Exhibit 10.5


 


COMMERCIAL
SECURITY AGREEMENT


 


	
  Grantor:

  	
  Advanced Life Sciences
  Holdings, Inc.

  1440 Davey Drive

  Woodridge, IL 60517

  	
  Lender:

  	
  THE LEADERS BANK

  2001 YORK ROAD, 

  SUITE 150

  OAK BROOK, IL 60523

  



 


THIS COMMERCIAL SECURITY
AGREEMENT dated October 23 2008, is made and executed
between Advanced Life Sciences Holding, Inc., a Delaware corporation
(“Grantor”) and THE LEADERS BANK (“Lender”). 
This Agreement is entered into pursuant to that certain Amended and
Restated Business Loan Agreement, dated as of even date herewith, by and
between the Advanced Life Sciences, Inc. (“Borrower”) and the Lender
(“Loan Agreement”), whereby the Lender has agreed to lend Ten Million and
00/100 Dollars ($10,000,000.00) to the Borrower subject to the terms and
conditions of the Loan Agreement.


 


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


 


COLLATERAL DESCRIPTION.  The word “Collateral” as used in this
Agreement means the following described property, whether now owned or
hereafter acquired, whether now existing or hereafter arising, and wherever
located, in which Grantor is giving to Lender a security interest for the
payment of the Indebtedness and performance of all other obligations of
Borrower under the Note and any Related Document:


 


All inventory, equipment,
accounts (including but not limited to all health-care-insurance receivables),
chattel paper, instruments (including but not limited to all promissory notes),
letter-of-credit rights, letters of credit, documents, deposit accounts, investment
property, money, other rights to payment and performance, and general
intangibles (including, but not limited to, all software and all payment
intangibles); all attachments, accessions, accessories, fittings, increases,
tools, parts, repairs, supplies, and commingled goods relating to the foregoing
property, and all additions, replacements of and substitutions for all or any
part of the foregoing property:  all
insurance refunds relating to the foregoing property; all good will relating to
the foregoing property; all records and data and embedded software relating to
the foregoing property, and all equipment, inventory and software to utilize,
create, maintain and process any such records and data on electronic media; all
supporting obligations relating to the foregoing property, all whether now
existing or hereafter arising, whether now owned or hereafter acquired or
whether now or hereafter subject to any rights in the foregoing property; and
all products and proceeds (including but not limited to “all insurance
payments”) of or relating to the foregoing property.


 


The word “Collateral”
also includes all proceeds of the above described collateral, including without
limitation, any equipment purchased with proceeds, as well as all accessories,
attachments, accessions, replacements and additions, whether added now or
later, together with all insurance proceeds and refunds of insurance premiums,
if any, and all sums that may be due from third parties who may cause damage to
any of the foregoing, whether due to judgment, settlement or other
process.  Further, the word “Collateral”
includes any rights that the Lender may have under that certain Intellectual
Property Security Agreement, dated as of even date herewith, by and between
Lender and Grantor.  The word
“Collateral” specifically excludes any rights that the Grantor may have as a
result of its License Agreement with Abbott Laboratories for cethromycin.


 


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 holds jointly 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 trust accounts for which setoff would be prohibited by
law.  Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any 


 

















 


and all such accounts,
and, at Lender’s option, to administratively freeze all such accounts to allow
Lender to protect Lender’s charge and .setoff rights provided in this
paragraph.


 


GRANTOR’S REPRESENTATIONS AND
WARRANTIES WITH RESPECT TO THE COLLATERAL.  With respect to the Collateral, Grantor
represents and promises to Lender that:


 


Perfection
of Security Interest. 
Grantor agrees to take whatever actions are requested by Lender to
perfect and continue Lender’s security interest in the Collateral.  Upon request of Lender, Grantor will deliver
to Lender any and all of the documents evidencing or constituting the
Collateral, and Grantor will note Lender’s interest upon any and all chattel
paper and instruments, if not delivered to Lender, for possession by Lender.  This is a continuing
Security Agreement and will continue in effect even though all or any part of
the Indebtedness is paid in full and even though, for a period of time, Grantor
may not be indebted to Lender.


 


Notices
to Lender.  Grantor
will promptly notify Lender in writing at Lender’s address shown above (or such
other addresses as Lender may designate from time to time) prior to any (1) change
in Grantor’s name; (2) change in Grantor’s assumed business name(s); (3) change
in the management of the Grantor; (4) change in the authorized signer(s) of
the Grantor; (5) change in Grantor’s principal office address; (6) change
in Grantor’s state of organization; (7) conversion of Grantor to a new or
different type of business entity; or (8) change in any other aspect of
Grantor that directly or indirectly relates to any agreements between Grantor
and Lender.  No change in Grantor’s name
or state of organization will take effect until after Lender has received
notice.


 


No
Violation.  The
execution and delivery of this Agreement will not violate any law or agreement
governing Grantor or to which Grantor is a party, and its certificate or
articles of incorporation and bylaws do not prohibit any term or condition of
this Agreement.


 


Enforceability
of Collateral.  To the
extent the Collateral consists, of accounts, chattel paper, or general
intangibles, as defined by the Uniform Commercial Code of the State of Illinois
(“UCC”), the Collateral is enforceable in accordance with its terms, is
genuine, and fully complies with all applicable laws and regulations concerning
form, content and manner of preparation and execution, and all persons
appearing to be obligated on the Collateral have authority and capacity to
contract and are in fact obligated as may appear to be on the Collateral.  At the time any account becomes subject to a
security interest in favor of Lender, the account shall be a good and valid
account representing an undisputed, bona fide Indebtedness incurred by the
account debtor, for merchandise held subject to delivery instructions or
previously shipped or delivered pursuant to a contract of sale, or for services
previously performed by Grantor with or for the account debtor. So long as this
Agreement remains in effect, Grantor shall not, without Lender’s prior written
consent, compromise, settle, adjust, or extend payment under or with regard to
any such Accounts.  There shall be no
setoffs or counterclaims against any of the Collateral, and no agreement shall
have been made under which any deductions or discounts may be claimed
concerning the Collateral except those disclosed to Lender in writing.


 


Location
of the Collateral. 
Except in the ordinary course of Grantor’s business, Grantor agrees to
keep the Collateral (or to the extent the Collateral consists of intangible
property such as accounts or general intangibles, the records concerning the
Collateral) at Grantor’s address shown above or at such other locations as are
acceptable to Lender.  Upon Lender’s
request, Grantor will deliver to Lender in form satisfactory to Lender a
schedule of real properties and Collateral locations relating to Grantor’s
operations, including without limitation the following: (1) all real
property Grantor owns or is purchasing; (2) all real property Grantor is
renting or leasing; (3) all storage facilities Grantor owns, rents,
leases, or uses; and (4) all other properties where Collateral is or may
be located.


 


Removal
of the Collateral. 
Except in the ordinary course of Grantor’s business, including the sales
of inventory, Grantor shall not remove the Collateral from its existing
location without Lender’s prior written consent. To the extent that the
Collateral consists of vehicles or other tilled property, Grantor shall not
take or permit any action which would require application for certificates of
title for the vehicles outside the State of Illinois without Lender’s prior
written consent.  Grantor shall, whenever
requested, advise Lender 


 


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of the exact location of
the Collateral.


 


Transactions
Involving Collateral. 
Except for inventory sold or accounts collected in the ordinary course
of Grantor’s business, or as otherwise provided for in this Agreement, Grantor
shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral.  While Grantor is not in default under this
Agreement, Grantor may sell inventory, but only in the ordinary course of its
business and only to buyers who qualify as a buyer in the ordinary course of
business.  A sale in the ordinary course
of Grantor’s business does not include a transfer in partial or total
satisfaction of a debt or any bulk sale. 
Grantor shall not pledge, mortgage, encumber or otherwise permit the
Collateral to be subject to any lien, security interest, encumbrance, or
charge, other than the security interest provided for in this Agreement,
without the prior written consent of Lender. This includes security interests
junior in right to the security interests granted under this Agreement.  Unless waived by Lender, all proceeds from
any disposition of the Collateral (for whatever reason) shall be held in trust
for Lender and shall not be commingled with any other funds; provided, however,
this requirement shall not constitute consent by Lender to any sale or other
disposition.  Upon receipt, Grantor shall
immediately deliver any such proceeds to Lender.


 


Title.  Grantor represents and warrants to Lender
that Grantor holds good and marketable title to the Collateral, free and clear
of all liens and encumbrances except for the lien of this Agreement.  No financing statement covering any of the
Collateral is on file in any public office other than those which reflect the
security interest created by this Agreement or to which Lender has specifically
consented.  Grantor shall defend Lender’s
rights in the Collateral against the claims and demands of all other persons.


 


Repairs
and Maintenance. 
Grantor agrees to keep and maintain, and to cause others to keep and
maintain, the Collateral in good order, repair and condition at all times while
this Agreement remains in effect. 
Grantor further agrees to pay when due all claims for work done on,
services rendered or material furnished in connection with the Collateral so
that no lien or encumbrance may ever attach to or be filed against the Collateral.


 


Inspection
of Collateral.  Lender
and Lender’s designated representatives and agents shall have the right at all
reasonable times to examine and inspect the Collateral wherever located.


 


Taxes,
Assessments and Liens. 
Grantor will pay when due all taxes, assessments and liens upon the
Collateral from its use or operation pursuant to the terms and conditions of
this Agreement, the Loan Agreement, the Note, or any of the other Related
Documents. Grantor may withhold any such payment or may elect to contest any
lien if Grantor is in good faith conducting an appropriate proceeding to
contest the obligation to pay and so long as Lender’s interest in the
Collateral is not jeopardized in Lender’s sale opinion.  If the Collateral is subjected to a lien
which is not discharged within fifteen (15) days, Grantor shall deposit with
Lender cash, a sufficient corporate surety bond or other security satisfactory
to Lender in an amount adequate to provide for the discharge of the lien plus
any interest, costs, attorneys’ fees or other charges that could accrue as a
result of foreclosure or sale of the Collateral.  In any contest, Grantor shall defend itself
and Lender and shall satisfy any final adverse judgment before enforcement against
the Collateral.  Grantor shall name
Lender as an additional obligee under any surety bond furnished in the contest
proceedings.  Grantor further agrees to
furnish Lender with evidence that such taxes, assessments, and governmental and
other charges have been paid in full and in a timely manner.


 


Compliance
with Governmental Requirements.  Grantor shall comply promptly with all laws,
ordinances, rules and regulations of all governmental authorities, now or
hereafter in effect, applicable to the ownership, production, disposition, or
use of the Collateral, including all laws or regulations relating to the undue
erosion of highly-erodible land or relating to the conversion of wetlands for
the production of an agricultural product or commodity.  Grantor may contest in good faith any such
law, ordinance or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Lender’s interest in the Collateral,
in Lender’s opinion, is not jeopardized.


 


Hazardous
Substances.  Grantor
represents and warrants that the Collateral never has been and never will be
used, so long as this Agreement remains a lien on the Collateral, in violation
of any Environmental Laws or for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened 


 


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release of any Hazardous
Substance.  The representations and
warranties contained herein are based on Grantor’s due diligence in
investigating the Collateral for Hazardous Substances.  Grantor hereby (1) releases and waives
any future claims against Lender for indemnity or contribution in the event
Grantor becomes liable for cleanup or other costs under any Environmental Laws,
and (2) agrees to indemnify and hold harmless Lender against any and all
claims and losses resulting from a breach of this provision of this
Agreement.  This obligation to indemnify
shall survive the payment of the Indebtedness and the satisfaction of this
Agreement.


 


Maintenance
of Casualty Insurance. 
Grantor shall procure and maintain all risk insurance, including without
limitation, fire, theft and liability coverage together with such other
insurance as Lender may require with respect to the Collateral, in form,
amounts, coverages and basis reasonably acceptable to Lender and issued by a
company or companies reasonably acceptable to Lender.  Grantor, upon request of Lender, will deliver
to Lender from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least thirty (30) days prior written notice
to Lender and not including any disclaimer of the insurer’s liability for
failure to give such a notice.  Each
insurance policy also shall include an endorsement providing that coverage in
favor of Lender will not be impaired in any way by any act, omission or default
of Grantor or any other person.  In
connection with all policies covering assets in which Lender holds or is
offered a security interest, Grantor will provide Lender with such loss payable
or other endorsements as Lender may require. 
If Grantor at any time fails to obtain or maintain any insurance as
required under this Agreement, Lender may (but shall not be obligated to) obtain
such insurance as Lender deems appropriate, including if Lender so chooses
“single interest insurance,” which will cover only Lender’s interest in the
Collateral.


 


Application
of Insurance Proceeds. 
Grantor shall promptly notify Lender of any loss or damage to the
Collateral, whether or not such casualty or loss is covered by insurance.  Lender may make proof of loss if Grantor
fails to do so within fifteen (15) days of the casualty.  All proceeds of any insurance on the
Collateral, including accrued proceeds thereon, shall be held by Lender as part
of the Collateral.  If Lender consents to
repair or replacement of the damaged or destroyed Collateral, Lender shall,
upon satisfactory proof of expenditure, pay or reimburse Grantor from the
proceeds for the reasonable cost of repair or restoration.  If Lender does not consent to repair or
replacement of the Collateral, Lender shall retain a sufficient amount of the
proceeds to pay all of the Indebtedness and shall pay the balance to Grantor.  Any proceeds which have not been disbursed
within six (6) months after their receipt and which Grantor has not
committed to the repair or restoration of the Collateral shall be used to
prepay the Indebtedness.


 


Insurance
Reserves.  Lender may
require Grantor to maintain with Lender reserves for payment of insurance
premiums, which reserves shall be created by monthly payments from Grantor of a
sum estimated by Lender to be sufficient to produce at least fifteen (15) days
before the premium due date in amounts at least equal to the insurance premiums
to be paid.  If fifteen (15) days before
payment is due, the reserve funds are insufficient, Grantor shall, upon demand,
pay any deficiency to Lender.  The
reserve funds shall be held by Lender as a general deposit and shall constitute
a non-interest-bearing account which Lender may satisfy by payment of the
insurance premiums required to be paid by Grantor as they become due.  Lender does not hold the reserve funds in
trust for Grantor, and Lender is not the agent of Grantor for payment of the
insurance premiums required to be paid by Grantor.  The responsibility for the payment of
premiums shall remain Grantor’s sole responsibility.


 


Insurance
Reports.  Grantor, upon
request of Lender, shall furnish to Lender reports on each existing policy of
insurance showing such information as Lender may reasonably request, including
the following: (1) the name of the insurer; (2) the risks insured; (3) the
amount of the policy; (4) the property insured; (5) the then current
value on the basis of which insurance has been obtained and the manner of
determining that value; and (6) the expiration date of the policy.  In addition, Grantor shall, upon request by
Lender (however not more often than annually), have an independent appraiser
who is satisfactory to Lender determine, as applicable, the cash value or
replacement cost of the Collateral.


 


Financing
Statements.  Grantor
authorizes Lender to file UCC financing statements, any amendments thereto,
and/or a copy of this Agreement to perfect Lender’s security interest with any
and all applicable 


 


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governmental
authorities.  Grantor authorizes Lender
to take any other actions that Lender deems appropriate to perfect the Security
Interest represented herein.  At Lender’s
request, Grantor additionally agrees to sign all other documents that are
necessary to perfect protect and continue Lender’s security interest in the
Property.  Grantor will pay all filing
fees, title transfer fees, and other fees and costs involved unless prohibited
by law or unless Lender is required by law to pay such fees and costs.  Grantor irrevocably appoints Lender to
execute documents necessary to transfer title if there is a default.  Lender may file a copy of this Agreement as a
financing statement.  If Grantor changes
Grantor’s name or address, or the name or address of any person granting a
security interest under this Agreement changes, Grantor will promptly notify
the Lender of such change.


 


GRANTOR’S RIGHT TO POSSESSION AND
TO COLLECT ACCOUNTS. 
Until the occurrence of an Event of Default and except as otherwise
provided below with respect to accounts, Grantor may have possession of the
tangible personal property and beneficial use of all the Collateral and may use
it in any lawful manner not consistent with this Agreement or the Related
Documents, provided that Grantor’s right to possession and beneficial use shall
not apply to any Collateral where possession of the Collateral by Lender is
required by law to perfect Lender’s security interest in such Collateral.  Until otherwise notified by Lender, Grantor
may collect any of the Collateral consisting of accounts. At any time and even
though no Event of Default exists, Lender may exercise its rights to collect
the accounts and to notify account debtors to make payments directly to Lender
for application to the Indebtedness.  If
Lender at any time has possession of any Collateral, whether before or after an
Event of Default, Lender shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral if Lender takes such action for
that purpose as Grantor shall request or as Lender, in its sole discretion,
shall deem appropriate under the circumstances; provided, however,
failure of the Lender to honor any request by Grantor shall not in and of
itself be deemed to be a failure to exercise reasonable care.  Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.


 


LENDER’S EXPENDITURES.  If any action or proceeding is commenced that
would materially affect Lender’s interest in the Collateral or if Grantor falls
to comply with any provision of this Agreement or any Related Documents,
including but not limited to Grantor’s failure to discharge or pay when due any
amounts Grantor is required to discharge or pay under this Agreement or any
Related Documents, Lender, on Grantor’s behalf, may (but shall not be obligated
to) take any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral, and paying all
costs for insuring, maintaining and preserving the Collateral.  All such expenditures incurred or paid by
Lender for such purposes will then bear interest at the rate charged to the
Borrower under the Note from the date incurred or paid by Lender to the date of
repayment by Grantor.  All such expenses
will become a part of the Indebtedness and, at Lender’s option, will (1) be
payable on demand; (2) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (A) the term of any applicable insurance policy or (B) the
remaining term of the Note; or (3) be treated as a balloon payment which
will be due and payable at the Note’s maturity. 
This Agreement also will secure payment of these amounts.  Such right shall be in addition to all other
rights and remedies to which Lender may be entitled upon Default.


 


REINSTATEMENT OF SECURITY
INTEREST.  If payment
is made by Grantor, whether voluntarily or otherwise, by any guarantor or by
any other third party on the Indebtedness and thereafter Lender is forced to
remit the amount of that payment (1) to Grantor’s trustee in bankruptcy or
to any similar person under any federal or state bankruptcy law or law for the
relief of debtors, (2) by reason of any judgment, decree or order of any
court or administrative body having jurisdiction over Lender or any of Lender’s
property, or (3) by reason of any settlement or compromise of any claim
made by Lender with any claimant (including without limitation Grantor), the
Indebtedness shall be considered unpaid for the purpose of enforcement of this
Agreement and this Agreement shall continue to be effective or shall be
reinstated, as the case may be, notwithstanding any cancellation of this
Agreement or of any note or other instrument or agreement evidencing the
Indebtedness and the Collateral will continue to secure the amount repaid or
recovered to the same extent as if that amount never had been originally
received 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 shall constitute an
Event of Default under this Agreement:


 


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Payment
Default.  Grantor fails
to make any payment when due under the Indebtedness.


 


Note
Default.  The
occurrence of an Event of Default under the Note.


 


Loan
Agreement Default.  The
occurrence of an Event of Default under the Loan Agreement or any of the Loan
Documents (as defined in the Loan Agreement).


 


Other
Defaults.  Grantor
fails to comply with or to perform any other term, obligation, covenant or
condition contained in this Agreement or in any of the Related Documents, or to
comply with or to perform any term, obligation, covenant or condition contained
in any other agreement between Lender and Grantor.


 


Default
in Favor of Third Parties. 
Should Borrower or any Grantor default under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect
any of Grantor’s property or Grantor’s ability to repay the Indebtedness or
perform its respective obligations under this Agreement or any of the Related
Documents.


 


False
Statements.  Any
warranty, representation or statement made or furnished to Lender by Grantor or
on Grantor’s behalf under this Agreement or the Related Documents is false or
misleading in any material respect either now or at the time made or furnished
or becomes false or misleading at any time thereafter.


 


Defective
Collateralization. 
This Agreement 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 perfected security interest or lien) at any time and for any reason.


 


Insolvency.  The dissolution or termination of Grantor’s
existence as a going business, the insolvency of Grantor, the appointment of a
receiver for any part of Grantor’s property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against Grantor.


 


Creditor
or Forfeiture Proceedings. 
Commencement of foreclosure or forfeiture proceedings, whether by
judicial proceeding, self-help, repossession or any other method, by any
creditor of Grantor or by any governmental agency against any collateral
securing the Indebtedness.  This includes
a garnishment of any of Grantor’s accounts, including deposit accounts, with
Lender.  However, this Event of Default
shall not apply if there is a good faith dispute by Grantor as to the validity
or reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if Grantor gives Lender written notice of the creditor or forfeiture
proceeding and deposits with Lender monies or a surety bond for the creditor or
forfeiture proceeding in an amount determined by Lender, in its sole
discretion, as being an adequate reserve or bond for the dispute.


 


Events
Affecting Guarantor. 
Any of 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 or disputes the validity of, or liability under, any Guaranty of the
Indebtedness.


 


Adverse
Change.  A material
adverse change occurs in Grantor’s financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired.


 


Insecurity.  Lender in good faith believes itself
insecure.


 


RIGHTS AND REMEDIES ON DEFAULT.  If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights at a
secured party under the UCC. In addition and without limitation, Lender may
exercise any one or more of the following rights and remedies:


 


Accelerate
Indebtedness.  Lender
may declare the entire Indebtedness, including any prepayment penalty which
Grantor would be required to pay, immediately due and payable, without notice
of any kind to Grantor.


 


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Assemble
Collateral.  Lender may
require Grantor to deliver to Lender all or any portion of the Collateral and
any and all certificates of title and other documents relating to the Collateral.  Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender.  Lender also shall have full
power to enter upon the property of Grantor to take possession of and remove
the Collateral.  If the Collateral
contains other goods not covered by this Agreement at the time of repossession,
Grantor agrees that Lender may take such other goods, provided that Lender
makes reasonable efforts to return them to Grantor after repossession.


 


Sell the Collateral.  Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in Lender’s
own name or that of Grantor.  Lender may
sell the Collateral at public auction or private sale.  Unless the Collateral threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Lender will give Grantor, and other persons as required by law, reasonable
notice of the time and place of any public sale, or the time after which any
private sale or any other disposition of the Collateral is to be made; provided,
however, no notice need be provided to any person who, after Event of
Default occurs, enters into and authenticates an agreement waiving that
person’s right to notification of sale.  The requirements of reasonable notice shall be
met if such notice is given at least ten (10) days before the time of the
sale or disposition.  All expenses
relating to the disposition of the Collateral, including without limitation the
expenses of retaking, holding, insuring, preparing for sale and selling the
Collateral, shall become a part of the Indebtedness secured by this Agreement
and shall be payable on demand, with interest at the rate set forth in the Note
from the date of expenditure until repaid.


 


Mortgagee
in Possession.  Lender
shall have the right to be placed as mortgagee in possession or to have a
receiver appointed to take possession of all or any part of the Collateral,
with the power to protect and preserve the Collateral, to operate the Collateral
preceding foreclosure or sale, and to collect the Rents from the Collateral and
apply the proceeds, over and above the cost of the receivership, against the
Indebtedness.  The mortgagee in
possession or receiver may serve without bond if permitted by law.  Lender’s right to the appointment of a
receiver shall exist whether or not the apparent value of the Collateral
exceeds the Indebtedness by a substantial amount.  Employment by Lender shall not disqualify a
person from serving as a receiver.


 


Collect
Revenues, Apply Accounts. 
Lender, either itself or through a receiver, may collect the payments,
Rents, income, and revenues from the Collateral.  Lender may at any time in Lender’s sole
discretion transfer any Collateral into Lender’s own name or that of Lender’s
nominee and receive the payments, Rents, income, and revenues therefrom, and
hold the same as security for the Indebtedness or apply it to payment of the
Indebtedness in such order of preference as Lender may determine.  Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel paper,
choses in action, or similar property, Lender may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as
Lender may determine, whether or not the Indebtedness or Collateral is then
due.  For these purposes, Lender may, on
behalf of and in the name of Grantor, receive, open and dispose of mail
addressed to Grantor, change any address to which mail and payments are to be
sent, and endorse notes, checks, drafts, money orders, documents of title,
instruments and items pertaining to payment, shipment, or storage of any
Collateral.  To facilitate collection,
Lender may notify account debtors and obligors on any Collateral to make
payments directly to Lender.


 


Obtain
Deficiency.  If Lender
chooses to sell any or all of the Collateral, Lender may obtain a judgment
against Grantor for any deficiency remaining on the Indebtedness due to Lender
after application of all amounts received from the exercise of the rights
provided in this Agreement.  Grantor
shall be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.


 


Other
Rights and Remedies. 
Lender shall have all the rights and remedies of a secured creditor
under the provisions of the UCC.  In
addition, Lender shall have and may exercise any or all other rights and
remedies it may have available at law, in equity, or otherwise.


 


Election
of Remedies.  Except as
may be prohibited by applicable law, all of Lender’s rights and remedies,
whether evidenced by this Agreement, the Related Documents, or by any other
writing, shall be cumulative 


 


7

















 


and may be exercised
singularly or concurrently.  Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy, and
an election to make expenditures or 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 declare an Event of Default and exercise its remedies.


 


MISCELLANEOUS PROVISIONS.  The following miscellaneous provisions are a
part of this Agreement:


 


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


 


Attorneys’
Fees; Expenses. 
Grantor agrees to pay upon demand all of Lender’s costs and expenses,
including Lender’s attorneys’ fees and Lender’s legal expenses, incurred in
connection with the enforcement of this Agreement upon any Event of
Default.  Lender may hire or pay someone
else to help enforce this Agreement, and Grantor shall pay the costs and
expenses of such enforcement.  Costs and
expenses include Lender’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 and
such additional fees as may be directed by the court.


 


Caption
Headings.  Caption
headings in this Agreement are for convenience purposes only and are not to be
used to interpret or define the provisions of this Agreement.


 


Governing
Law.  This Agreement
will be governed by federal law applicable to Lender and, to the extent not
preempted by federal law, the laws of the State of Illinois without regard to
its conflicts of law provisions.  This
Agreement has been accepted by Lender in the State of Illinois.


 


Choice of
Venue.  If there is a
lawsuit, Grantor agrees upon Lender’s request to submit to the jurisdiction of
the courts of DuPage County, State of Illinois.


 


No Waiver
by Lender.  Lender
shall not be deemed to have waived any rights under this Agreement unless such
waiver is given in writing and signed by Lender.  No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or any other
right.  A waiver by Lender of a provision
of this Agreement shall not prejudice or constitute a waiver of Lender’s right
otherwise to demand strict compliance with that provision or any other
provision of this Agreement.  No prior
waiver by Lender, nor any course of dealing between Lender and Grantor, shall
constitute a waiver of any of Lender’s rights or of any of Grantor’s
obligations as to any future transactions. 
Whenever the consent of Lender is required under this Agreement, the
granting of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is required and
in all cases such consent may be granted or withheld in the sale discretion of
Lender.


 


Notices.  Any notice required to be given under this
Agreement shall be given in writing, and shall be effective when actually
delivered, when actually received by facsimile (unless otherwise required by
law), when deposited with a nationally recognized overnight courier, or, if
mailed, when deposited in the United States mail, as first class, certified or
registered mail postage prepaid, directed to the addresses shown near the
beginning of this Agreement.  Any party
may change its address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice is to
change the party’s address.  For notice
purposes, Grantor agrees to keep Lender informed at all times of Grantor’s
current address.  Unless otherwise
provided or required by law, if there is more than one Grantor, any notice
given by Lender to any Grantor is deemed to be notice given to all Grantors.


 


Power of
Attorney.  Grantor
hereby appoints Lender as Grantor’s irrevocable attorney-in-fact for the
purpose of executing any documents necessary to perfect, amend, or to continue
the security interest granted in this Agreement or to demand termination of
filings of other secured parties.  Lender
may at any tine, and without further authorization from Grantor, file a carbon,
photographic or other reproduction of 


 


8

















 


any financing statement
or of this Agreement for use as a financing statement.  Grantor will reimburse Lender for all
expenses for the perfection and the continuation of the perfection of Lender’s
security interest in the Collateral.


 


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


 


Successors
and Assigns.  Subject
to any limitations stated in this Agreement regarding the transfer of Grantor’s
interest, this Agreement shall be binding upon and inure to the benefit of the
parties, their successors and assigns. If ownership of the Collateral becomes
vested in a person other than Grantor, Lender, without notice to Grantor, may
deal with Grantor’s successors with reference to this Agreement and the
Indebtedness by way of forbearance or extension without releasing Grantor from
the obligations of this Agreement or liability under the Indebtedness.


 


Survival
of Representations and Warranties.  All representations, warranties, and
agreements made by Grantor in this Agreement shall survive the execution and
delivery of this Agreement, shall be continuing in nature, and shall remain in
full force and effect until such time as Grantor’s Indebtedness shall be paid
in full.


 


Time is
of the Essence.  Time
is of the essence in the performance of this Agreement.


 


Waive
Jury.  All parties to
this Agreement hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by any party against any other party.


 


DEFINITIONS.  The following capitalized words and terms
shall have the following meanings when used in this Agreement.  Unless specifically stated to the contrary,
all references to dollar amounts shall mean amounts in lawful money of the
United States of America.  Words and
terms used in the singular shall include the plural, and the plural shall
include the singular, as the context may require.  Words and terms not otherwise defined in this
Agreement shall have the meanings attributed to such terms in the UCC:


 


Agreement.  The word “Agreement” means this Commercial
Security Agreement, as this Commercial Security Agreement may be amended or
modified from time to tine, together with all exhibits and schedules attached
to this Security Agreement from time to time.


 


Borrower.  The word “Borrower” means Advanced Life
Sciences, Inc. and includes all co-signers and co-makers signing the Note
and all their successors and assigns.


 


Collateral.  The word “Collateral” means all of Grantors
right, title and interest in and to all the Collateral as described in the
COLLATERAL DESCRIPTION section of this Agreement.


 


Default.  The word “Default” means the default set forth
in this Agreement in the section titled DEFAULT.


 


Environmental
Laws.  The words
“Environmental Laws” mean any and all state, federal and local statutes,
regulations and ordinances relating to the protection of human health or the
environment, including without limitation the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601,
at seq., the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99499,
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
et seq., or other applicable state or federal laws, rules, or regulations
adopted pursuant thereto.


 


Event of
Default.  The words
“Event of Default” mean any of the events of default set forth in this 


 


9

















 


Agreement in the DEFAULT
section of this Agreement.


 


Grantor.  The word “Grantor” means Advanced Life
Sciences Holdings, Inc.


 


Guaranty.  The word “Guaranty” means any guaranty from
any guarantor, endorser, surety, or accommodation party of any of the
Indebtedness to Lender, including without limitation a guaranty of all or part
of the Note.


 


Hazardous
Substances.  The words
“Hazardous Substances” mean materials that, because of their quantity,
concentration or physical, chemical or infectious characteristics, may cause or
pose a present or potential hazard to human health or the environment when
improperly used, treated, stored, disposed of, generated, manufactured,
transported or otherwise handled.  The
words “Hazardous Substances” are used in their very broadest sense and include
without limitation any and all hazardous or toxic substances, materials or waste
as defined by or listed under the Environmental Laws.  The term “Hazardous Substances” also
includes, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos.


 


Indebtedness.  The word “Indebtedness” means the
indebtedness evidenced by the Note or Related Documents, including all
principal and interest together with all other indebtedness and costs and
expenses for which Grantor is responsible under this Agreement or under any of
the Related Documents.


 


Lender.  The word “Lender” means THE LEADERS BANK, its
successors and assigns.


 


Note.  The word “Note” means the Amended and
Restated Promissory Note executed by Borrower in the principal amount of Ten
Million and 00/100 Dollars ($10,000,000.00), dated as of even date herewith,
together with all renewals of, extensions of, modifications of, refinancings
of, consolidations of, and substitutions for the note.


 


Property.  The word “Property” means all of Grantor’s
right, title and interest in and to all the Property as described in the
COLLATERAL DESCRIPTION section of this Agreement.


 


Related
Documents.  The words
“Related Documents” mean all promissory notes, credit agreements, Joan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, security deeds, collateral mortgages, and all other
instruments, agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.


 


Rents.  The word “Rents” means all present and future
rents, revenues, income, issues, royalties, profits, and other benefits derived
from the Property.


 


UCC.  The word “UCC” means the Uniform Commercial
Code of the State of Illinois, as amended.


 


[Signature
Page Follows]


 


10

















 


GRANTOR HAS READ AND
UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT AND AGREES
TO ITS TERMS.


 


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


 


 


	
  GRANTOR:

  	
   

  
	
   

  	
   

  
	
  ADVANCED LIFE SCIENCES
  HOLDINGS, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  John L. Flavin

  	
   

  
	
   

  	
  John
  L. Flavin, President and Chief Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  LENDER:

  	
   

  
	
   

  	
   

  
	
  THE LEADERS BANK

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  John Prosia

  	
   

  
	
   

  	
  John
  Prosia, Executive Vice President