Document:

Exhibit 10.19

 

AMENDED AND RESTATED SECURITY AGREEMENT

 

This
Amended and Restated Security Agreement (the “Security Agreement”) is dated as
of September 9, 2010, by and among Advanced Life Sciences, Inc.  (the “Borrower”), with its mailing address as set forth in
Section 13(b) below, and The Leaders Bank (the “Lender”), with its
mailing address as set forth in Section 13(b) below.

 

P R E L I M I N A R Y   S T A T E M E N T S

 

A.             The Borrower, Advanced Life
Sciences Holdings, Inc. (the “Guarantor”), Michael Flavin and Lender have
entered into  that certain Second Amended
and Restated Credit Agreement dated as of even date herewith (such Credit
Agreement, as the same may be amended or modified from time to time, including
amendments and restatements thereof in its entirety, being hereinafter referred
to as the “Credit Agreement”), which amends and restates that certain Amended
and Restated Business Loan Agreement by and between the Borrower and Lender
dated as of October 23, 2008 (the “Original Credit Agreement”), pursuant
to which the Lender has agreed, subject to certain terms and conditions, to
extend credit and make certain other financial accommodations available to the
Borrower.

 

B.            In connection with the Original
Credit Agreement, the Borrower executed that certain security agreement in
favor of Lender (the “Original Security Agreement”) in support of its
obligations under that certain Commercial Guaranty (the “Original Guaranty”)
each dated as of October 23, 2008.

 

C.            As a condition to continuing to
extend credit or otherwise making financial accommodations available to or for
the account of the Borrower under the Credit Agreement, the Lender requires,
among other things, that Borrower execute an amended and restated guaranty
evidencing the Borrower’s obligation to guaranty the obligations of the
Borrower under the Credit Agreement (the “Guaranty”) and that Borrower execute
this Security Agreement, which amends and restates the Original Security
Agreement, pursuant to which the Borrower grants to the Lender a lien on and
security interest in the personal property and fixtures of Borrower described
herein subject to the terms and conditions hereof.

 

NOW,
THEREFORE, for good and valuable consideration, receipt whereof is hereby
acknowledged, the parties hereto agree as follows:

 

Section 1.              Terms defined in Credit
Agreement.  Except as otherwise
provided in Section 2 below, all capitalized terms used herein without
definition shall have the same meanings herein as such terms have in the Credit
Agreement.

 

Section 2.              Grant of Security Interest in
the Collateral.  As collateral
security for the Secured Obligations defined below, Borrower hereby grants to
the Lender a lien on and security interest in, and right of set-off against,
and acknowledges and agrees that the Lender has and shall continue to have a
continuing lien on and security interest in, and right of set-off against, all

 

 

right,
title, and interest of Borrower, whether now owned or existing or hereafter
created, acquired or arising, in and to all of the following:

 

(a)         Accounts;

 

(b)         Chattel
Paper;

 

(c)          Instruments
(including the Revolving Note);

 

(d)         Documents;

 

(e)          General
Intangibles (including Payment Intangibles and Software, patents, trademarks,
tradestyles, copyrights, and all other intellectual property rights, including
all applications, registration, and licenses therefor, and all goodwill of the
business connected therewith or represented thereby);

 

(f)          Letter-of-Credit
Rights;

 

(g)          Supporting
Obligations;

 

(h)         Deposit
Accounts;

 

(i)           Investment
Property (including certificated and uncertificated Securities, Securities
Accounts, Security Entitlements, Commodity Accounts, and Commodity Contracts);

 

(j)          Inventory;

 

(k)         Equipment
(including all software, whether or not the same constitutes embedded software,
used in the operation thereof);

 

(l)           Fixtures;

 

(m)        Commercial
Tort Claims (as described on Schedule E hereto or on one or more
supplements to this Agreement);

 

(n)         Rights
to merchandise and other Goods (including rights to returned or repossessed
Goods and rights of stoppage in transit) which is represented by, arises
from, or relates to any of the foregoing;

 

(o)         Monies,
personal property, and interests in personal property of Borrower of any kind
or description now held by Lender or at any time hereafter transferred or
delivered to, or coming into the possession, custody or control of Lender, or
Lender or affiliate of Lender, whether expressly as collateral security or for
any other purpose (whether for safekeeping, custody, collection or otherwise),
and all dividends and distributions on or other rights in connection with any
such property;

 

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(p)         Supporting
evidence and documents relating to any of the above-described property,
including, without limitation, computer programs, disks, tapes and related
electronic data processing media, and all rights of Borrower to retrieve the
same from third parties, written applications, credit information, account
cards, payment records, correspondence, delivery and installation certificates,
invoice copies, delivery receipts, notes and other evidences of indebtedness,
insurance certificates and the like, together with all books of account,
ledgers, and cabinets in which the same are reflected or maintained;

 

(q)         Accessions
and additions to, and substitutions and replacements of, any and all of the
foregoing; and

 

(r)          Proceeds
and products of the foregoing, and all insurance of the foregoing and proceeds
thereof;

 

all
of the foregoing being herein sometimes referred to as the “Collateral”.  Notwithstanding anything herein to the
contrary, in no event shall the Collateral include or the security interest
granted hereunder attach to (a) any lease, license, contract, property
rights or agreement to which Borrower is a party or any of its rights or
interests thereunder if and for so long as the grant of such security interest
shall constitute or result in (i) the abandonment, invalidation or
unenforceability of any right, title or interest of Borrower therein or (ii) in
a breach or termination pursuant to the terms of, or a default under, any such
lease, license, contract property rights or agreement (other than to the extent
that any such term would be rendered ineffective pursuant to Sections 9-406,
9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of
any relevant jurisdiction or any other applicable law (including the Bankruptcy
Code) or principles of equity); provided, however, (x) that the Collateral
shall include, and such security interest shall attach, immediately and
automatically at such time as the condition causing such abandonment,
invalidation or unenforceability shall be remedied and to the extent severable,
shall attach immediately to any portion of such lease, license, contract,
property rights or agreement that does not result in any of the consequences
specified in (i) or (ii) above and (y) upon request of the
Lender, Borrower will in good faith use reasonable efforts to obtain consent
for the creation of a security interest in favor of the Lender (and to Lender’s
enforcement of such security interest) such lease, license, contract, property
rights or agreement.  All terms which are
used in this Agreement which are defined in the Uniform Commercial Code of the
State of Delaware as in effect from time to time (“UCC”) shall have the same
meanings herein as such terms are defined in the UCC, unless this Agreement
shall otherwise specifically provide. 
For purposes of this Agreement, the term “Accounts” means all rights to
the payment of a monetary obligation, whether or not earned by performance, and
whether evidenced by an Account, Chattel Paper, Instrument, General
Intangible, or otherwise.

 

Section 3.              Secured Obligations.  This Agreement is made and given to secure,
and shall secure, the prompt payment and performance of (a) any and all
indebtedness, obligations, and liabilities of Borrower to the Lender under or
in connection with or evidenced by the Guaranty or any other Loan Documents,
including, without limitation, all obligations evidenced by Revolving Note of
the Borrower heretofore or hereafter issued under the Credit Agreement, and all
obligations of Borrower arising under any guaranty issued by it relating to the
foregoing

 

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or
any part thereof, in each case whether now existing or hereafter arising (and
whether arising before or after the filing of a petition in bankruptcy and
including all interest accrued after the petition date), due or to become due,
direct or indirect, absolute or contingent, and howsoever evidenced, held or
acquired and (b) any and all reasonable expenses and charges, legal or
otherwise, suffered or incurred by the Lender in collecting or enforcing any of
such indebtedness, obligations, and liabilities or in realizing on or
protecting or preserving any security therefor, including, without limitation,
the lien and security interest granted hereby (all of the indebtedness,
obligations, liabilities, expenses, and charges described above being hereinafter
referred to as the “Secured Obligations”). 
Notwithstanding anything in this Agreement to the contrary, the right of
recovery against Borrower under this Agreement shall not exceed $1.00 less than
the lowest amount that would render Borrower’s obligations under this Agreement
void or voidable under applicable law, including fraudulent conveyance law.

 

Section 4.              Covenants, Agreements,
Representations and Warranties. 
Borrower hereby covenants and agrees with, and represents and warrants
to, the Lender that:

 

(a)         Borrower
is duly organized and validly existing in good standing under the laws of the
jurisdiction of its organization. 
Borrower is the sole and lawful owner of its Collateral, and has full
right, power, and authority to enter into this Agreement and to perform each
and all of the matters and things herein provided for.  The execution and delivery of this Agreement,
and the observance and performance of each of the matters and things herein set
forth, will not (i) contravene or constitute a default under any provision
of law or any judgment, injunction, order or decree binding upon Borrower or
any provision of Borrower’s organizational documents (e.g., charter, articles
or certificate of incorporation and bylaws or similar organizational documents)
or any covenant, indenture or agreement of or affecting Borrower or any of its
property or (ii) result in the creation or imposition of any lien or
encumbrance on any property of Borrower except for the lien and security
interest granted to the Lender hereunder.

 

(b)         Borrower’s
chief executive office is located at 1440 Davey Drive, Woodridge, Illinois
60517, and Borrower has no other executive offices or places of business other
than those listed under on Schedule A attached hereto.  The Collateral is and shall remain in
Borrower’s possession or control at the locations listed on Schedule A
attached hereto (the “Permitted Collateral Locations”).  If for any reason any Collateral
is at any time kept or located at a location other than a Permitted Collateral
Location, the Lender shall nevertheless have and retain a lien on and security
interest therein.  Borrower shall not
move its chief executive office or maintain a place of business at a location
other than those specified on Schedule A or permit any Collateral to be
located at a location other than a Permitted Collateral Location, in each case
without first providing the Lender at least 30 days prior written notice of
Borrower’s intent to do so; provided  that Borrower shall at all
times maintain its chief executive office, places of business, and Permitted
Collateral Locations in the United States of America unless specifically agreed
to in writing by the Lender and Borrower shall have taken all action reasonably
requested by the Lender to maintain the lien and security interest of the
Lender in the Collateral at all times fully perfected and in full force and
effect.

 

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(c)          Borrower’s
legal name, jurisdiction of organization and organizational number are correctly
set forth on Schedule A of this Agreement.  Borrower has not transacted business at any
time during the immediately preceding five-year period, and does not currently
transact business, under any other legal names or trade names other than the
prior legal names and trade names set forth on Schedule B attached
hereto.  Borrower shall not change its
jurisdiction of organization without the Lender’s prior written consent.  Borrower shall not change its legal name or
transact business under any other trade name without first giving 30 days’
prior written notice of its intent to do so to the Lender.

 

(d)         The
Collateral and every part thereof is and shall be free and clear of all
security interests, liens (including, without limitation, mechanics’, laborers’
and statutory liens), attachments, levies, and encumbrances of every kind,
nature, and description and whether voluntary or involuntary, except for the
lien and security interest of the Lender therein and other Permitted Liens.  To the extent it is commercially reasonable,
Borrower shall warrant and defend the Collateral against any material claims
and demands of all persons at any time claiming the same or any interest in the
Collateral adverse to the Lender.

 

(e)          Borrower
will promptly pay when due all taxes, assessments, and governmental charges and
levies upon or against it or its Collateral, in each case before the same
become delinquent and before penalties accrue thereon, unless and to the extent
that the same are being contested in good faith by appropriate proceedings
which prevent attachment of any lien resulting therefrom to, foreclosure on or
other realization upon any Collateral and preclude interference with the
operation of its business in the ordinary course and Borrower shall have
established adequate reserves therefor.

 

(f)         Borrower
agrees it will not waste or destroy the Collateral or any part thereof and will
not be negligent in the care or use of any Collateral.  Borrower agrees it will not use, manufacture,
sell or distribute any Collateral in violation of any statute, ordinance or
other governmental requirement.  To the
extent it is commercially reasonable, Borrower will perform in all material
respects its obligations under any contract or other agreement constituting
part of the Collateral, it being understood and agreed that the Lender has no
responsibility to perform such obligations.

 

(g)          Borrower
agrees it will not, without the Lender’s prior written consent, sell, assign,
mortgage, lease, or otherwise dispose of the Collateral or any interest
therein, except for (i) transactions in the ordinary course of business
and (ii) transaction in an aggregate amount not to exceed $100,000 in any
given calendar year.

 

(h)         Borrower
will insure its Collateral consisting of tangible personal property against
such risks and hazards as other companies similarly situated insure against,
and including in any event loss or damage by fire, theft, burglary, pilferage,
and loss in transit, in amounts and under policies containing loss payable
clauses to the Lender as its interest may appear (and, if the Lender requests,
naming the Lender as additional insureds therein) by insurers reasonably
acceptable to the Lender.  All premiums
on such

 

5

 

insurance
shall be paid by Borrower and the policies of such insurance (or certificates
therefor) delivered to the Lender.  All
insurance required hereby shall provide that any loss shall be payable
notwithstanding any act or negligence of Borrower, shall provide that no cancellation
thereof shall be effective until at least 30 days after receipt by Borrower and
the Lender of written notice thereof, and shall be reasonably satisfactory to
the Lender in all other respects.  In
case of any material loss, damage to or destruction of the Collateral or any
part thereof, Borrower shall promptly give written notice thereof to the Lender
generally describing the nature and extent of such damage or destruction.  In case of any loss, damage to or destruction
of the Collateral or any part thereof, the relevant Borrower, whether or not
the insurance proceeds, if any, received on account of such damage or
destruction shall be sufficient for that purpose, at Borrower’s cost and
expense, will promptly repair or replace the Collateral so lost, damaged or
destroyed, except to the extent such Collateral is not necessary to the conduct
of Borrower’s business in the ordinary course. In the event Borrower shall
receive any proceeds of such insurance, Borrower shall immediately pay over
such proceeds of insurance to Lender which will thereafter be applied to the
reduction of the Secured Obligations (whether or not then due) or held as
collateral security therefor, as the Lender may then determine or as otherwise
provided for in the Credit Agreement; provided, however, that the Lender agrees
to release such insurance proceeds to Borrower for replacement or restoration
of the portion of the Collateral lost, damaged or destroyed if, but only if,
(i) at the time of release no Default or Event of Default exists,
(ii) written application for such release is received by the Lender from
Borrower within 30 days of the receipt of such proceeds, and
(iii) the Lender has received evidence reasonably satisfactory to it that
the collateral lost, damaged or destroyed has been or will be replaced or
restored to its condition immediately prior to the loss, destruction or other
event giving rise to the payment of such insurance proceeds.  Borrower hereby authorizes the Lender, at the
Lender’s option, to adjust, compromise, and settle any losses under any
insurance afforded at any time after the occurrence and during the continuation
of any Default or Event of Default, and Borrower irrevocably designates the
Lender, its officers, Lenders, and attorneys, as Borrower’s attorneys-in-fact,
with full power and authority after the occurrence and during the continuation
of any Default or Event of Default to effect such adjustment, compromise,
and/or settlement and to endorse any drafts drawn by an insurer of the
Collateral or any part thereof and to do everything necessary to carry out such
purposes and to receive and receipt for any unearned premiums due under
policies of such insurance.  Unless the
Lender elects to adjust, compromise or settle losses as aforesaid, any
adjustment, compromise, and/or settlement of any losses under any insurance
shall be made by Borrower subject to final approval of the Lender (regardless
of whether or not an Event of Default shall have occurred) in the case of
losses exceeding $[50,000].  All insurance
proceeds shall be subject to the lien and security interest of the Lender
hereunder.

 

UNLESS BORROWER PROVIDES THE LENDER WITH EVIDENCE OF THE INSURANCE
COVERAGE REQUIRED BY THIS AGREEMENT, THE LENDER MAY PURCHASE INSURANCE AT
BORROWER’S EXPENSE TO PROTECT THE LENDER’S INTERESTS IN THE COLLATERAL.  THIS INSURANCE MAY, BUT NEED NOT, PROTECT
BORROWER’S INTERESTS IN 

 

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THE
COLLATERAL.  THE COVERAGE PURCHASED BY
THE LENDER MAY NOT PAY ANY CLAIMS THAT BORROWER MAKES OR ANY CLAIM THAT IS
MADE AGAINST BORROWER IN CONNECTION WITH THE COLLATERAL.  BORROWER MAY LATER CANCEL ANY SUCH
INSURANCE PURCHASED BY THE LENDER, BUT ONLY AFTER PROVIDING THE LENDER WITH
EVIDENCE THAT BORROWER HAS OBTAINED INSURANCE AS REQUIRED BY THIS
AGREEMENT.  IF THE LENDER PURCHASES
INSURANCE FOR THE COLLATERAL, BORROWER WILL BE RESPONSIBLE FOR THE COSTS OF
THAT INSURANCE, INCLUDING INTEREST AND ANY OTHER CHARGES THAT THE LENDER MAY IMPOSE
IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF
THE CANCELLATION OR EXPIRATION OF THE INSURANCE.  THE COSTS OF THE INSURANCE MAY BE ADDED
TO THE SECURED OBLIGATIONS SECURED HEREBY. 
THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE
BORROWER MAY BE ABLE TO OBTAIN ON ITS OWN.

 

(i)         Borrower
will at all times allow the Lender and their respective representatives free
access to and right of inspection of the Collateral at such reasonable times
and intervals as the Lender or any other Lender may designate and, in the
absence of any existing Default or Event of Default, with reasonable prior
written notice to Borrower.

 

(j)         If
any Collateral is in the possession or control of Borrower or processors of
Borrower and the Lender so requests, Borrower agrees to notify such processors
in writing of the Lender’s lien and security interest therein and instruct them
to hold all such Collateral for the Lender’s account and subject to the Lender’s
instructions.  Borrower will, upon the
request of the Lender, authorize and instruct all bailees and any other
parties, if any, at any time processing, labeling, packaging, holding, storing,
shipping or transferring all or any part of the Collateral to permit the Lender
and their respective representatives to examine and inspect any of the
Collateral then in such party’s possession and to verify from such party’s own
books and records any information concerning the Collateral or any part thereof
which the Lender or their respective representatives may seek to verify.  As to any premises not owned by Borrower
wherein any of the Collateral is located, if any, Borrower shall, upon the
Lender’s request, cause each party having any right, title or interest in, or
lien on, any of such premises to enter into an agreement (any such agreement to
contain a legal description of such premises) whereby such party disclaims any
right, title, and interest in and lien on the Collateral, allows the removal of
such Collateral by the Lender or representatives, and otherwise is in form and
substance reasonably acceptable to the Lender.

 

(k)         Borrower
agrees from time to time to deliver to the Lender such evidence of the
existence, identity, and location of its Collateral and of its availability as
collateral security pursuant hereto (including, without limitation, schedules
describing all Accounts created or acquired by Borrower, copies of customer
invoices or the equivalent and original shipping or delivery receipts for all
merchandise and other goods sold or leased or services rendered by it, together
with Borrower’s warranty of the genuineness thereof,

 

7

 

and
reports stating the book value of its Inventory and Equipment by major category
and location), in each case as the Lender may reasonably request.  The Lender shall have the right to verify all
or any part of the Collateral in any manner, and through any medium, which the
Lender considers appropriate and reasonable, and Borrower agrees to furnish all
assistance and information, and perform any acts, which the Lender may require
in connection therewith.

 

(l)         Borrower
will comply in all material respects with the terms and conditions of any and
all leases, easements, right-of-way agreements, and other agreements binding
upon Borrower or affecting the Collateral, in each case which cover the
premises wherein the Collateral is located, and any orders, ordinances, laws or
statutes of any city, state or other governmental entity, department or agency
having jurisdiction with respect to such premises or the conduct of business
thereon.

 

(m)         Schedule C
attached hereto contains a true, complete, and current listing of all patents,
trademarks, tradestyles, copyrights, and other intellectual property rights
(including all registrations and applications therefor) owned by Borrower as of
the date hereof that are registered with any governmental authority.  Borrower shall promptly notify the Lender in
writing of any additional intellectual property rights acquired or arising
after the date hereof, and shall submit to the Lender a supplement to Schedule C
to reflect such additional rights (provided Borrower’s failure to do so shall
not impair the Lender’s security interest therein).  Borrower owns or possesses rights to use all
franchises, licenses, patents, trademarks, trade names, tradestyles,
copyrights, and rights with respect to the foregoing which are required to
conduct its business and which do not infringe on the rights of any third
party.  No event has occurred which
permits, or after notice or lapse of time or both would permit, the revocation
or termination of any such rights, and Borrower is not liable to any person for
infringement under applicable law with respect to any such rights as a result
of its business operations.

 

(n)         Schedule E
attached hereto contains a true, complete and current listing of all Commercial
Tort Claims held by Borrower as of the date hereof, each described by referring
to a specific incident giving rise to the claim.

 

(o)         Borrower
agrees to execute and deliver to the Lender such further agreements,
assignments, instruments, and documents, and to do all such other things, as
the Lender may reasonably deem necessary or appropriate to assure the Lender
its lien and security interest hereunder, including, without limitation,
(i) such financing statements or other instruments and documents as the
Lender may from time to time reasonably require to comply with the UCC and any
other applicable law, (ii) such agreements with respect to patents,
trademarks, copyrights, and similar intellectual property rights as the Lender
may from time to time reasonably require to comply with the filing requirements
of the United States Patent and Trademark Office and the United States
Copyright Office, and (iii) such control agreements with respect to
Deposit Accounts, Investment Property, Letter-of-Credit Rights, and
electronic Chattel Paper, and to cause the relevant depository institutions,
financial intermediaries, and issuers to execute and deliver such control
agreements, as the Lender may from time to time

 

8

 

reasonably
require.  Borrower hereby agrees that a
carbon, photographic or other reproduction of this Agreement or any such
financing statement is sufficient for filing as a financing statement by the
Lender without notice thereof to Borrower wherever the Lender in its sole
discretion desires to file the same. 
Borrower hereby authorizes the Lender to file any and all financing
statements covering the Collateral or any part thereof as the Lender may
require, including financing statements describing the Collateral as “all
assets” or “all personal property” or words of like meaning.  The Lender may order lien searches from time
to time against Borrower and the Collateral, and Borrower shall promptly
reimburse the Lender for all reasonable costs and expenses incurred in
connection with such lien searches.  In
the event for any reason the law of any jurisdiction other than Delaware
becomes or is applicable to the Collateral or any part thereof, or to any of
the Secured Obligations, Borrower agrees to execute and deliver all such
agreements, assignments, instruments, and documents and to do all such other
things as the Lender deems necessary or appropriate to preserve, protect, and
enforce the security interest of the Lender under the law of such other
jurisdiction.  Borrower agrees to mark
its books and records to reflect the lien and security interest of the Lender
in the Collateral.

 

(p)         On
failure of Borrower to perform any of the covenants and agreements herein contained,
the Lender may, at its option, perform the same and in so doing may expend such
sums as the Lender deems reasonably advisable in the performance thereof,
including, without limitation, the payment of any insurance premiums, the
payment of any taxes, liens, and encumbrances, expenditures made in defending
against any adverse claims to the extent commercially reasonable, and all other
reasonable expenditures which the Lender may be compelled to make by operation
of law or which the Lender may make by agreement or otherwise for the
protection of the security hereof.  All
such sums and amounts so expended shall be repayable by Borrower upon demand,
shall constitute additional Secured Obligations secured hereunder, and shall
bear interest at the Default Rate.  No
such performance of any covenant or agreement by the Lender on behalf of
Borrower, and no such advancement or expenditure therefor, shall relieve
Borrower of any default under the terms of this Agreement or in any way
obligate Lender to take any further or future action with respect thereto.  The Lender, in making any payment hereby
authorized, may do so according to any bill, statement or estimate procured
from the appropriate public office or holder of the claim to be discharged
without inquiry into the accuracy of such bill, statement or estimate or into
the validity of any tax assessment, sale, forfeiture, tax lien or title or
claim.  The Lender, in performing any act
hereunder, shall be the sole judge of whether Borrower is required to perform the
same under the terms of this Agreement. 
The Lender is hereby authorized to charge any account of Borrower
maintained with Lender for the amount of such sums and amounts so expended.

 

Section 5.              Special Provisions Re: Accounts.  (a) As of the time any Account owned by
Borrower becomes subject to the security interest provided for hereby, and at
all times thereafter, Borrower shall be deemed to have warranted as to each
such Account that all warranties of Borrower set forth in this Agreement are
true and correct with respect to such Account; that such Account and all papers
and documents relating thereto are genuine and in all respects what they

 

9

 

purport
to be; that such Account is valid and subsisting; that the amount of such
Account represented as owing is the correct amount actually and unconditionally
owing, except for normal cash discounts on normal trade terms in the ordinary
course of business; that the amount of such Account represented as owing is not
disputed and is not subject to any set-offs, credits, deductions or
countercharges other than those arising in the ordinary course of Borrower’s
business which are disclosed to the Lender in writing promptly upon Borrower
becoming aware thereof; and, except as disclosed to the Lender in writing at or
prior to the time such Account is created, that no surety bond was required or
given in connection with such Account or the contracts or purchase orders out
of which the same arose.

 

(b)             If any Account arises out of a
contract with the United States of America, or any state or political
subdivision thereof, or any department, agency or instrumentality of any of the
foregoing, Borrower agrees to promptly so notify the Lender and, at the request
of the Lender or the Lender, execute whatever instruments and documents are
required by the Lender in order that such Account shall be assigned to the
Lender and that proper notice of such assignment shall be given under the
federal Assignment of Claims Act (or any successor statute) or any similar
state or local statute, as the case may be.

 

(c)             Unless and until an Event of
Default has occurred and is continuing, any merchandise or other goods which
are returned by a customer or account debtor or otherwise recovered may be
resold by Borrower in the ordinary course of its business as presently
conducted in accordance with Section 7(b) hereof; and, during the
existence of any Event of Default, such merchandise and other goods shall be
set aside at the request of the Lender and held by Borrower as trustee for the
Lender and shall remain part of the Lender’ Collateral.  Unless and until an Event of Default has
occurred and is continuing, Borrower may settle and adjust disputes and claims
with its customers and account debtors, handle returns and recoveries, and
grant discounts, credits, and allowances in the ordinary course of its business
as presently conducted for amounts and on terms which Borrower in good faith
considers advisable; and, during the existence of any Event of Default, at the
Lender’s request, Borrower shall notify the Lender promptly of all returns and
recoveries and, on the Lender’s request, deliver any such merchandise or other
goods to the Lender.  During the
existence of any Event of Default, at the Lender’s request, Borrower shall also
notify the Lender promptly of all disputes and claims and settle or adjust them
at no expense to the Lender, but no discount, credit or allowance other than on
normal trade terms in the ordinary course of business as presently conducted
shall be granted to any customer or account debtor and no returns of
merchandise or other goods shall be accepted by Borrower without the Lender’s
consent.  The Lender may, at all times
during the existence of any Event of Default, settle or adjust disputes and
claims directly with customers or account debtors for amounts and upon terms
which the Lender considers advisable.

 

(d)             To the extent any Account or other
item of Collateral is evidenced by an Instrument or tangible Chattel Paper,
Borrower shall cause such Instrument or tangible Chattel Paper to be pledged
and delivered to the Lender; provided, however, that, prior to the existence of
a Default or Event of Default and thereafter until otherwise required by the
Lender, Borrower shall not be required to deliver any such Instrument or
tangible Chattel Paper if and only so long as the aggregate unpaid principal
balance of all such Instruments and tangible Chattel Paper held by Borrower and
not delivered to the Lender hereunder is less than $25,000 at any one time

 

10

 

outstanding.  Unless delivered to the Lender, all tangible
Chattel Paper and Instruments shall contain a legend acceptable to the Lender
indicating that such Chattel Paper or Instrument is subject to the security
interest of the Lender contemplated by this Agreement.

 

Section 6.              Collection of Accounts.  (a) Except as otherwise provided in this
Agreement, Borrower shall make collection of its Accounts and may use the same
to carry on its business in accordance with sound business practice and
otherwise subject to the terms hereof.

 

(b)             Upon the occurrence of any Default
or Event of Default, whether or not the Lender has exercised any of its other
rights under other provisions of this Section 6, in the event the Lender
requests Borrower to do so:

 

(i)         all
Instruments and tangible Chattel Paper at any time constituting part of the
Accounts (including any postdated checks) shall, upon receipt by Borrower, be
immediately endorsed to and deposited with Lender; and/or

 

(ii)          Borrower
shall instruct all customers and account debtors to remit all payments in
respect of Accounts or any other Collateral to a lockbox or lockboxes under the
sole custody and control of the Lender and which are maintained at one or more
post offices selected by the Lender.

 

(c)             Upon the occurrence and during the
continuation of any Default or Event of Default, whether or not the Lender has
exercised any of its other rights under the other provisions of this
Section 6, the Lender or its designee may notify Borrower’s customers and
account debtors at any time that Accounts have been assigned to the Lender or
of the Lender’s security interest therein, and either in its own name, or
Borrower’s name, or both, demand, collect (including, without limitation,
through a lockbox analogous to that described in Section 6(b)(ii) hereof),
receive, receipt for, sue for, compound and give acquittance for any or all
amounts due or to become due on Accounts, and in the Lender’s discretion file
any claim or take any other action or proceeding which the Lender may deem
necessary or appropriate to protect and realize upon the security interest of
the Lender in the Accounts or any other Collateral.

 

(d)             Any proceeds of Accounts or other
Collateral transmitted to or otherwise received by the Lender pursuant to any
of the provisions of Sections 6(b) or 6(c) hereof may be handled
and administered by the Lender in and through a remittance account or accounts
maintained at the Lender or by the Lender at a commercial bank or banks
selected by the Lender (collectively the “Depositary Banks” and individually a “Depositary
Bank”), and Borrower acknowledges that the maintenance of such remittance
accounts by the Lender is solely for the Lender’s convenience and that Borrower
does not have any right, title or interest in such remittance accounts or any
amounts at any time standing to the credit thereof.  The Lender may, after the occurrence and
during the continuation of any Default or Event of Default, apply all or any
part of any proceeds of Accounts or other Collateral received by it from any
source to the payment of the Secured Obligations (whether or not then due and
payable), such applications to be made in such amounts, in such manner and
order, and at such intervals as the Lender may from time to time in its
discretion determine, but not less often than once each week.  The Lender need not

 

11

 

apply
or give credit for any item included in proceeds of Accounts or other
Collateral until the Depositary Bank has received final payment therefor at its
office in cash or final solvent credits current at the site of deposit
acceptable to the Lender and the Depositary Bank as such.  However, if the Lender does permit credit to
be given for any item prior to a Depositary Bank receiving final payment
therefor and such Depositary Bank fails to receive such final payment or an
item is charged back to the Lender or any Depositary Bank for any reason, the
Lender may at its election in either instance charge the amount of such item
back against any such remittance accounts or any Deposit Account of Borrower
subject to the lien and security interest of this Agreement, together with
interest thereon at the Default Rate. 
Concurrently with each transmission of any proceeds of Accounts or other
Collateral to any such remittance account, upon the Lender’s request, Borrower
shall furnish the Lender with a report in such form as Lender shall reasonably
require identifying the particular Account or such other Collateral from which
the same arises or relates.  Unless and
until a Default or an Event of Default has occurred and is continuing, the
Lender will release proceeds of Collateral which the Lender has not applied to
the Secured Obligations as provided above from the remittance account from time
to time after receipt thereof.  Borrower
hereby indemnifies the Lender from and against all liabilities, damages,
losses, actions, claims, judgments, and all reasonable costs, expenses, charges,
and attorneys’ fees suffered or incurred by Lender because of the maintenance
of the foregoing arrangements; provided, however, that Borrower shall not be
required to indemnify Lender for any of the foregoing to the extent they arise
solely from the gross negligence or willful misconduct of the person seeking to
be indemnified.  The Lender shall have no
liability or responsibility to Borrower for the Lender or any Depositary Bank
accepting any check, draft or other order for payment of money bearing the
legend “payment in full” or words of similar import or any other restrictive
legend or endorsement whatsoever or be responsible for determining the
correctness of any remittance.

 

Section 7.              Special Provisions Re:  Inventory and Equipment.  (a) Borrower shall at its own cost and
expense maintain, keep, and preserve its Inventory in good and merchantable
condition and keep and preserve its Equipment in good repair, working order,
and condition, ordinary wear and tear excepted, and, without limiting the foregoing,
make all necessary and proper repairs, replacements, and additions to its
Equipment so that the efficiency thereof shall be fully preserved and
maintained.

 

(b)             Borrower may, until an Event of
Default has occurred and is continuing and thereafter until otherwise notified
by the Lender, use, consume, sell, and lease the Inventory in the ordinary
course of its business, but a sale in the ordinary course of business shall not
under any circumstance include any transfer or sale in satisfaction, partial or
complete, of a debt owing by Borrower.

 

(c)             Borrower may, until an Event of
Default has occurred and is continuing and thereafter until otherwise notified
by the Lender, sell Equipment to the extent permitted by the Credit Agreement.

 

(d)             As of the time any Inventory or
Equipment of Borrower becomes subject to the security interest provided for
hereby and at all times thereafter, Borrower shall be deemed to have warranted
as to any and all of such Inventory and Equipment that all warranties of

 

12

 

Borrower
set forth in this Agreement are true and correct with respect to such Inventory
and Equipment; and that all of such Inventory and Equipment is located at a
location set forth pursuant to Section 4(b) hereof.  Borrower warrants and agrees that none of its
Inventory is or will be consigned to any other person without the Lender’s
prior written consent.

 

(e)             Upon the Lender’s request, Borrower
shall at its own cost and expense cause the lien of the Lender in and to any
portion of the Collateral subject to a certificate of title law to be duly
noted on such certificate of title or to be otherwise filed in such manner as
is prescribed by law in order to perfect such lien and will cause all such
certificates of title and evidences of lien to be deposited with the Lender.

 

(f)             Except for Equipment from time to
time located on the real estate described on Schedule D attached hereto or
as otherwise hereafter disclosed to the Lender and the Lender in writing, none of
the Equipment is or will be attached to real estate in such a manner that the
same may become a fixture.

 

(g)             If any of the Inventory is at any
time evidenced by a document of title, such document shall be promptly
delivered by Borrower to the Lender.

 

Section 8.              Power of Attorney.  In addition to any other powers of attorney
contained herein, Borrower hereby appoints the Lender, its nominee, or any
other person whom the Lender may designate as Borrower’s attorney-in-fact, with
full power and authority upon the occurrence and during the continuation of any
Event of Default to sign Borrower’s name on verifications of Accounts and other
Collateral; to send requests for verification of Collateral to Borrower’s
customers, account debtors, and other obligors; to endorse Borrower’s name on
any checks, notes, acceptances, money orders, drafts, and any other forms of
payment or security that may come into the Lender’s possession; to endorse the
Collateral in blank or to the order of the Lender or its nominee; to sign
Borrower’s name on any invoice or bill of lading relating to any Collateral, on
claims to enforce collection of any Collateral, on notices to and drafts
against customers and account debtors and other obligors, on schedules and
assignments of Collateral, on notices of assignment and on public records; to
notify the post office authorities to change the address for delivery of
Borrower’s mail to an address designated by the Lender; to receive, open, and
dispose of all mail addressed to Borrower; and to do all things necessary to
carry out this Agreement.  Borrower
hereby ratifies and approves all acts of any such attorney and agrees that
neither the Lender nor any such attorney will be liable for any acts or omissions
or for any error of judgment or mistake of fact or law other than such person’s
gross negligence or willful misconduct. 
The foregoing powers of attorney, being coupled with an interest, are
irrevocable until the Secured Obligations have been fully paid and satisfied
and the commitments of the Lenders to extend credit to or for the account of
the Borrower under the Credit Agreement have expired or otherwise terminated.

 

13

 

Section 9.              Defaults
and Remedies.  (a) The
occurrence of any event or the existence of any condition specified as an “Event
of Default” under the Guaranty shall constitute an “Event of Default”
hereunder.

 

(b)        Upon the occurrence and
during the continuation of any Event of Default, the Lender shall have, in
addition to all other rights provided herein or by law, the rights and remedies
of a secured party under the UCC (regardless of whether the UCC is the law of
the jurisdiction where the rights or remedies are asserted and regardless of
whether the UCC applies to the affected Collateral), and further the Lender
may, without demand and, to the extent permitted by applicable law, without
advertisement, notice, hearing or process of law, all of which Borrower hereby
waives to the extent permitted by applicable law, at any time or times, sell
and deliver any or all Collateral held by or for it at public or private sale,
at any securities exchange or broker’s board or at the Lender’s office or
elsewhere, for cash, upon credit or otherwise, at such prices and upon such
terms as the Lender deems advisable, in its discretion.  In the exercise of any such remedies, the
Lender may sell the Collateral as a unit even though the sales price thereof
may be in excess of the amount remaining unpaid on the Secured
Obligations.  In addition to all other
sums due Lender hereunder, Borrower shall pay the Lender all costs and expenses
incurred by the Lender, including reasonable attorneys’ fees and court costs,
in obtaining, liquidating or enforcing payment of Collateral or the Secured
Obligations or in the prosecution or defense of any action or proceeding by or
against Lender or Borrower concerning any matter arising out of or connected
with this Agreement or the Collateral or the Secured Obligations, including,
without limitation, any of the foregoing arising in, arising under or related
to a case under the United States Bankruptcy Code (or any successor
statute).  Any requirement of reasonable
notice shall be met if such notice is personally served on or mailed, postage
prepaid, to Borrower in accordance with Section 13(b) hereof at least
10 days before the time of sale or other event giving rise to the requirement
of such notice; provided, however, no notification need be given to Borrower if
Borrower has signed, after an Event of Default hereunder has occurred, a
statement renouncing any right to notification of sale or other intended
disposition.  The Lender shall not be
obligated to make any sale or other disposition of the Collateral regardless of
notice having been given.  Lender may be
the purchaser at any such sale.  Borrower
hereby waives all of its rights of redemption from any such sale.  The Lender may postpone or cause the
postponement of the sale of all or any portion of the Collateral by
announcement at the time and place of such sale, and such sale may, without
further notice, be made at the time and place to which the sale was postponed
or the Lender may further postpone such sale by announcement made at such time and
place.  The Lender has no obligation to
prepare the Collateral for sale.  The
Lender may sell or otherwise dispose of the Collateral without giving any
warranties as to the Collateral or any part thereof, including disclaimers of
any warranties of title or the like, and Borrower acknowledges and agrees that
the absence of such warranties shall not render the disposition commercially
unreasonable.

 

(c)        Without in any way
limiting the foregoing, upon the occurrence and during the continuation of any
Event of Default hereunder, in addition to all other rights provided herein or
by law, (i) the Lender shall have the right to take physical possession of
any and all of the Collateral and anything found therein, the right for that
purpose to enter without legal process any premises where the Collateral may be
found (provided such entry be done lawfully), and the right to maintain such
possession on Borrower’s premises (Borrower hereby agreeing, to the

 

14

 

extent it may lawfully do so, to lease such premises without cost or
expense to the Lender or its designee if the Lender so requests) or to remove
the Collateral or any part thereof to such other places as the Lender may
desire, (ii) the Lender shall have the right to direct any intermediary at
any time holding any Investment Property or other Collateral, or any issuer
thereof, to deliver such Collateral or any part thereof to the Lender and/or to
liquidate such Collateral or any part thereof and deliver the proceeds thereof
to the Lender (including, without limitation, the right to deliver a notice of
control with respect to any Collateral held in a securities account or
commodities account and deliver all entitlement orders with respect thereto),
(iii) the Lender shall have the right to exercise any and all rights with
respect to all Deposit Accounts of Borrower, including, without limitation, the
right to direct the disposition of the funds in each Deposit Account and to
collect, withdraw, and receive all amounts due or to become due or payable
thereunder, and (iv) Borrower shall, upon the Lender’s demand, promptly
assemble the Collateral and make it available to the Lender at a place
reasonably designated by the Lender.  If
the Lender exercises its right to take possession of the Collateral, Borrower
shall also at its expense perform any and all other steps reasonably requested
by the Lender to preserve and protect the security interest hereby granted in
the Collateral, such as placing and maintaining signs indicating the security
interest of the Lender, appointing overseers for the Collateral and maintaining
Collateral records.

 

(d)        Without in any way
limiting the foregoing, Borrower hereby grants to the Lender a royalty-free
irrevocable license and right to use all of Borrower’s patents, patent
applications, patent licenses, trademarks, trademark registrations, trademark
licenses, trade names, trade styles, and similar intangibles in connection with
any foreclosure or other realization by the Lender or the Lender on all or any
part of the Collateral to the extent permitted by law.  The license and right granted the Lender
hereby shall be without any royalty or fee or charge whatsoever.

 

(f)         The powers conferred
upon the Lender hereunder are solely to protect their interest in the
Collateral and shall not impose on them any duty to exercise such powers.  The Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its possession
or control if such Collateral is accorded treatment substantially equivalent to
that which the Lender accords its own property, consisting of similar type
assets.  This Agreement constitutes an
assignment of rights only and not an assignment of any duties or obligations of
Borrower in any way related to the Collateral, and the Lender shall have no
duty or obligation to discharge any such duty or obligation.  Neither Lender nor any party acting as
attorney for Lender shall be liable for any acts or omissions or for any error
of judgment or mistake of fact or law other than such person’s gross negligence
or willful misconduct.

 

(g)        Failure by the Lender
to exercise any right, remedy or option under this Agreement or any other
agreement between Borrower and the Lender or provided by law, or delay by the
Lender in exercising the same, shall not operate as a waiver; and no waiver
shall be effective unless it is in writing, signed by the party against whom
such waiver is sought to be enforced and then only to the extent specifically
stated.  The rights and remedies of the
Lender under this Agreement shall be cumulative and not exclusive of any other
right or remedy which Lender may have. 
For purposes of this Agreement, an Event of Default shall be construed as
continuing after its occurrence until the same is waived in writing by the
Lender.

 

15

 

Section 10.   Application
of Proceeds.  The proceeds and avails
of the Collateral at any time received by the Lender upon the occurrence and
during the continuation of any Event of Default shall, when received by the
Lender in cash or its equivalent, be applied by the Lender in reduction of, or
held as collateral security for, the Secured Obligations in accordance with the
terms of the Credit Agreement.  The Borrower
shall remain liable to the Lender for any deficiency.  Any surplus remaining after the full payment
and satisfaction of the Secured Obligations shall be returned to the Borrower
or to whomsoever the Lender reasonably determines is lawfully entitled thereto.

 

Section 11.   Continuing
Agreement.  This Agreement shall be a
continuing agreement in every respect and shall remain in full force and effect
until all of the Secured Obligations, both for principal and interest, have
been fully paid and satisfied and the commitments of the Lender to extend
credit to or for the account of the Borrower under the Credit Agreement have
expired or otherwise terminated.  Upon
such termination of this Agreement, the Lender shall, upon the request and at
the expense of Borrower, forthwith release its liens and security interests
hereunder.

 

Section 12.   The Lender.  In acting under or by virtue of this
Agreement, the Lender shall be entitled to all the rights, authority,
privileges, and immunities provided in the Credit Agreement, all of which
provisions of said Credit Agreement are incorporated by reference herein with
the same force and effect as if set forth herein in their entirety.  The Lender hereby disclaims any
representation or warranty to the Lender or any other holders of the Secured
Obligations concerning the perfection of the liens and security interests
granted hereunder or in the value of any of the Collateral.

 

Section 13.   Miscellaneous.  (a) This Agreement cannot be changed or
terminated orally.  This Agreement shall
create a continuing lien on and security interest in the Collateral and shall
be binding upon Borrower, its successors and assigns and shall inure, together
with the rights and remedies of the Lender hereunder, to the benefit of the
Lender and their successors and permitted assigns; provided, however, that
Borrower may not assign its rights or delegate its duties hereunder without the
Lender’s prior written consent.  Without
limiting the generality of the foregoing, and subject to the provisions of the
Credit Agreement, Lender may assign or otherwise transfer any indebtedness held
by it secured by this Agreement to any other person, and such other person
shall thereupon become vested with all the benefits in respect thereof granted
to such Lender herein or otherwise.

 

(b)       Except as otherwise
specified herein, all notices hereunder shall be in writing (including, without
limitation, notice by telecopy) and shall be given to the relevant party at its
address or telecopier number set forth below (or, if no such address is set
forth below, at the address of Borrower as shown on the records of the Lender),
or such other address or telecopier number as such party may hereafter specify
by notice to the other given by courier, by United States certified or registered
mail, by telecopy or by other telecommunication device capable of creating a
written record of such notice and its receipt. 
Notices hereunder shall be addressed:

 

16

 

	
  to
  Borrower at:

  	
  to
  the Lender at

  
	
   

  	
   

  
	
  Advanced
  Life Sciences, Inc.

  1440 Davey Road

  Woodridge, Illinois 60517 

  	
  The
  Leaders Bank

  2001 York Road

  Suite 150

  Oak Brook, Illinois 60523

  

 

Each such notice, request or other communication shall be effective
(i) if given by telecopier, when such telecopy is transmitted to the
telecopier number specified in this Section and a confirmation of such
telecopy has been received by the sender, (ii) if given by mail, five (5) days
after such communication is deposited in the mail, certified or registered with
return receipt requested, addressed as aforesaid or (iii) if given by any
other means, when delivered at the addresses specified in this Section.

 

(c)        In the event and to the
extent that any provision hereof shall be deemed to be invalid or unenforceable
by reason of the operation of any law or by reason of the interpretation placed
thereon by any court, this Agreement shall to such extent be construed as not
containing such provision, but only as to such jurisdictions where such law or
interpretation is operative, and the invalidity or unenforceability of such
provision shall not affect the validity of any remaining provisions hereof, and
any and all other provisions hereof which are otherwise lawful and valid shall
remain in full force and effect.  Without
limiting the generality of the foregoing, in the event that this Agreement
shall be deemed to be invalid or otherwise unenforceable with respect to
Borrower, such invalidity or unenforceability shall not affect the validity of
this Agreement with respect to Borrower.

 

(d)        The lien and security
interest herein created and provided for stand as direct and primary security
for the Secured Obligations of the Borrower arising under or otherwise relating
to the Guaranty as well as for the other Secured Obligations secured
hereby.  No application of any sums
received by the Lender in respect of the Collateral or any disposition thereof
to the reduction of the Secured Obligations or any part thereof shall in any
manner entitle Borrower to any right, title or interest in or to the Secured
Obligations or any collateral or security therefor, whether by subrogation or
otherwise, unless and until all Secured Obligations have been fully paid and
satisfied and all commitments to extend credit to or for the account of the
Borrower under the Credit Agreement have expired or otherwise terminated.  Borrower acknowledges and agrees that the
lien and security interest hereby created and provided are absolute and
unconditional and shall not in any manner be affected or impaired by any acts
of omissions whatsoever of Lender or any other holder of any Secured
Obligations, and without limiting the generality of the foregoing, the lien and
security interest hereof shall not be impaired by any acceptance by Lender or
any other holder of any Secured Obligations of any other security for  Borrower upon any of the Secured Obligations
or by any failure, neglect or omission on the part of Lender or any other
holder of any of the Secured Obligations to realize upon or protect any of the
Secured Obligations or any collateral or security therefor.  The lien and security interest hereof shall
not in any manner be impaired or affected by (and the Lender, without notice to
anyone, are hereby authorized to make from time to time) any sale, pledge, surrender,
compromise, settlement, release, renewal, extension, indulgence, alteration,
substitution, exchange, change in, modification or disposition of any of the
Secured Obligations or of any

 

17

 

collateral or security therefor, or of any guaranty thereof, or of any
instrument or agreement setting forth the terms and conditions pertaining to
any of the foregoing.  The Lender may at
its discretion at any time grant credit to the Borrower without notice to Borrower
in such amounts and on such terms as the Lender may elect without in any manner
impairing the lien and security interest created and provided for.  In order to realize hereon and to exercise
the rights granted the Lender hereunder and under applicable law, there shall
be no obligation on the part of Lender or any other holder of any Secured
Obligations at any time to first resort for payment to the Borrower or to any
guaranty of the Secured Obligations or any portion thereof or to resort to any
other collateral, security, property, liens or any other rights or remedies
whatsoever, and the Lender shall have the right to enforce this Agreement
against Borrower or its Collateral irrespective of whether or not other
proceedings or steps seeking resort to or realization upon or from any of the
foregoing are pending.

 

(e)        This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterpart signature pages, each constituting an original, but all
together one and the same instrument. 
Borrower acknowledges that this Agreement is and shall be effective upon
its execution and delivery by Borrower to the Lender, and it shall not be
necessary for the Lender to execute this Agreement or any other acceptance
hereof or otherwise to signify or express its acceptance hereof.

 

(f)         This Agreement shall
be deemed to have been made in the State of Illinois and shall be governed by,
and construed in accordance with, the laws of Illinois.  The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning of any
provision hereof.

 

(g)        Borrower hereby submits
to the non-exclusive jurisdiction of the United States District Court for the
Northern District of Illinois and of any Illinois state court sitting in DuPage County
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby.  Borrower irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to
the laying of the venue of any such proceeding brought in such a court and any
claim that any such proceeding brought in such a court has been brought in an
inconvenient form.  Borrower and, by
accepting the benefits of this Agreement, Lender hereby irrevocably waives any
and all right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.

 

[SIGNATURE PAGES TO FOLLOW]

 

18

 

IN
WITNESS WHEREOF, Borrower has caused this Security Agreement to be duly
executed and delivered as of the date first above written.

 

 

	
   

  	
  ADVANCED
  LIFE SCIENCES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John L. Flavin

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  President
  and Chief Financial Officer

  

 

Accepted
and agreed to as of the date first above written.

 

 

	
   

  	
  THE
  LEADERS BANK

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John Prosia

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Executive
  Vice President

  

 

19

 

SCHEDULE A

 

LOCATIONS

 

1440
Davey Drive

Woodridge, Illinois
60517

 

Organizational
ID Number
                              

 

 

SCHEDULE B

 

OTHER NAMES

 

A.                                  PRIOR LEGAL
NAMES

 

None.

 

B.                                    TRADE NAMES

 

None.

 

 

SCHEDULE C

 

INTELLECTUAL PROPERTY RIGHTS

 

 

SCHEDULE D

 

REAL ESTATE LEGAL DESCRIPTIONS

 

None.

 

2

 

SCHEDULE E

 

COMMERCIAL TORT CLAIMS

 

[PLEASE PROVIDE LIST, IF ANY]Exhibit
10.21

 

GUARANTY

 

This
GUARANTY dated as of September 9, 2010 (the “Guaranty”), is executed by
the undersigned (“Guarantor”), to and for the benefit of THE LEADERS BANK (the “Lender”),
whose address is 2001 York Road, Suite 150, Oak Brook, Illinois
60523.

 

WHEREAS,
Lender has agreed to continue to extend credit to Advanced Life Sciences, Inc.
(the “Borrower”) in the original principal amount of $8,500,000 (the “Loan”)
pursuant to the terms of that certain Second Amended and Restated Business Loan
Agreement (the “Loan Agreement”);

 

WHEREAS,
Borrower has executed that certain Second Amended and Restated Promissory Note
in the original principal amount of $8,500,000 in favor of Lender (the “Note”);

 

WHEREAS,
extension of credit by the Lender to the Borrower is necessary and desirable to
the finance the Borrower’s operations and will inure to the financial benefit
of the Guarantor;

 

NOW,
THEREFORE, in consideration of the premises and the agreements herein and in
order to induce the Lender to continue make and maintain the Loan pursuant to
the Note, the Guarantor hereby agrees with Lender as follows:

 

1.             It is agreed that the preceding
provisions and preambles are an integral part hereof and that this Guaranty
shall be construed in light thereof, and in consideration of advances, credit
or other financial accommodation heretofore afforded, concurrently herewith
being afforded or hereafter to be afforded to the Borrower by the Lender, the
Guarantor hereby unconditionally and absolutely guarantees to the Lender,
irrespective of the validity, regularity or enforceability of any instrument,
writing, arrangement or credit agreement relating to or the subject of any such
financial accommodation, (i) the payment in full to the Lender at
maturity, whether by acceleration or otherwise, and at all times thereafter, of
the Guaranteed Debt (as hereinafter defined), promptly upon demand of the
Lender or other person paying or incurring the same, and (ii) the prompt,
full and faithful performance and discharge by the Borrower of each of the
terms, conditions, agreements, representations and warranties on the part of
the Borrower contained in any agreement, or in any modification or addenda
thereto or substitution thereof, entered into in connection with the Guaranteed
Obligation (as hereinafter defined); provided, however, that this
Guaranty shall terminate and Guarantor’s obligation to pay the Guaranteed Debt
shall terminate upon the date the Borrower has made a payment under the Note to
reduce the principal balance of the Note to an amount not to exceed Seven
Million Dollars ($7,000,000).

 

2.             As used herein, “Guaranteed Debt”
shall mean and include (i) the principal amount of the Guaranteed
Obligation, plus (ii) all reasonable costs, legal expenses and
attorneys’ and paralegals’ fees of every kind, paid or incurred by the Lender
in endeavoring to collect any of the foregoing indebtedness, obligations and
liabilities of the Borrower or any part thereof, or in enforcing this Guaranty,
or in defending against any defense, counterclaim, setoff or crossclaim based
on any act of commission or omission by the Lender with respect to any of the
foregoing indebtedness, obligations and liabilities of the Borrower, or in
connection with any Repayment Claim (as hereinafter defined).

 

 

3.             As used herein, “Guaranteed
Obligation” shall mean and include any and all indebtedness, obligations and
liabilities of the Borrower to the Lender arising under and pursuant to the
Note executed by the Borrower, including any amendments thereto.

 

4.             In case of the occurrence of an
Event of Default by Borrower under the Note or the Loan Agreement, or a default
by Guarantor hereunder of any of the covenants, terms and conditions set forth
herein, all of the Guaranteed Debt shall, without notice to anyone, immediately
become due or accrued and all amounts due hereunder shall be payable from the
Guarantor.  The Guarantor hereby
expressly and irrevocably:  (a) waives,
to the fullest extent possible, on behalf of himself and his successors and
assigns (including any surety) and any other person, any and all rights at law
or in equity to subrogation, reimbursement, exoneration, contribution,
indemnification, set off or to any other rights that could accrue to a surety
against a principal, a guarantor against a maker or obligor, an accommodation
party against the party accommodated, a holder or transferee against a maker,
or to the holder of a claim against any person, and which Guarantor may have or
hereafter acquire against any person in connection with or as a result of
Guarantor’s execution, delivery and/or performance of this Guaranty, or any
other documents to which Guarantor is a party or otherwise; (b) waives any
“claim” (as such term is defined in the United States Bankruptcy Code) of any
kind against the Borrower, and further agrees that he or she, as the case may
be, shall not have or assert any such rights against any person (including any
surety), either directly or as an attempted set off to any action commenced
against the Guarantor by the Lender or any other person; and (c) acknowledges
and agrees (i) that foregoing waivers are intended to benefit the Lender
and shall not limit or otherwise effect the Guarantor’s liability hereunder or
the enforceability of this Guaranty, (ii) that the Borrower and its successors
and assigns are intended third party beneficiaries of the foregoing waivers,
and (iii) the agreements set forth in this paragraph and the Lender’s
rights under this paragraph shall survive payment in full of the Guaranteed
Debt.

 

5.             All dividends or other payments
received by the Lender on account of the Guaranteed Debt, from whatever source
derived, shall be taken and applied by the Lender toward the payment of the
Guaranteed Debt and in such order of application as the Lender may, in its sole
discretion, from time to time elect, and this Guaranty shall apply to and
secure any ultimate balance that shall remain owing to the Lender.  The Lender shall have the exclusive right to
determine how, when and what application of payments and credits, if any,
whether derived from the Borrower or any other source, shall be made on the
Guaranteed Debt and such determination shall be conclusive upon the Guarantor.

 

6.             This
Guaranty shall in all respects be continuing, absolute and unconditional, and
shall remain in full force and effect with respect to Guarantor until all
Guaranteed Debt shall have been fully paid.

 

7.             Guarantor’s
liability under this Guaranty shall in no way be modified, affected, impaired,
reduced, released or discharged by any of the following (any or all of which
may be done or omitted by the Lender in its sole discretion, without notice to
anyone and irrespective of whether the Guaranteed Debt shall be increased or
decreased thereby): (a) any acceptance by the Lender of any new or renewal
note or notes of the Borrower, or of any security or collateral for, or other
guarantors or obligors upon, any of the Guaranteed Debt; (b) any
compromise, settlement, surrender, release, discharge, renewal, refinancing,
extension, alteration, exchange, 

 

 

sale,
pledge or election with respect to the Guaranteed Debt, or any note by the
Borrower, or take any action under Section 364, or any other section of
the United States Bankruptcy Code (11 U.S.C. § 101 et.  seq.), now
existing or hereafter amended, or other disposition of, or substitution for, or
indulgence with respect to, or failure, neglect or omission to realize upon, or
to enforce or exercise any liens or rights of appropriation or other rights
with respect to, any Guaranteed Debt or any security or collateral therefor or
any claims against any person or persons primarily or secondarily liable
thereon; (c) any failure, neglect or omission to perfect, protect, secure
or insure any of the foregoing security interests, liens, or encumbrances of
the properties or interests in properties subject thereto; (d) any change
in the Borrower’s name or the merger of the Borrower into another corporation; (e) any
act of commission or omission of any kind or at any time upon the part of the
Lender with respect to any matter whatsoever, other than the execution and
delivery by the Lender to the Guarantor of an express written release or
cancellation of this Guaranty; or (f) the payment in full of the
Guaranteed Debt.  The Guarantor hereby
consents to all acts of commission or omission of the Lender set forth above
and agrees that the standards by which good faith, diligence, reasonableness
and care shall be measured, determined and governed solely by the terms and
provisions hereof.

 

8.             Notwithstanding any provision of this
Guaranty to the contrary, it is intended that this Guaranty not constitute a
Fraudulent Conveyance (as defined below). 
Consequently, Guarantor agrees that if this Guaranty, would, but for the
application of this sentence, constitute a Fraudulent Conveyance, this Guaranty
shall be valid and enforceable only to the maximum extent that would not cause
this Guaranty to constitute a Fraudulent Conveyance, and this Guaranty shall
automatically be deemed to have been amended accordingly at all relevant times.  For purposes hereof, “Fraudulent Conveyance”
means a fraudulent conveyance under Section 548 of the Bankruptcy Code or
a fraudulent conveyance or fraudulent transfer under the provisions of any
applicable fraudulent conveyance or fraudulent transfer law or similar law of
any state, nation or governmental unit, as in effect from time to time.

 

9.             In order to hold the Guarantor
liable hereunder, there shall be no obligation on the part of the Lender, at
any time, to resort for payment from the Borrower or to anyone else, or to any
collateral, security, property, liens or other rights and remedies whatsoever,
all of which are hereby expressly waived by the Guarantor.  The Guarantor hereby expressly waives
diligence in collection or protection, presentment, demand or protest or in
giving notice to anyone of the protest, dishonor, default, or nonpayment or of
the creation or existence of any of the Guaranteed Debt or of the acceptance of
this Guaranty or of extension of credit or indulgences hereunder or of any
other matters or things whatsoever relating hereto.

 

10.           The Guarantor waives any and all
defenses, claims and discharges of the Borrower, or any other obligor,
pertaining to the Guaranteed Debt, except the defense of discharge by payment
in full.  Without limiting the generality
of the foregoing, the Guarantor will not assert, plead or enforce against the
Lender any defense of waiver, release, discharge in bankruptcy, statute of
limitations, res judicata, statute of frauds, anti-deficiency statute, minority
or unenforceability which may be available to the Borrower or any other person
liable in respect of any of the Guaranteed Debt, or any setoff available
against the Lender to the Borrower or any such other person, whether or not on
account of a related transaction.  The
Guarantor expressly agrees that the Guarantor shall be and remain liable for
any deficiency remaining after foreclosure of any security interest securing
the Guaranteed Debt, whether or not the liability of 

 

 

the
Borrower or any other obligor for such deficiency is discharged pursuant to
statute or judicial decision.

 

11.           The Lender may, without demand or
notice of any kind to anyone, apply or set off any balances, credits, deposits,
accounts, moneys or other indebtedness at any time credited by or due from the
Lender to the Guarantor against the amounts due hereunder and in such order of
application as the Lender may from time to time elect.  Any notification of intended disposition of
any property required by law shall be deemed reasonably and properly given if
given in the manner provided by the applicable statute.

 

12.           THE GUARANTOR WAIVES EVERY DEFENSE,
CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH THE GUARANTOR MAY NOW HAVE
OR HEREAFTER MAY HAVE TO ANY ACTION BY THE LENDER IN ENFORCING THIS
GUARANTY.  AS FURTHER SECURITY, ANY AND
ALL DEBTS AND LIABILITIES NOW OR HEREAFTER ARISING AND OWING TO THE GUARANTOR
BY THE BORROWER, OR TO ANY OTHER PARTY LIABLE TO THE LENDER, ARE HEREBY
SUBORDINATED TO THE LENDER’S CLAIMS AND ARE HEREBY ASSIGNED TO THE LENDER.  THE GUARANTOR HEREBY AGREES THAT THE
GUARANTOR MAY BE JOINED AS A PARTY DEFENDANT IN ANY LEGAL PROCEEDING
(INCLUDING, BUT NOT LIMITED TO, A FORECLOSURE PROCEEDING) INSTITUTED BY THE
LENDER AGAINST THE BORROWER.  THE
GUARANTOR AND THE LENDER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO
CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
IRREVOCABLY THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY SUCH LEGAL
PROCEEDING IN WHICH THE GUARANTOR AND THE LENDER ARE ADVERSE PARTIES.  THIS PROVISION IS A MATERIAL INDUCEMENT TO
THE LENDER GRANTING ANY FINANCIAL ACCOMMODATION TO THE BORROWER AND ACCEPTING
THIS GUARANTY.

 

13.           Should a claim (a “Repayment Claim”)
be made upon the Lender at any time for repayment of any amount received by the
Lender in payment of the Guaranteed Debt, or any part thereof, whether received
from the Borrower, the Guarantor pursuant hereto, or received by the Lender as
the proceeds of collateral, by reason of: 
(i) any judgment, decree or order of any court or administrative
body having jurisdiction over the Lender or any of its property; or (ii) any
settlement or compromise of any such Repayment Claim effected by the Lender, in
its sole discretion, with the claimant (including the Borrower), the Guarantor
shall remain liable to the Lender for the amount so repaid to the same extent
as if such amount had never originally been received by the Lender,
notwithstanding any termination hereof or the cancellation of any note or other
instrument evidencing any of the Guaranteed Debt.

 

14.           The Lender may, without notice to
anyone, sell or assign the Guaranteed Debt, or any part thereof, or grant
participations therein, and in any such event each and every immediate or
remote assignee or holder of, or participant in, all or any of the Guaranteed
Debt shall have the right to enforce this Guaranty, by suit or otherwise for
the benefit of such assignee, holder, or participant, as fully as if herein by
name specifically given such right herein, but the Lender shall have an
unimpaired right, prior and superior to that of any such assignee, holder or
participant, to 

 

 

enforce
this Guaranty for the benefit of the Lender, as to any part of the Guaranteed
Debt retained by the Lender.

 

15.           Unless and until all of the Guaranteed
Debt has been paid in full, no release or discharge of any other person,
whether primarily or secondarily liable for and obligated with respect to the
Guaranteed Debt, or the institution of bankruptcy, receivership, insolvency,
reorganization, dissolution or liquidation proceedings by or against the
Guarantor or any other person primarily or secondarily liable for and obligated
with respect to the Guaranteed Debt, or the entry of any restraining or other
order in any such proceedings, shall release or discharge the Guarantor, or any
other guarantor of the indebtedness, or any other person, firm or corporation
liable to the Lender for the Guaranteed Debt.

 

16.           (a)           All
references herein to the Borrower and to the Guarantor, respectively, shall be
deemed to include any successors or assigns, whether immediate or remote, to
either corporation and any executors or administrators to such individual.

 

(b)           If this Guaranty contains any blanks
when executed by the Guarantor, the Lender is hereby authorized, without notice
to the Guarantor, to complete any such blanks according to the terms upon which
this Guaranty is executed by the Guarantor and is accepted by the Lender.

 

(c)           This Guaranty has been delivered to
the Lender, and the rights, remedies and liabilities of the parties shall be
construed and determined in accordance with the laws of the State of Illinois,
in which State it shall be performed by the Guarantor.

 

(d)           TO INDUCE THE LENDER TO GRANT
FINANCIAL ACCOMMODATIONS TO THE BORROWER, THE GUARANTOR IRREVOCABLY AGREES THAT
ALL ACTIONS ARISING DIRECTLY OR INDIRECTLY AS A RESULT OR IN CONSEQUENCE OF
THIS GUARANTY SHALL BE INSTITUTED AND LITIGATED ONLY IN COURTS HAVING SITUS IN
THE CITY OF CHICAGO, ILLINOIS, COUNTY OF COOK.  THE GUARANTOR HEREBY CONSENTS TO THE
EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT LOCATED AND
HAVING ITS SITUS IN CHICAGO, ILLINOIS, COUNTY OF COOK AND WAIVES ANY
OBJECTION BASED ON FORUM NON CONVENIENS. 
THE GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS, AND
TO THE SERVICE OF PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, DIRECTED
TO THE GUARANTOR AT THE ADDRESS SET FORTH BELOW IN THE MANNER PROVIDED BY
APPLICABLE STATUTE, LAW, RULE OF COURT OR OTHERWISE.  FURTHERMORE, THE GUARANTOR WAIVES ALL NOTICES
AND DEMANDS IN CONNECTION WITH THE ENFORCEMENT OF THE LENDER’S RIGHTS
HEREUNDER, AND HEREBY CONSENTS TO, AND WAIVES NOTICE OF THE RELEASE, WITH OR
WITHOUT CONSIDERATION, OF THE BORROWER OR ANY OTHER PERSON RESPONSIBLE FOR
PAYMENT OF THE GUARANTEED DEBT, OR OF ANY COLLATERAL THEREFOR.

 

(e)           Wherever possible each provision of
this Guaranty shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this 

 

 

Guaranty
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Guaranty.

 

(f)            It is agreed that the Guarantor’s
liability is independent of any other guaranties at any time in effect with
respect to all or any part of the Borrower’s indebtedness to the Lender, and
that the Guarantor’s liability hereunder may be enforced regardless of the
existence of any such other guaranties.

 

(g)           No delay on the part of the Lender in
the exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by the Lender of any right or remedy shall preclude
other or further exercise thereof, or the exercise of any other right or
remedy.  No modification, termination,
discharge or waiver of any of the provisions hereof shall be binding upon the
Lender, except as expressly set forth in a writing duly signed and delivered on
behalf of the Lender.

 

(h)           This Guaranty may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constituted one and the
same instrument.

 

 

IN
WITNESS WHEREOF, the Guarantor has executed and delivered this Guaranty as of
the date set forth above.

 

 

	
   

  	
  MICHAEL
  FLAVIN

  
	
   

  	
   

  
	
   

  	
  /s/
  Michael T Flavin, Ph.D.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Notice
  Address:

  
	
   

  	
   

  
	
   

  	
  Michael
  Flavin

  
	
   

  	
  1440
  Davey Road

  
	
   

  	
  Woodridge, Illinois
  60517

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