute provision ofthe Code, with the effect that the Executive is liable for the payment of the excisetax described in Code Section 4999 or any successor or substitute provision ofthe Code (the “Excise Tax”), then, after taking into account any reduction inthe Total Payments provided by reason of Code Section 280G in such other plan,arrangement or agreement, the cash payments provided in Section 7(a)(i) of thisAgreement shall first be reduced, and the noncash payments and benefits shallthereafter be reduced, to the extent necessary so that no portion of the TotalPayments is subject to the Excise Tax.

 

(ii)           All determinationsrequired to be made under this Section 7(d), and the assumptions to be utilizedin arriving at such determination, shall be made by the certified publicaccounting firm used for auditing purposes by the Company immediately prior tothe date of the Executive’s termination of employment or, if the partiesdetermine that such certified public accounting firm cannot make suchdetermination because of legal restrictions, the parties shall agree on adifferent certified public accounting firm (such certified public accountingfirm is hereinafter referred to as the “Accounting Firm”), which shall providedetailed supporting calculations both to the Company and the Executive notlater than 5 days prior to the date of the Executive’s termination ofemployment. The Company shall pay all fees and expenses of the Accounting Firm.Any determination by the Accounting Firm shall be binding upon the Company andthe Executive, except as provided in paragraph (ii) below.

 

(iii)          As a result of theuncertainty in the application of Code Sections 280G and 4999 at the time ofthe initial determination by the Accounting Firm hereunder, it is possible thatthe Internal Revenue Service (the “IRS”) or other agency will claim that anExcise Tax, or a greater Excise Tax, is due. If the Executive is required tomake a payment of any such Excise Tax, the Company will promptly pay theExecutive an additional amount equal to the amount, or greater amount, ofExcise Tax the Executive is required to pay (plus a gross up payment for anyincome taxes, interest, penalties or additional Excise Tax payable by Executivewith respect to such Excise Tax or additional payment), as determined by theAccounting Firm. The Executive will notify the Company in writing of any claimby the IRS or other agency that, if successful, would require payment by theCompany of the additional payments under this paragraph. The Executive and theCompany shall each reasonably cooperate with the other in connection with anyadministrative or judicial proceedings concerning the existence or amount ofliability for Excise Tax with respect to the Total Payments. The Company shallpay all fees and expenses of the Executive relating to a claim by the IRS orother agency. Payments under this Section 7(d)(iii) will be made by the end ofthe Executive’s taxable year next following the Executive’s taxable year inwhich the Executive remits the related taxes, in accordance with Code Section409A and Treas. Reg. §1.409A-3(i)(1)(v) (or any similar or successorprovisions).

 

8.             Code Section 409A.

 

(a)           This Agreement isintended to comply with Code Section 409A and the interpretative guidancethereunder, including the exceptions for short-term deferrals, separation payarrangements, reimbursements, and in-kind distributions, and shall beadministered accordingly. The Agreement shall be construed and interpreted withsuch intent.

 

(b)           To the extent paymentsunder Section 6(d) are subject to Code Section 409A and the Executive is aSpecified Employee (as defined below) as of the Date of Termination,distributions to the Executive may not be made before the date that is sixmonths after the date of the Date of Termination or, if earlier, the date ofthe Executive’s death (the “Six Month Delay Rule”). The term “SpecifiedEmployee” has the meaning given to that term in Code Section 409A and Treas.Reg. §1.409A-1(c)(i) (or other similar or successor provisions). Payments towhich the Executive would otherwise be entitled during the first six monthsfollowing the Date of Termination (the “Six Month Delay”) will be accumulatedand paid on the first day of the seventh month following the Date ofTermination. Notwithstanding the Six Month Delay Rule set forth in this Section8(b), to the maximum extent permitted under Code Section 409A and Treas. Reg.§1.409A-1(b)(9)(iii) (or any similar or successor provision), during the SixMonth Delay, the Company will provide the payments set forth in Section 6(d)(i)above, but in no event will the amount of such payments exceed during the SixMonth Delay an amount equal to two times the lesser of (i) the maximum amountthat may be taken into account under a qualified plan pursuant to Code Section401(a)(17) for the year in which the Date of Termination occurs and (ii) thesum of the Executive’s annualized compensation based upon the annual rate ofpay for services provided to the Company for the taxable year of the Executivepreceding the taxable year of the Executive in which the Executive’s Date ofTermination occurs (adjusted for any increase during that year that wasexpected to continue indefinitely if the Executive had not had a Date ofTermination), provided that amounts paid under this sentence will count toward,and will not be in addition to, the total payment amount required to be made tothe Executive by the Company under Section 6(d)(i) above. Notwithstanding theSix Month Delay Rule set forth in this Section 8(b), to the maximum extentpermitted under

 

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Code Section 409A and Treas.Reg. §1.409A-1(b)(9)(v) (or any similar or successor provision), the Companywill provide the payments set forth in Section 6(d)(ii), if not otherwiseexcepted from Code Section 409A, to the extent such payments do not exceed theapplicable dollar amount under Code Section 402(g)(1)(B) for the year in whichthe Date of Termination occurs; provided that amounts paid under this sentencewill count toward, and will not be in addition to, the total payment amountrequired to be made to the Executive by the Company under Section 6(d)(ii)above.

 

(c)           Payments under Section7(a)(i) are intended to qualify as short-term deferrals. However, if theCompany reasonably determines that a payment under Section 7(a)(i) above doesnot qualify as a short-term deferral under Code Section 409A and Treas. Reg.§1.409A-1(b)(4) (or any similar or successor provisions), or that otherbenefits under Section 7(a) do not qualify for an exception from Code Section409A and the Executive is a Specified Employee as of the Date of Termination,distributions to the Executive are subject to the Six Month Delay Rule. Paymentsto which the Executive would otherwise be entitled during the Six Month Delaywill be accumulated and paid on the first day of the seventh month followingthe Date of Termination. Notwithstanding the Six-Month Delay Rule set forth inthis Section 8(c):

 

(i)            To the maximum extentpermitted under Code Section 409A and Treas. Reg. §1.409A-1(b)(9)(iii) (or anysimilar or successor provision), during the first month of the Six-Month Delay,the Company will pay the Executive an amount equal to the lesser of:  (i) the total lump sum severance providedunder Section 7(a)(i) or (ii) two times the lesser of (A) the maximum amountthat may be taken into account under a qualified plan pursuant to Code Section401(a)(17) for the year in which the Date of Termination occurs, and (B) thesum of the Executive’s annualized compensation based upon the annual rate ofpay for services provided to the Company for the taxable year of the Executivepreceding the taxable year of the Executive in which the Executive’s Date ofTermination occurs (adjusted for any increase during that year that wasexpected to continue indefinitely if the Executive had not had a Date ofTermination); provided that amounts paid under this sentence will count toward,and will not be in addition to, the total payment amount required to be made tothe Executive by the Company under Section 7(a)(i) above.

 

(ii)           To the maximum extentpermitted under Code Section 409A and Treas. Reg. §1.409A-1(b)(9)(v) (or anysimilar or successor provision), the Company will provide the payments setforth in Section 7(a)(ii), if not otherwise excepted from Code Section 409A, tothe extent such payments do not exceed the applicable dollar amount under CodeSection 402(g)(1)(B) for the year in which the Date of Termination occurs;provided that amounts paid under this sentence will count toward, and will notbe in addition to, the total payment amount required to be made to the Executiveby the Company under Section 7(a)(ii) above.

 

9.             RestrictiveCovenants.

 

(a)           Trade Secrets. The Executive acknowledgesthat he has had and shall have access to confidential information of theCompany, whether or not reduced to writing and whether in paper, electronic,digital, analog or other format (including, but not limited to, trade secrets,know-how, Inventions (as defined below), new product and product developmentinformation, research results, marketing and sales programs, customer andsupplier information, financial data, employee records, cost information,pricing information, sales and marketing strategies, the identity of customers,information received by the Company under an obligation of confidentiality tocustomers, and all information generated by the Company for customers) relatingto the past, present or planned business, customers, clients, contacts,prospects and assets of the Company that is unique, valuable and has notpurposefully been made generally known to the public by the Company (“ConfidentialInformation”). Confidential Information shall not include any information that:(i) is now, or hereafter becomes, through no act or failure to act on the partof the Executive that constitutes a breach of this Section 9, generally knownor available to the public; (ii) is hereafter furnished without restriction ondisclosure to the Executive by a third party, other than an employee or agentof the Company, who is not under any obligation of confidentiality to theCompany; (iii) is disclosed with the written approval of the Company; or (iv)is required to be disclosed or provided by law, court order, or similarcompulsion, including pursuant to or in connection with any legal proceedinginvolving the parties hereto; provided, however, that such disclosure shall belimited to the extent so required or compelled; and provided further, however,that if the Executive is required to disclose such Confidential Information,the Executive shall give the Company notice of such disclosure and cooperate inseeking suitable protections. The Executive acknowledges that all ConfidentialInformation, and all documents, files, reports, drawings, designs,specifications, formulae, samples, data, writings, tools, equipment, memorydevices or any other tangible objects that incorporate, contain, refer to orembody any Confidential Information (“Items”), acquired by the Executive inconnection with the Executive’s employment with

 

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the Company are the property of the Company. Other than in the courseof performing services for the Company or otherwise authorized in writing bythe Company, the Executive shall not, at any time, directly or indirectly use,divulge, furnish or make accessible to any person any Confidential Information,but instead shall keep all Confidential Information strictly and absolutelyconfidential. The Executive shall deliver promptly to the Company, at thetermination of his employment or at any other time at the request of theCompany, without retaining any copies, all Items and any other documents ormaterials in the Executive’s possession relating, directly or indirectly, toany Confidential Information.

 

(b)           Non-competition. Beginning on the EffectiveDate and for a period of twelve (12) months following Executive’s Date ofTermination (the “Restricted Period”), Executive shall not directly orindirectly, alone or in conjunction with any other party, own any interest in,operate, control, engage in or participate as a partner, director, principal,officer, employee, independent contractor or agent of, act as a consultant to,perform any services for, or assist in any way any company, person, or entityin the United States that is engaged in “Competing Services” (as definedherein). Competing Services shall mean chemistry and biology research anddevelopment relating to, arising from, connected with, or competitive with orintended to be competitive with, any product or research project as to whichthe Executive performed services for the Company, or about which the Executivereceived access to Confidential Information while employed by the Company. Ifthe Executive obtains other employment during the twelve-month period after theExecutive’s Date of Termination, the Executive agrees to notify the Company inwriting of the name and address of such employer.

 

(c)           Non-Solicitation of Employees. During theRestricted Period, the Executive shall not, directly or indirectly solicit orinduce, or attempt to solicit or induce, any current employee of the Company,or any individual who becomes an employee during the Restricted Period, toleave his or her employment with the Company or join or become affiliated withany other business or entity, hire any employee of the Company or in any wayinterfere with the relationship between any employee and the Company.

 

(d)           Non-Solicitationof Customers. During the Restricted Period, the Executive shall not, directlyor indirectly, solicit or induce, or attempt to solicit or induce, anycustomer, supplier, licensee, licensor or other business relation of theCompany to terminate its relationship or contract with the Company, to ceasedoing business with the Company, or in any way interfere with the relationshipbetween any such customer, supplier, licensee or business relation and theCompany (including making any negative statements or communications concerningthe Company or their employees).

 

(e)           Inventions.The Executive acknowledges all inventions of the Company (including, but notlimited to, procedures, systems, machines, methods, processes, uses,apparatuses, compositions of matter, designs, or configurations of any kind,discovered, conceived, reduced to practice, developed, made or produced) (“Inventions”)that (i) relate to the present or planned business of the Company or the workperformed by the Company for its customers, and (ii) are conceived or reducedto practice by the Executive, either alone or with others, during the Executive’semployment with the Company or during a period of 120 days after the Executive’sDate of Termination, whether or not done during the Executive’s regular workinghours, are the sole property of the Company, including, without limitation, alldomestic and foreign patent rights, rights of registration or other protectionunder the copyright laws, or other rights pertaining to the Inventions. Forpurposes of this Agreement, Inventions shall include any improvements to anInvention and shall not be limited to the definition of a patentable inventionor copyrightable work of authorship as contained in the United States patent orcopyright laws. The Executive shall disclose promptly and fully in writing tothe Company each Invention, whether or not reduced to practice, that theExecutive conceives or learns (either alone or jointly with others) during theTerm of Employment. The Executive hereby assigns to the Company, or itsnominee, all of the Executive’s right, title and interest, includinginternational priority rights, in and to all Inventions (other than anyInvention that was developed entirely on the Executive’s own time and for whichno equipment, supplies, facilities or trade secret information of the Companywas used, unless such Invention relates directly to the Company’s business orto the Company’s actual or demonstrably anticipated research or development),and in and to all United States or foreign patents, copyrights and otherproprietary rights granted thereon or resulting therefrom, and in and to allapplications for United States or foreign copyrights, patents and other proprietaryrights. The Executive shall execute all papers, perform all lawful acts orassist the Company in any way the Company deems necessary or advisable (at theCompany’s expense) for the preparation, filing, prosecution, issuance,procurement, maintenance or enforcement of patents applications and patents ofthe United States and foreign countries, and for obtaining and enforcingcopyright protection and registration, of any Invention. To that end, theExecutive shall at the Company’s request and without limitation, testify in anysuit or other proceeding involving any of the Inventions, execute all documentsthat the Company

 

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reasonably determines to be necessary or convenientfor use in applying for and obtaining patent or copyright protection andregistration on any of the Inventions and enforcement of that protection andregistration, and execute all necessary documents and papers required to vesttitle in and assign to the Company (or its nominee) patent or copyrightprotection and registration. The Executive’s obligation to assist the Companyin obtaining and enforcing patent or copyright protection and registration forthe Inventions shall continue following termination of this Agreement, butCompany shall compensate the Executive following the expiration or terminationof this Agreement at a rate of $10 for the execution of each document and $150per day for each day or portion thereof spent at the Company’s request inrendering assistance, plus reimbursement for the reasonable out-of-pocketexpenses incurred by the Executive for such assistance. The Executive herebyirrevocably appoints the Company and its duly authorized officers and agents ashis agent and attorney-in-fact to act for and on behalf of the Executive infiling all patent applications, applications for copyright protection andregistration amendments, renewals and all other appropriate documents in anyway related to the Inventions.

 

(f)            Survival.The provisions set forth in this Section 9 shall survive termination of thisAgreement.

 

(g)           ScopeLimitations. If the scope, period of time or area of restriction specified inthis Section 9 are or would be judged to be unreasonable in any courtproceeding, then the period of time, scope or area of restriction shall bereduced or limited in the manner and to the extent necessary to make therestriction reasonable, so that the restriction may be enforced in those areas,during the period of time and in the scope that are or would be judged to bereasonable.

 

10.           Binding Agreement;Successors. This Agreement and all rights of the Executive hereunder shallinure to the benefit of and be enforceable by the Executive’s personal or legalrepresentatives, executors, administrators, successors, heirs, distributees,devisees and legatees. If the Executive should die while any amounts wouldstill be payable to him hereunder if he had continued to live, all suchamounts, unless otherwise provided herein, shall be paid in accordance with theterms of this Agreement to the Executive’s devisee, legatee, or other designeeor, if there be no such designee, to the Executive’s estate. This Agreementshall be binding upon, and inure to the benefit of, any successors or assignsof the Company. This Agreement is not intended to confer upon any person otherthan the parties hereto (and the Executives’ Spouse and dependents) any rightsor remedies, except as specifically provided in this Section 10.

 

11.           Notice. Notices,demands and all other communications provided for in this Agreement shall be inwriting and shall be deemed to have been duly given when delivered, ifdelivered personally, or (unless otherwise specified) when received, if mailedby United States certified or registered mail, return receipt requested, postageprepaid, by Federal Express or other reputable overnight courier service or byfacsimile, addressed as follows:

 

If to the Executive:

 

John L. Flavin

1440 Davey Road

Woodridge, Illinois 60517

 

If to the Company:

 

Advanced Life Sciences, Inc.

1440 Davey Road

Woodridge, Illinois 60517

Attn: Chief Executive Officer

 

or to such other address as any party may havefurnished to the other in writing in accordance herewith, except that noticesof change of address shall be effective only upon receipt.

 

12.           General Provisions.No provision of this Agreement may be modified, waived or discharged unlesssuch waiver, modification or discharge is agreed to in writing signed by theExecutive and such officer of the Company as may be specifically designated bythe Company’s Board. No waiver by either party hereto at any time of any breachby the other party hereto of, or compliance with, any condition or provision ofthis Agreement to be performed by such other party shall be deemed a waiver ofsimilar or dissimilar provisions or conditions at the same or at any prior orsubsequent time. No agreements or representations, oral or otherwise, expressor implied, with respect to the subject matter hereof have been made by eitherparty that are not set forth expressly in this Agreement.

 

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13.           Validity. Theinvalidity or unenforceability of any provision or provisions of this Agreementshall not affect the validity or enforceability of any other provision of thisAgreement, which shall remain in full force and effect. If any provision ofthis Agreement is found to be invalid or unenforceable, in whole or in part,then it shall be deemed to be modified or restricted to the extent and in themanner necessary to render it valid and enforceable, or shall be deemed excisedfrom this Agreement, as the case may require, and this Agreement shall beconstrued and enforced to the maximum extent permitted by law, as if theprovision had been originally incorporated herein as so modified or restricted,or as if it had not originally been incorporated herein, as the case may be.

 

14.           Counterparts. ThisAgreement may be executed in one or more counterparts, each of which shall bedeemed to be an original but all of which together shall constitute one and thesame instrument.

 

15.           Entire Agreement.This Agreement sets forth the entire agreement of the parties hereto in respectof the subject matter contained herein and supersedes all prior agreements,promises, covenants, arrangements, communications, representations orwarranties, whether oral or written, by any officer, employee or representativeof any party hereto; and any prior agreement of the parties hereto in respectof the subject matter contained herein is hereby terminated and canceled. Forthe avoidance of doubt, the Company and the Executive hereby agree that thisAgreement shall replace and supersede the Original Employment Contract andFirst Amended and Restated Employment Agreement and govern the relationship ofthe parties.

 

16.           Irreparable Harm.The Executive acknowledges that: (i) the Executive’s compliance with thisAgreement is necessary to preserve and protect the proprietary rights,Confidential Information and the goodwill of the Company and its subsidiariesas going concerns; (ii) any failure by the Executive to comply with theprovisions of this Agreement shall result in irreparable and continuing injuryfor which there will be no adequate remedy at law; and (iii) in the event thatthe Executive should fail to comply with the terms and conditions of thisAgreement, the Company shall be entitled, in addition to such other relief asmay be proper, to all types of equitable relief (including, but not limited to,the issuance of an injunction and/or temporary restraining order) as may benecessary to cause the Executive to comply with this Agreement, to restore tothe Company its property, and to make the Company whole.

 

17.           Consent toJurisdiction and Forum; Legal Fees and Costs. The Company and the Executivehereby expressly and irrevocably agree that any action, whether at law or inequity, arising out of or based upon this Agreement or the Executive’semployment by the Company shall only be brought in a federal or state courtlocated in Cook County, Illinois. The Executive hereby irrevocably consents topersonal jurisdiction in such court and to accept service of process inaccordance with the provisions of such court. In connection with any disputearising out of or based upon this Agreement or the Executive’s employment by theCompany, each party shall be responsible for its or his own legal fees andexpenses and all court costs shall be shared equally by the Company and theExecutive unless the court apportions such legal fees or court costs in adifferent manner.

 

18.           Withholding. Allpayments made to the Executive pursuant to this Agreement shall be subject toapplicable withholding taxes, if any, and any amount so withheld shall bedeemed to have been paid to the Executive for purposes of amounts due to theExecutive under this Agreement.

 

19.           Governing Law. ThisAgreement is governed by and is to be construed and enforced in accordance withthe laws of the State of Illinois, without regard to its conflict of lawprovisions.

 

IN WITNESS WHEREOF, theparties have executed this Agreement on the date and year first above written.

 
| **EXECUTIVE**        |                     | **ADVANCED LIFE SCIENCES, INC.** |
|----------------------|--------------------------|----------------------------------|
|                 |                     |                             |
| By:                  |  /s/ John L. Flavin |                             | By: | /s/ Richard  Wieland |   |
| Name: John L. Flavin |                     | Name:                            | Richard Wieland |
|                 |                     | Title:                           | EVP & CFO |
|                      |                          |                                  |  |  |  |  |

 

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