Document:

Exhibit 10.1

 

PROMISSORY
NOTE

 

	
  Borrower:

  	
  Advanced Life Sciences, Inc.

  	
  Lender:

  	
  THE LEADERS BANK

  
	
   

  	
  1440
  Davey Drive

  	
   

  	
  2001
  YORK ROAD, SUITE 150

  
	
   

  	
  Woodridge,
  IL 60517

  	
   

  	
  OAK
  BROOK, IL 60523

  

 

	
  Principal
  Amount:  $4,000,000.00

  	
  Interest
  Rate:  6.750%

  	
  Date of
  Note:  April 18, 2006

  

 

PROMISE TO PAY.  Advanced
Life Sciences, Inc. (“Borrower”) promises to pay to THE LEADERS BANK (“Lender”),
or order, in lawful money of the United States of America, the principal amount
of Four Million & 00/100 Dollars ($4,000,000.00) or so much as may be
outstanding, together with interest at the rate of 6.750% per annum on the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance. The
interest rate may change under the terms and conditions of the “INTEREST AFTER
DEFAULT” section.

 

PAYMENT.  Borrower
will pay this loan in one payment of all outstanding principal plus all accrued
unpaid interest on January 1, 2008. In addition, Borrower will pay regular
monthly payments of all accrued unpaid interest due as of each payment date,
beginning May 1, 2006, with all subsequent interest payments to be due on the
same day of each month after that. Unless otherwise agreed or required by
applicable law, payments will be applied first to any accrued unpaid interest;
then to principal; then to any unpaid collection costs; and then to any late
charges. The annual interest rate for this Note is computed on a 365/360 basis;
that is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender
at Lender’s address shown above or at such other place as Lender may designate
in writing.

 

PREPAYMENT.  Borrower may pay without penalty all or a
portion of the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of Borrower’s
obligation to continue to make payments of accrued unpaid interest. Rather,
early payments will reduce the principal balance due. Borrower agrees not to
send Lender payments marked “paid in full”, “without recourse”, or similar
language. If Borrower sends such a payment, Lender may accept it without losing
any of Lender’s rights under this Note, and Borrower will remain obligated to
pay any further amount owed to Lender. All written communications concerning
disputed amounts, including any check or other payment instrument that indicates
that the payment constitutes “payment in full” of the amount owed or that is
tendered with other conditions or limitations or as full satisfaction of a
disputed amount must be mailed or delivered to: The Leaders Bank, Post Office
Box 3516 Oak Brook, IL 60522-3516.

 

LATE CHARGE.  If a payment is 10 days or more late, Borrower
will be charged 5.000% of the regularly scheduled payment or $10.00, whichever
is greater.

 

INTEREST AFTER DEFAULT.  Upon default, including failure
to pay upon final maturity, the interest rate on this Note shall be increased
by 4.000 percentage points. However, in no event will the interest rate exceed
the maximum interest rate limitations under applicable law.

 

DEFAULT.  Each of the following shall constitute an
event of default (“Event of Default”) under this Note:

 

Payment Default.  Borrower fails to make any payment when
due under this Note.

 

Other Defaults.  Borrower fails to comply with or to
perform any other term, obligation, covenant or condition contained in this
Note 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 Borrower, and
such failure shall continue for a period of 15 days.

 

Default in Favor of Third Parties.  Borrower
or any Grantor defaults 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 Borrower’s property
or Borrower’s ability to repay this Note or perform Borrower’s obligations
under this Note or any of the related documents.

 

False Statements.  Any warranty, representation or
statement made or furnished to Lender by Borrower or on Borrower’s behalf under
this Note 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.

 

Insolvency.  The dissolution or termination of Borrower’s
existence as a going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower’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 Borrower.

 

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 Borrower or by
any governmental agency against any collateral securing the loan. This includes
a garnishment of any of Borrower’s accounts, including deposit accounts, with
Lender. However, this Event of Default shall not apply if there is a good faith
dispute by Borrower as to the validity or reasonableness of the claim which is
the basis of the creditor or forfeiture proceeding and if Borrower 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.

 

Insufficient Market Value of Securities.  Failure
to satisfy Lender’s requirement set forth in the Insufficient Market Value of
Securities section of the Pledge Agreement.

 

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 any 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 evidenced by this Note.

 

Change
In Ownership.  Any change in ownership of fifty-one percent
(51%) or more of the common stock of
Borrower. *fifty-one (51%)

 

Adverse Change.  A material adverse change occurs in
Borrower’s financial condition.

 

LENDER’S RIGHTS.  Upon default, Lender may declare the
entire unpaid principal balance under this Note and all accrued unpaid interest
immediately due, and then Borrower will pay that amount.

 

ATTORNEYS’ FEES; EXPENSES.  Lender may hire or pay someone
else to help collect this Note if Borrower does not pay. Borrower will pay
Lender that amount. This includes, subject to any limits under applicable law,
Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is a
lawsuit, including attorneys’ fees, expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction), and
appeals. If not prohibited by applicable law, Borrower also will pay any court
costs, in addition to all other sums provided by law.

 

JURY WAIVER.  Lender
and Borrower hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Lender or Borrower against the
other.

 

GOVERNING LAW.  This
Note 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 Note has been accepted by Lender in
the State of Illinois.

 

 

CHOICE OF VENUE.  If there is a lawsuit, Borrower agrees upon
Lender’s request to submit to the jurisdiction of the courts of DU PAGE County,
State of Illinois.

 

CONFESSION OF JUDGMENT.  Borrower
hereby irrevocably authorizes and empowers any attorney-at-law to appear in any
court of record and to confess judgment against Borrower for the unpaid amount
of this Note as evidenced by an affidavit signed by an officer of Lender
setting forth the amount then due, attorneys’ fees plus costs of suit, and to
release all errors, and waive all rights of appeal. If a copy of this Note,
verified by an affidavit, shall have been filed in the proceeding, it will not
be necessary to file the original as a warrant of attorney. Borrower waives the
right to any stay of execution and the benefit of all exemption laws now or
hereafter in effect. No single exercise of the foregoing warrant and power to
confess judgment will be deemed to exhaust the power, whether or not any such
exercise shall be held by any court to be invalid, voidable, or void; but the
power will continue undiminished and may be exercised from time to time as
Lender may elect until all amounts owing on this Note have been paid in full. Borrower
hereby waives and releases any and all claims or causes of action which
Borrower might have against any attorney acting under the terms of authority
which Borrower has granted herein arising out of or connected with the
confession of judgement hereunder.

 

RIGHT OF SETOFF.  To the extent permitted by applicable law,
Lender reserves a right of setoff in all Borrower’s accounts with Lender
(whether checking, savings, or some other account). This includes all accounts
Borrower holds jointly with someone else and all accounts Borrower may open in
the future. However, this does not include any IRA or Keogh accounts, or any
trust accounts for which setoff would be prohibited by law. Borrower 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.

 

COLLATERAL.  Borrower acknowledges this Note is secured by
a Commercial Security Agreement from Borrower to Lender dated April 3, 2006
pledging all business assets, a Commercial Pledge Agreement from Grantor to
Lender dated April 3, 2006 pledging 2,540,000 shares of Advanced Life Sciences
Holdings, Inc. common stock.

 

LINE OF CREDIT.  This Note evidences a straight line of credit.
Once the total amount of principal has been advanced, Borrower is not entitled
to further loan advances. Advances under this Note may be requested orally by Borrower
or as provided in this paragraph. All oral requests shall be confirmed in
writing on the day of the request. All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender’s
office shown above. The following persons currently are authorized to request
advances and authorize payments under the line of credit until Lender receives
from Borrower, at Lender’s address shown above, written notice of revocation of
their authority: John L. Flavin; Michael T.
Flavin; and Richard Wieland. Borrower agrees to be liable for all sums either: (A) advanced in
accordance with the instructions of an authorized person or (B) credited to any
of Borrower’s accounts with Lender. The unpaid principal balance owing on this Note
at any time may be evidenced by endorsements on this Note or by Lender’s
internal records, including daily computer print-outs.

 

USA PATRIOT ACT NOTICE.  Lender
hereby notifies Borrower that pursuant to the requirments of the USA Patriot
Act (Title III of Pub. L 107-56 (signed into law October 26, 2001)) (the “Patriot
Act”), it is required to obtian, verify and record information that identifies
Borrower, which information includes the name and address of Borrower and other
information that will allow Lender to identify Borrower in accordance with the
Patriot Act.

 

ADDITION TO ILLINOIS INSURANCE NOTICE.  Lender
agrees that the insurance policies in effect on the date hereof are sufficient
in coverage and amount to protect Lenders interest in the collateral.

 

ADDITION TO LINE OF CREDIT.  Lender
will have no obligation to advance funds under this Note if: (A) Borrower or
any guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (B) 
Borrower or any guarantor ceases doing business or is insolvent; (C)  any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor’s guarantee of this Note or
any other loan with Lender; (D) Borrower has applied funds provided pursuant to
this Note for purposes other than those authorized by Lender.

 

PRIOR NOTE.  Refinance of both Note(s) number 1000786 dated
May 31, 2005 in the amount of $1,000,000.00 to Advanced Life Sciences, Inc.,
and number 1000705 dated December 21, 2004 and amended on May 31, 2005 in the
amount of $3,000,000.00 to Advanced Life Sciences, Inc.

 

SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon
Borrower, and upon Borrower’s heirs, personal representatives, successors and
assigns, and shall inure to the benefit of Lender and its successors and
assigns.

 

NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER
REPORTING AGENCIES.  Please notify us if we report any inaccurate
information about your account(s) to a consumer reporting agency. Your written
notice describing the specific inaccuracy(ies) should be sent to us at the
following address: The Leaders Bank P.O. Box 3516 Oak Brook, IL 60522-3516.

 

GENERAL PROVISIONS.  If any part of this Note cannot be enforced,
this fact will not affect the rest of the Note. Lender may delay or forgo
enforcing any of its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses this Note, to
the extent allowed by law, waive presentment, demand for payment, and notice of
dishonor. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender’s security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made. The obligations under this Note are
joint and several.

 

ILLINOIS INSURANCE NOTICE.  Unless Borrower provides Lender with evidence
of the insurance coverage required by Borrower’s agreement with Lender,
Lender may purchase insurance at Borrower’s expense to protect Lender’s
interests in the collateral. This insurance may, but need not, protect Borrower’s
interests. The coverage that Lender purchases may not pay any claim that
Borrower makes or any claim that is made against Borrower in connection with
the collateral. Borrower may later cancel any insurance purchased by Lender,
but only after providing Lender with evidence that Borrower has obtained
insurance as required by their agreement. If Lender purchases insurance for the
collateral, Borrower will be responsible for the costs of that insurance,
including interest and any other charges 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
Borrower’s total outstanding balance or obligation. The costs of the insurance
may be more than the cost of insurance Borrower may be able to obtain on
Borrower’s own.

 

2

 

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL
THE PROVISIONS OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE.

 

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS
PROMISSORY NOTE.

 

BORROWER:

 

 

	
   

  	
  ADVANCED
  LIFE SCIENCES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John L. Flavin

  	
   

  
	
   

  	
   

  	
  John L.
  Flavin, President of Advanced Life

  Sciences, Inc.

  

 

3

 

DISBURSEMENT REQUEST AND AUTHORIZATION

 

	
  Borrower:

  	
  Advanced Life Sciences, Inc.

  	
  Lender:

  	
  THE LEADERS BANK

  
	
   

  	
  1440
  Davey Drive

  	
   

  	
  2001
  YORK ROAD, SUITE 150

  
	
   

  	
  Woodridge,
  IL 60517

  	
   

  	
  OAK
  BROOK, IL 60523

  

 

LOAN TYPE.  This is a Fixed Rate (6.750%) Nondisclosable
Draw Down Line of Credit Loan to a Corporation for $4,000,000.00 due on January
1, 2008.

 

PRIMARY PURPOSE OF LOAN.  The
primary purpose of this loan is for:

 

o Personal, Family, or Household Purposes or Personal
Investment.

 

ý Business.

 

SPECIFIC PURPOSE.  The specific purpose of this loan is:  Restructure and Refinance of working capital
line of credit and building loan - Note number(s) 1000705 and 1000786.

 

DISBURSEMENT INSTRUCTIONS.  Borrower
understands that no loan proceeds will be disbursed until all of Lender’s
conditions for making the loan have been satisfied. Please disburse the loan
proceeds of $4,000,000.00 as follows:

 

	
  Undisbursed
  Funds:

  	
   

  	
  $

  	
  85,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Amount
  paid on Borrower’s account:

  	
   

  	
  $

  	
  3,915,000.00

  	
   

  
	
  $915,000.00
  Payment on Loan # 1000786

  	
   

  	
   

  	
   

  
	
  $3,000,000.00
  Payment on Loan # 1000705

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Note
  Principal:

  	
   

  	
  $

  	
  4,000,000.00

  	
   

  

 

AUTOMATIC PAYMENTS.  Borrower hereby authorizes Lender
automatically to deduct from Borrower’s Checking account, numbered 4001001595,
the amount of any loan payment. If the funds in the account are insufficient to
cover any payment, Lender shall not be obligated to advance funds to cover the
payment. At any time and for any reason, Borrower or Lender may voluntarily
terminate Automatic Payments.

 

FINANCIAL CONDITION.  BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER’S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER’S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED APRIL 18, 2006.

 

 

BORROWER:

 

 

	
   

  	
  ADVANCED
  LIFE SCIENCES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John L. Flavin

  	
   

  
	
   

  	
   

  	
  John
  L. Flavin, President of Advanced Life

  Sciences, Inc.

  

 

 

 

COMMERCIAL PLEDGE AGREEMENT

 

	
  Borrower:

  	
  Advanced Life Sciences, Inc.

  	
  Lender:

  	
  THE LEADERS BANK

  
	
   

  	
  1440
  Davey Drive

  	
   

  	
  2001
  YORK ROAD, SUITE 150

  
	
   

  	
  Woodridge,
  IL 60517

  	
   

  	
  OAK
  BROOK, IL 60523

  
	
   

  	
   

  	
   

  	
   

  
	
  Grantor:

  	
  ALS Ventures, LLC

  	
   

  	
   

  
	
   

  	
  1440
  Davey Rd

  	
   

  	
   

  
	
   

  	
  Woodridge,
  IL 60517

  	
   

  	
   

  

 

THIS COMMERCIAL PLEDGE AGREEMENT dated April 18,
2006, is made and executed among ALS Ventures, LLC (“Grantor”); Advanced Life
Sciences, Inc. (“Borrower”); and THE LEADERS BANK (“Lender”).

 

GRANT OF SECURITY INTEREST.  For valuable consideration, Grantor 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 all of Grantor’s property (however owned if more than
one), in the possession of Lender (or in the possession of a third party
subject to the control of Lender), whether existing now or later and whether
tangible or intangible in character, including without limitation each and all
of the following:

 

2,540,000 Shares of Advanced Life Sciences Holdings, Inc. common stock

 

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

 

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

 

(B)    All property assigned to
Lender.

 

(C)    All promissory notes, bills
of exchange, stock certificates, bonds, savings passbooks, time certificates of
deposit, insurance policies, and all other instruments and evidences of an
obligation.

 

(D)    All records relating to any
of the property described in this Collateral section, whether in the form of a
writing, microfilm, microfiche, or electronic media.

 

(E)     All Income and Proceeds from
the Collateral as defined herein.

 

BORROWER’S WAIVERS AND RESPONSIBILITIES.  Except
as otherwise required under this Agreement or by applicable law,  (A) 
Borrower agrees that Lender need not tell Borrower about any action or
inaction Lender takes in connection with this Agreement;  (B)  Borrower
assumes the responsibility for being and keeping informed about the Collateral;
and (C) Borrower waives any defenses that may arise because of any action or
inaction of Lender, including without limitation any failure of Lender to
realize upon the Collateral or any delay by Lender in realizing upon the
Collateral; and Borrower agrees to remain liable under the Note no matter what
action Lender takes or fails to take under this Agreement.

 

GRANTOR’S REPRESENTATIONS AND WARRANTIES.  Grantor
warrants that: (A) this Agreement is executed at Borrower’s request and not at
the request of Lender; (B) Grantor has the full right, power and authority to
enter into this Agreement and to pledge the Collateral to Lender; (C) Grantor
has established adequate means of obtaining from Borrower on a continuing basis
information about Borrower’s financial condition; and (D) Lender has made no
representation to Grantor about Borrower or Borrower’s creditworthiness.

 

GRANTOR’S WAIVERS.  Grantor waives all requirements
of presentment, protest, demand, and notice of dishonor or non-payment to
Borrower or Grantor, or any other party to the Indebtedness or the Collateral. Lender
may do any of the following with respect to any obligation of any Borrower,
without first obtaining the consent of Grantor: (A) grant any extension of time
for any payment, (B) grant any renewal, (C) permit any modification of payment
terms or other terms, or (D) exchange or release any Collateral or other
security. No such act or failure to act shall affect Lender’s rights against
Grantor or the Collateral.

 

RIGHT OF SETOFF.  To the extent permitted by applicable
law, Lender reserves a right of setoff in all Grantor’s accounts with Lender
(whether checking, savings, or some other account). This includes all accounts
Grantor holds jointly with someone else and all accounts Grantor may open in
the future. 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.

 

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL.  Grantor represents and warrants to Lender
that:

 

Ownership.  Grantor is the lawful owner of the Collateral
free and clear of all security interests, liens, encumbrances and claims of
others except as disclosed to and accepted by Lender in writing prior to
execution of this Agreement.

 

Right to Pledge.  Grantor has the full right, power and
authority to enter into this Agreement and to pledge the Collateral.

 

Authority; Binding Effect.  Grantor has the full right,
power and authority to enter into this Agreement and to grant a security
interest in the Collateral to Lender. This Agreement is binding upon Grantor as
well as Grantor’s successors and assigns, and is legally enforceable in
accordance with its terms. The foregoing representations and warranties, and
all other representations and warranties contained in this Agreement are and
shall be continuing in nature and shall remain in full force and effect until
such time as this Agreement is terminated or cancelled as provided herein.

 

No Further Assignment.  Grantor has not, and shall not,
sell, assign, transfer, encumber or otherwise dispose of any of Grantor’s
rights in the Collateral except as provided in this Agreement.

 

No Defaults.  There are no defaults existing under the
Collateral, and there are no offsets or counterclaims to the same. Grantor will
strictly and promptly perform each of the terms, conditions, covenants and
agreements, if any, contained in the Collateral which are to be performed by
Grantor.

 

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 membership agreement does not prohibit any term or condition
of this Agreement.

 

Financing Statements.  Grantor authorizes Lender to
file a UCC financing statement, or alternatively, a copy of this Agreement to
perfect Lender’s security interest. 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.

 

LENDER’S RIGHTS AND OBLIGATIONS WITH RESPECT TO THE
COLLATERAL.  Lender may hold the Collateral until all Indebtedness has been paid and
satisfied. Thereafter Lender may deliver the Collateral to Grantor or to any
other owner of the Collateral. Lender shall have the following rights in
addition to all other rights Lender may have by law:

 

Maintenance and Protection of Collateral.  Lender
may, but shall not be obligated to, take such steps as it deems necessary or
desirable to protect, maintain, insure, store, or care for the Collateral,
including paying of any liens or claims against the Collateral. This may
include such things as hiring other people, such as attorneys, appraisers or
other experts. Lender may charge Grantor for any cost incurred in so doing.
When applicable law provides more than one method of perfection of Lender’s
security interest, Lender may choose the method(s) to be used. If the
Collateral consists of stock, bonds or other investment property for which no
certificate has been issued, Grantor agrees, at Lender’s request, either to
request issuance of an appropriate certificate or to give instructions on
Lender’s forms to the issuer, transfer agent, mutual fund company, or broker,
as the case may be, to record on its books or records Lender’s security
interest in the Collateral. Grantor also agrees to execute any additional
documents, including but not limited to, a control agreement, necessary to
perfect Lender’s security interest as Lender may desire.

 

Income and Proceeds from the Collateral.  Lender
may receive all Income and Proceeds and add it to the Collateral. Grantor
agrees to deliver to Lender immediately upon receipt, in the exact form
received and without commingling with other property, all Income and Proceeds
from the Collateral which may be received by, paid, or delivered to Grantor or
for Grantor’s account, whether as an addition to, in discharge of, in
substitution of, or in exchange for any of the Collateral.

 

Application of Cash.  At Lender’s option, Lender may apply any cash,
whether included in the Collateral or received as Income and Proceeds or
through liquidation, sale, or retirement, of the Collateral, to the
satisfaction of the Indebtedness or such portion thereof as Lender shall
choose, whether or not matured.

 

Transactions with Others.  Lender
may (1) extend time for payment or other performance, (2) grant a renewal or
change in terms or conditions, or (3) compromise, compound or release any obligation,
with any one or more Obligors, endorsers, or Guarantors of the Indebtedness as
Lender deems advisable, without obtaining the prior written consent of Grantor,
and no such act or failure to act shall affect Lender’s rights against Grantor
or the Collateral.

 

All Collateral Secures Indebtedness.  All
Collateral shall be security for the Indebtedness, whether the Collateral is
located at one or more offices or branches of Lender. This will be the case
whether or not the office or branch where Grantor obtained Grantor’s loan knows
about the Collateral or relies upon the Collateral as security.

 

Collection of Collateral.  Lender
at Lender’s option may, but need not, collect the Income and Proceeds directly
from the Obligors. Grantor authorizes and directs the Obligors, if Lender
decides to collect the Income and Proceeds, to pay and deliver to Lender all
Income and Proceeds from the Collateral and to accept Lender’s receipt for the
payments.

 

Power of Attorney.  Grantor irrevocably appoints Lender as Grantor’s
attorney-in-fact, with full power of substitution, (a) to demand, collect,
receive, receipt for, sue and recover all Income and Proceeds and other sums of
money and other property which may now or hereafter become due, owing or
payable from the Obligors in accordance with the terms of the Collateral; (b)
to execute, sign and endorse any and all instruments, receipts, checks, drafts
and warrants issued in payment for the Collateral;  (c) to settle or compromise any and all
claims arising under the Collateral, and in the place and stead of Grantor,
execute and deliver Grantor’s release and acquittance for Grantor; (d) to file
any claim or claims or to take any action or institute or take part in any
proceedings, either in Lender’s own name or in the name of Grantor, or
otherwise, which in the discretion of Lender may seem to be necessary or
advisable; and (e) to execute in Grantor’s name and to deliver to the Obligors
on Grantor’s behalf, at the time and in the manner specified by the Collateral,
any necessary instruments or documents.

 

Perfection of Security Interest.  Upon
Lender’s request, Grantor will deliver to Lender any and all of the documents
evidencing or constituting the Collateral. When applicable law provides more
than one method of perfection of Lender’s security interest, Lender may choose
the method(s) to be used. Upon Lender’s request, Grantor will sign and deliver
any writings necessary to perfect Lender’s security interest. If any of the
Collateral consists of securities for which no certificate has been issued,
Grantor agrees, at Lender’s option, either to request issuance of an
appropriate certificate or to execute appropriate instructions on Lender’s
forms instructing the issuer, transfer agent, mutual fund company, or broker,
as the case may be, to record on its books or records, by book-entry or
otherwise, Lender’s security interest in the Collateral. 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. 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 Borrower may not be indebted to Lender.

 

LENDER’S EXPENDITURES.  If
any action or proceeding is commenced that would materially affect Lender’s
interest in the Collateral or if Grantor fails 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
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 (A)  be
payable on demand;  (B)  be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (1) the term of any applicable insurance policy; or (2) the
remaining term of the Note; or (C)  be
treated as a balloon payment which will be due and payable at the Note’s
maturity. The 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.

 

LIMITATIONS ON OBLIGATIONS OF LENDER.  Lender
shall use ordinary reasonable care in the physical preservation and custody of
the Collateral in Lender’s possession, but shall have no other obligation to
protect the Collateral or its value. In particular, but without limitation,
Lender shall have no responsibility for (A) any depreciation in value of the
Collateral or for the collection or protection of any Income and Proceeds from
the Collateral, (B) preservation of rights against parties to the Collateral or
against third persons,  (C)  ascertaining any maturities, calls,
conversions, exchanges, offers, tenders, or similar matters relating to any of
the Collateral, or (D) informing Grantor about any of the above, whether or not
Lender has or is deemed to have knowledge of such matters. Except as provided
above, Lender shall have no liability for depreciation or deterioration of the
Collateral.

 

REINSTATEMENT OF SECURITY INTEREST.  If payment is made by Borrower, whether voluntarily or otherwise, or by
guarantor or by any third party, on the Indebtedness and thereafter Lender is
forced to remit the amount of that payment (A) to Borrower’s trustee in
bankruptcy or to any

 

2

 

similar
person under any federal or state bankruptcy law or law for the relief of
debtors, (B) 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 (C) by reason of any settlement or compromise of any claim made by
Lender with any claimant (including without limitation Borrower), 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:

 

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

 

Other Defaults.  Borrower or 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 Borrower or 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 Borrower’s property
or Borrower’s or any Grantor’s ability to repay the Indebtedness or perform
their respective obligations under this Agreement or any of the Related
Documents.

 

False Statements.  Any warranty, representation or statement made
or furnished to Lender by Borrower or Grantor or on Borrower’s or 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 Borrower’s
or Grantor’s existence as a going business, the insolvency of Borrower or
Grantor, the appointment of a receiver for any part of Borrower’s or 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 Borrower or 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 Borrower or
Grantor or by any governmental agency against any collateral securing the
Indebtedness. This includes a garnishment of any of Borrower’s or Grantor’s
accounts, including deposit accounts, with Lender. However, this Event of
Default shall not apply if there is a good faith dispute by Borrower or Grantor
as to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower or 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.

 

Insufficient Market Value of Securities.  Stock:  The
market value of the Collateral falls below $8,000,000.00; and as a result of
the deterioration of the market value of the Collateral, Grantor does not, by
the close of business on the next business day after Grantor has received
notice from Lender of the deterioration, either (1) reduce the amount of the
Indebtedness in this loan as required by Lender or (2) pledge or grant an
additional security interest to increase the value of the Collateral as
required by Lender.

 

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 Borrower’s
or 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
may exercise any one or more of the following rights and remedies:

 

Accelerate Indebtedness.  Declare
all Indebtedness, including any prepayment penalty which Borrower would be
required to pay, immediately due and payable, without notice of any kind to
Borrower or Grantor.

 

Collect the Collateral.  Collect
any of the Collateral and, at Lender’s option and to the extent permitted by
applicable law, retain possession of the Collateral while suing on the Indebtedness.

 

Sell the Collateral.  Sell the Collateral, at Lender’s discretion,
as a unit or in parcels, at one or more public or private sales. Unless the
Collateral is perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market, Lender shall give or mail to
Grantor, and other persons as required by law, notice at least ten (10) days in
advance of the time and place of any public sale, or of the time after which
any private sale may be made. However, no notice need be provided to any person
who, after an Event of Default occurs, enters into and authenticates an
agreement waiving that person’s right to notification of sale. Grantor agrees
that any requirement of reasonable notice as to Grantor is satisfied if Lender
mails notice by ordinary mail addressed to Grantor at the last address Grantor
has given Lender in writing. If a public sale is held, there shall be
sufficient compliance with all requirements of notice to the public by a single
publication in any newspaper of general circulation in the county where the
Collateral is located, setting forth the time and place of sale and a brief
description of the property to be sold. Lender may be a purchaser at any public
sale.

 

Sell Securities.  Sell any securities included in the Collateral
in a manner consistent with applicable federal and state securities laws. If,
because of restrictions under such laws, Lender is unable, or believes Lender
is unable, to sell the securities in an open market transaction, Grantor agrees
that Lender will have no obligation to delay sale until the securities can be
registered. Then Lender may make a private sale to one or more persons or to a
restricted group of persons, even though such sale may result in a price that
is less favorable than might be obtained in an open market transaction. Such a
sale will be considered commercially reasonable. If any securities held as
Collateral are “restricted securities” as defined in the Rules of the
Securities and Exchange Commission (such as Regulation D or Rule 144) or the
rules of state securities departments under state “Blue Sky” laws, or if
Grantor or any other owner of the Collateral is an affiliate of the issuer of
the securities, Grantor agrees that neither Grantor, nor any member of Grantor’s
family, nor any other person signing this Agreement will sell or dispose of any
securities of such issuer without obtaining Lender’s prior written consent.

 

Rights and Remedies with Respect to Investment Property,
Financial Assets and Related Collateral.  In
addition to other rights and remedies

 

3

 

granted
under this Agreement and under applicable law, Lender may exercise any or all
of the following rights and remedies: (1) register with any issuer or broker or
other securities intermediary any of the Collateral consisting of investment
property or financial assets (collectively herein, “investment property”) in
Lender’s sole name or in the name of Lender’s broker, agent or nominee;  (2)  cause
any issuer, broker or other securities intermediary to deliver to Lender any of
the Collateral consisting of securities, or investment property capable of
being delivered;  (3) enter into a
control agreement or power of attorney with any issuer or securities intermediary
with respect to any Collateral consisting of investment property, on such terms
as Lender may deem appropriate, in its sole discretion, including without
limitation, an agreement granting to Lender any of the rights provided
hereunder without further notice to or consent by Grantor; (4) execute any such
control agreement on Grantor’s behalf and in Grantor’s name, and hereby
irrevocably appoints Lender as agent and attorney-in-fact, coupled with an
interest, for the purpose of executing such control agreement on Grantor’s
behalf; (5) exercise any and all rights of Lender under any such control
agreement or power of attorney; (6) exercise any voting, conversion,
registration, purchase, option, or other rights with respect to any Collateral;  (7)  collect,
with or without legal action, and issue receipts concerning any notes, checks,
drafts, remittances or distributions that are paid or payable with respect to
any Collateral consisting of investment property. Any control agreement entered
with respect to any investment property shall contain the following provisions,
at Lender’s discretion. Lender shall be authorized to instruct the issuer,
broker or other securities intermediary to take or to refrain from taking such
actions with respect to the investment property as Lender may instruct, without
further notice to or consent by Grantor. Such actions may include without
limitation the issuance of entitlement orders, account instructions, general
trading or buy or sell orders, transfer and redemption orders, and stop loss
orders. Lender shall be further entitled to instruct the issuer, broker or
securities intermediary to sell or to liquidate any investment property, or to
pay the cash surrender or account termination value with respect to any and all
investment property, and to deliver all such payments and liquidation proceeds
to Lender. Any such control agreement shall contain such authorizations as are
necessary to place Lender in “control” of such investment collateral, as
contemplated under the provisions of the Uniform Commercial Code, and shall
fully authorize Lender to issue “entitlement orders” concerning the transfer,
redemption, liquidation or disposition of investment collateral, in conformance
with the provisions of the Uniform Commercial Code.

 

Foreclosure.  Maintain a judicial suit for foreclosure and
sale of the Collateral.

 

Transfer Title.  Effect transfer of title upon sale of all or
part of the Collateral. For this purpose, Grantor irrevocably appoints Lender
as Grantor’s attorney-in-fact to execute endorsements, assignments and
instruments in the name of Grantor and each of them (if more than one) as shall
be necessary or reasonable.

 

Other Rights and Remedies.  Have
and exercise any or all of the rights and remedies of a secured creditor under
the provisions of the Uniform Commercial Code, at law, in equity, or otherwise.

 

Application of Proceeds.  Apply
any cash which is part of the Collateral, or which is received from the
collection or sale of the Collateral, to reimbursement of any expenses, including
any costs for registration of securities, commissions incurred in connection
with a sale, attorneys’ fees and court costs, whether or not there is a lawsuit
and including any fees on appeal, incurred by Lender in connection with the
collection and sale of such Collateral and to the payment of the Indebtedness
of Borrower to Lender, with any excess funds to be paid to Grantor as the
interests of Grantor may appear. Borrower agrees, to the extent permitted by
law, to pay any deficiency after application of the proceeds of the Collateral
to the Indebtedness.

 

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 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 a 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. 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 DU PAGE County,
State of Illinois.

 

Joint and Several Liability.  All
obligations of Borrower and Grantor under this Agreement shall be joint and
several, and all references to Grantor shall mean each and every Grantor, and
all references to Borrower shall mean each and every Borrower. This means that
each Borrower and Grantor signing below is responsible for all obligations in
this Agreement. Where any one or more of the parties is a corporation,
partnership, limited liability company or similar entity, it is not necessary
for Lender to inquire into the powers of any of the officers, directors,
partners, members, or other agents acting or purporting to act on the entity’s
behalf, and any obligations made or created in reliance upon the professed
exercise of such powers shall be guaranteed under this Agreement.

 

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 sole discretion

 

4

 

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 telefacsimile (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.

 

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 on 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.

 

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 Uniform
Commercial Code:

 

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

 

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

 

Grantor.  The word “Grantor” means ALS Ventures, LLC.

 

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

 

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

 

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
Borrower 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 Note executed by
Advanced Life Sciences, Inc. in the principal amount of $4,000,000.00 dated
April 18, 2006, together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of, and substitutions for the note or credit
agreement.

 

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

 

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, loan 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.

 

BORROWER AND GRANTOR HAVE READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS COMMERCIAL PLEDGE AGREEMENT AND AGREE TO ITS TERMS. THIS
AGREEMENT IS DATED APRIL 18, 2006.

 

5

 

	
   

  	
  GRANTOR:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ALS
  VENTURES, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael T. Flavin

  	
   

  
	
   

  	
   

  	
  Michael T. Flavin, Manager of
  ALS Ventures, LLC

  
	
   

  	
   

  
	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ADVANCED
  LIFE SCIENCES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John L. Flavin

  	
   

  
	
   

  	
   

  	
  John L. Flavin, President of
  Advanced Life

  Sciences, Inc.

  
	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE
  LEADERS BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James E. Lynch

  	
   

  
	
   

  	
   

  	
  Authorized Signer

  

 

6

 

COMMERCIAL SECURITY AGREEMENT

 

	
  Grantor:

  	
  Advanced Life Sciences, Inc.

  	
  Lender:

  	
  THE LEADERS BANK

  
	
   

  	
  1440 Davey
  Drive

  	
   

  	
  2001 YORK
  ROAD, SUITE 150

  
	
   

  	
  Woodridge,
  IL 60517

  	
   

  	
  OAK BROOK,
  IL 60523

  

 

THIS COMMERCIAL SECURITY AGREEMENT dated April 18, 2006, is made and
executed between Advanced Life Sciences, Inc. (“Grantor”) and THE LEADERS BANK
(“Lender”).

 

GRANT OF SECURITY INTEREST.  For valuable
consideration, Grantor 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 under the Note and this
Agreement:

 

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; and 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. 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. 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 Corporation Grantor; (4) change in the authorized signer(s);
(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, 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 they 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
titled 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 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 even if 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, or 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, its use
or operation, upon this Agreement, upon any promissory note or notes evidencing
the Indebtedness, or upon 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 sole 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. 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.

 

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
so long as this Agreement remains a lien on the Collateral, used in violation
of any Environmental Laws or for the generation, manufacture, storage,
transportation, treatment, disposal, release-or threatened 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 risks 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,
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 satisfactory to Lender
determine, as applicable, the cash value or replacement cost of the Collateral.

 

Financing Statements.  Grantor
authorizes Lender to file a UCC financing statement, or alternatively, a copy
of this Agreement to perfect Lender’s

 

2

 

security
interest. 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
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 inconsistent
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 Lender’s sole discretion, shall deem
appropriate under the circumstances, but failure to honor any request by
Grantor shall not 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 fails 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
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 (A)  be
payable on demand;  (B)  be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (1)  the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note’s
maturity. The 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, or by guarantor
or by any third party, on the Indebtedness and thereafter Lender is forced to
remit the amount of that payment (A) 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, (B) 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 (C) 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:

 

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

 

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 or any Grantor’s ability to repay the Indebtedness or perform
their 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 of a secured party under the Illinois Uniform
Commercial Code. 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.

 

3

 

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 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. 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 Note rate from 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 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 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 Uniform Commercial Code, as may be amended from time to time.
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 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 a 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. 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 DU PAGE 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 sole 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 telefacsimile (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

 

4

 

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 time, and without further authorization from Grantor, file a
carbon, photographic or other reproduction of 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 on 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 Uniform
Commercial Code:

 

Agreement.  The word “Agreement” means this Commercial
Security Agreement, as this Commercial Security Agreement may be amended or
modified from time to time, together with all exhibits and schedules attached
to this Commercial 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 Grantor’s
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, et seq. (“CERCLA”), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), 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 Agreement in the default section of this
Agreement.

 

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

 

Guaranty.  The word “Guaranty” means the guaranty from
guarantor, endorser, surety, or accommodation party 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 Note executed by Advanced
Life Sciences, Inc. in the principal amount of $4,000,000.00 dated April 18,
2006, together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of, and substitutions for the note or credit
agreement.

 

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, loan 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.

 

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
APRIL 18, 2006.

 

5

 

	
   

  	
  GRANTOR:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ADVANCED
  LIFE SCIENCES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John L. Flavin

  	
   

  
	
   

  	
   

  	
  John L.
  Flavin, President of Advanced Life

  Sciences, Inc.

  
	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE
  LEADERS BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  X

  	
  /s/ James E. Lynch

  	
   

  
	
   

  	
   

  	
  Authorized
  Signer

  
					

 

6

 

BUSINESS LOAN AGREEMENT

 

	
  Borrower:

  	
  Advanced Life Sciences, Inc.

  	
  Lender:

  	
  THE LEADERS BANK

  
	
   

  	
  1440 Davey
  Drive

  	
   

  	
  2001 YORK
  ROAD, SUITE 150

  
	
   

  	
  Woodridge,
  IL 60517

  	
   

  	
  OAK BROOK,
  IL 60523

  

 

THIS BUSINESS LOAN AGREEMENT dated April 18, 2006, is made
and executed between Advanced Life Sciences, Inc. (“Borrower”) and THE LEADERS
BANK (“Lender”) on the following terms and conditions. Borrower has received
prior commercial loans from Lender or has applied to Lender for a commercial
loan or loans or other financial accommodations, including those which may be
described on any exhibit or schedule attached to this Agreement (“Loan”).
Borrower understands and agrees that: (A) in granting, renewing, or extending
any Loan, Lender is relying upon Borrower’s representations, warranties, and
agreements as set forth in this Agreement; (B) the granting, renewing, or
extending of any Loan by Lender at all times shall be subject to Lender’s sole
judgment and discretion; and (C) all such Loans shall be and remain subject to
the terms and conditions of this Agreement.

 

TERM.  This Agreement shall be effective as of April
18, 2006, and shall continue in full force and effect until such time as all of
Borrower’s Loans in favor of Lender have been paid in full, including
principal, interest, costs, expenses, attorneys’ fees, and other fees and
charges, or until such time as the parties may agree in writing to terminate
this Agreement.

 

ADVANCE AUTHORITY.  The following persons currently
are authorized to request advances and authorize payments under the line of
credit until Lender receives from Borrower, at Lender’s address shown above,
written notice of revocation of their authority: John L.
Flavin; Michael T. Flavin; and Richard Wieland.

 

CONDITIONS PRECEDENT TO EACH ADVANCE.  Lender’s
obligation to make the initial Advance and each subsequent Advance under this
Agreement shall be subject to the fulfillment to Lender’s satisfaction of all
of the conditions set forth in this Agreement and in the Related Documents.

 

Loan Documents.  Borrower shall provide to Lender the
following documents for the Loan: (1) the Note; (2) Security Agreements granting
to Lender security interests in the Collateral; (3) financing statements and
all other documents perfecting Lender’s Security Interests; (4) evidence of
insurance as required below; (5) together with all such Related Documents as
Lender may require for the Loan; all in form and substance satisfactory to
Lender and Lender’s counsel.

 

Borrower’s Authorization.  Borrower shall have provided in
form and substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the
Related Documents. In addition, Borrower shall have provided such other
resolutions, authorizations, documents and instruments as Lender or its
counsel, may require.

 

Payment of Fees and Expenses.  Borrower shall have paid to
Lender all fees, charges, and other expenses which are then due and payable as
specified in this Agreement or any Related Document.

 

Representations and Warranties.  The
representations and warranties set forth in this Agreement, in the Related Documents,
and in any document or certificate delivered to Lender under this Agreement are
true and correct.

 

No Event of Default.  There shall not exist at the
time of any Advance a condition which would constitute an Event of Default
under this Agreement or under any Related Document.

 

REPRESENTATIONS AND WARRANTIES.  Borrower
represents and warrants to Lender, as of the date of this Agreement, as of the
date of each disbursement of loan proceeds, as of the date of any renewal,
extension or modification of any Loan, and at all times any Indebtedness
exists:

 

Organization.  Borrower is a corporation for profit which is,
and at all times shall be, duly organized, validly existing, and in good
standing under and by virtue of the laws of the State of Illinois. Borrower is
duly authorized to transact business in all other states in which Borrower is
doing business, having obtained all necessary filings, governmental licenses
and approvals for each state in which Borrower is doing business. Specifically,
Borrower is, and at all times shall be, duly qualified as a foreign corporation
in all states in which the failure to so qualify would have a material adverse
effect on its business or financial condition. Borrower has the full power and
authority to own its properties and to transact the business in which it is
presently engaged or presently proposes to engage. Borrower maintains an office
at 1440 Davey Drive, Woodridge, IL 60517. Unless Borrower has designated
otherwise in writing, the principal office is the office at which Borrower
keeps its books and records including its records concerning the Collateral.
Borrower will notify Lender prior to any change in the location of Borrower’s
state of organization or any change in Borrower’s name. Borrower shall do all things
necessary to preserve and to keep in full force and effect its existence,
rights and privileges, and shall comply with all regulations, rules,
ordinances, statutes, orders and decrees of any governmental or
quasi-governmental authority or court applicable to Borrower and Borrower’s
business activities.

 

Assumed Business Names.  Borrower has filed or recorded
all documents or filings required by law relating to all assumed business names
used by Borrower. Excluding the name of Borrower, the following is a complete
list of all assumed business names under which Borrower does business: None.

 

Authorization.  Borrower’s execution, delivery, and
performance of this Agreement and all the Related Documents have been duly
authorized by all necessary action by Borrower and do not conflict with, result
in a violation of, or constitute a default under (1) any provision of (a)
Borrower’s articles of incorporation or organization, or bylaws, or (b) any
agreement or other instrument binding upon Borrower or (2) any law,
governmental regulation, court decree, or order applicable to Borrower or to
Borrower’s properties.

 

Financial Information.  Each of Borrower’s financial
statements supplied to Lender truly and completely disclosed Borrower’s
financial condition as of the date of the statement, and there has been no
material adverse change in Borrower’s financial condition subsequent to the
date of the most recent financial statement supplied to Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.

 

Legal Effect.  This Agreement constitutes, and any instrument
or agreement Borrower is required to give under this Agreement when delivered
will constitute legal, valid, and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.

 

Properties.  Except as contemplated by this Agreement or as
previously disclosed in Borrower’s financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of Borrower’s
properties free and clear of all Security Interests, and has not executed any
security documents or financing statements relating to such properties. All of
Borrower’s properties are titled in Borrower’s legal name, and Borrower has not
used or filed a financing statement under any other name for at least the last
five (5) years.

 

Hazardous Substances.  Except as disclosed to and
acknowledged by Lender in writing, Borrower represents and warrants that: (1)
During the period of Borrower’s ownership of the Collateral, there has been no
use, generation, manufacture, storage, treatment, disposal, release or
threatened release of any Hazardous Substance by any person on, under, about or
from any of the Collateral. (2) Borrower has no knowledge of, or reason to
believe that there has been (a) any breach or violation of any Environmental
Laws; (b) any use, generation, manufacture, storage, treatment, disposal,
release or threatened release of any Hazardous Substance on, under, about or
from the Collateral by any prior owners or occupants of any of the Collateral;
or (c) any actual or threatened litigation or claims of any kind by any person
relating to such matters. 

 

 

(3)
Neither Borrower nor any tenant, contractor, agent or other authorized user of
any of the Collateral shall use, generate, manufacture, store, treat, dispose
of or release any Hazardous Substance on, under, about or from any of the
Collateral; and any such activity shall be conducted in compliance with all
applicable federal, state, and local laws, regulations, and ordinances,
including without limitation all Environmental Laws. Borrower authorizes Lender
and its agents to enter upon the Collateral to make such inspections and tests
as Lender may reasonably deem appropriate to determine compliance of the
Collateral with this section of the Agreement. Any inspections or tests made by
Lender shall be at Borrower’s expense and for Lender’s purposes only and shall
not be construed to create any responsibility or liability on the part of
Lender to Borrower or to any other person. The representations and warranties
contained herein are based on Borrower’s due diligence in investigating the
Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases
and waives any future claims against Lender for indemnity or contribution in
the event Borrower becomes liable for cleanup or other costs under any such
laws, and (2) agrees to indemnify and hold harmless Lender against any and all
claims, losses, liabilities, damages, penalties, and expenses which Lender may
directly or indirectly sustain or suffer resulting from a breach of this
section of the Agreement or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release of a hazardous
waste or substance on the Collateral. The provisions of this section of the
Agreement, including the obligation to indemnify, shall survive the payment of
the Indebtedness and the termination, expiration or satisfaction of this
Agreement and shall not be affected by Lender’s acquisition of any interest in
any of the Collateral, whether by foreclosure or otherwise, 

 

Litigation and Claims.  No
litigation, claim, investigation, administrative proceeding or similar action
(including those for unpaid taxes) against Borrower is pending or threatened,
and no other event has occurred which may materially adversely affect Borrower’s
financial condition or properties, other than litigation, claims, or other
events, if any, that have been disclosed to and acknowledged by Lender in
writing.

 

Taxes.  To the best of Borrower’s knowledge, all of
Borrower’s tax returns and reports that are or were required to be filed, have
been filed, and all taxes, assessments and other governmental charges have been
paid in full, except those presently being or to be contested by Borrower in
good faith in the ordinary course of business and for which adequate reserves
have been provided.

 

Lien Priority.  Unless otherwise previously disclosed to
Lender in writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security Interests on
or affecting any of the Collateral directly or indirectly securing repayment of
Borrower’s Loan and Note, that would be prior or that may in any way be
superior to Lender’s Security Interests and rights in and to such Collateral.

 

Binding Effect.  This Agreement, the Note, all Security
Agreements (if any), and all Related Documents are binding upon the signers
thereof, as well as upon their successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.

 

AFFIRMATIVE COVENANTS.  Borrower
covenants and agrees with Lender that, so long as this Agreement remains in
effect, Borrower will:

 

Notices of Claims and Litigation.  Promptly
inform Lender in writing of (1) all material adverse changes in Borrower’s
financial condition, and (2) all existing and all threatened litigation, claims,
investigations, administrative proceedings or similar actions affecting
Borrower or any Guarantor which could materially affect the financial condition
of Borrower or the financial condition of any Guarantor.

 

Financial Records.  Maintain its books and records in accordance
with GAAP, applied on a consistent basis, and permit Lender to examine and
audit Borrower’s books and records at all reasonable times.

 

Financial Statements.  Furnish
Lender with such financial statements and other related information at such
frequencies and in such detail as Lender may reasonably request.

 

Additional Information.  Furnish
such additional information and statements, as Lender may request from time to
time.

 

Insurance.  Maintain fire and other risk insurance, public
liability insurance, and such other insurance as Lender may require with
respect to Borrower’s properties and operations, in form, amounts, coverages
and with insurance companies acceptable to Lender. Borrower, upon request of
Lender, will deliver to Lender from time to time the policies or certificates
of insurance in form reasonably satisfactory to Lender, including stipulations
that coverages will not be cancelled or diminished without at least thirty (30)
days prior written notice reasonably to Lender. 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 Borrower or any
other person. In connection with all policies covering assets in which Lender
holds or is offered a security interest for the Loans, Borrower will provide
Lender with such lender’s loss payable or other endorsements as Lender may
require. 

 

Insurance Reports.  Furnish to Lender, upon request of Lender,
reports on each existing insurance policy showing such information as Lender
may reasonably request, including without limitation the following: (1) the
name of the insurer; (2) the risks insured; (3) the amount of the policy; (4)
the properties insured; (5) the then current property values on the basis of
which insurance has been obtained, and the manner of determining those values;
and (6) the expiration date of the policy. In addition, upon request of Lender
(however not more often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.

 

Other Agreements.  Comply with all terms and conditions of all
other agreements, whether now or hereafter existing, between Borrower and any other
party and notify Lender immediately in writing of any default in connection in
all material respects with any other such agreements.

 

Loan Proceeds.  Use all Loan proceeds solely for Borrower’s
business operations, unless specifically consented to the contrary by Lender in
writing.

 

Taxes, Charges and Liens.  Pay
and discharge when due all of its indebtedness and obligations, including
without limitation all assessments, taxes, governmental charges, levies and
liens, of every kind and nature, imposed upon Borrower or its properties,
income, or profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any of
Borrower’s properties, income, or profits.

 

Performance.  Perform and comply, in a timely manner, with
all terms, conditions, and provisions set forth in this Agreement, in the
Related Documents, and in all other instruments and agreements between Borrower
and Lender. Borrower shall notify Lender immediately in writing of any default
in connection with any agreement.

 

Operations.  Maintain executive and management personnel
with substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to Lender of any
change in executive and management personnel; conduct its business affairs in a
reasonable and prudent manner.

 

Environmental Studies.  Promptly
conduct and complete, at Borrower’s expense, all such investigations, studies,
samplings and testings as may be requested by any governmental authority
relative to any substance, or any waste or by-product of any substance defined
as toxic or a hazardous substance under applicable federal, state, or local
law, rule, regulation, order or directive, at or affecting any property or any
facility owned, leased or used by Borrower.

 

Compliance with Governmental Requirements.  Comply
with all laws, ordinances, and regulations, now or hereafter in effect, of all
governmental authorities applicable to the conduct of Borrower’s properties,
businesses and operations, and to the use or occupancy of the Collateral,
including without limitation, the Americans With Disabilities Act. Borrower may
contest in good faith any such law, ordinance, or

 

2

 

regulation
and withhold compliance during any proceeding, including appropriate appeals,
so long as Borrower has notified Lender in writing prior to doing so and so
long as, in Lender’s sole opinion, Lender’s interests in the Collateral are not
jeopardized. Lender may require Borrower to post adequate security or a surety
bond, reasonably satisfactory to Lender, to protect Lender’s interest.

 

Inspection.  Permit employees or agents of Lender at any
reasonable time to inspect any and all Collateral for the Loan or Loans and
Borrower’s other properties and to examine or audit Borrower’s books, accounts,
and records and to make copies and memoranda of Borrower’s books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer software
programs for the generation of such records) in the possession of a third
party, Borrower, upon request of Lender, shall notify such party to permit
Lender free access to such records at all reasonable times and to provide
Lender with copies of any records it may request, all at Borrower’s expense.

 

Environmental Compliance and Reports.  Borrower
shall comply in all respects with any and all Environmental Laws; not cause or
permit to exist, as a result of an intentional or unintentional action or
omission on Borrower’s part or on the part of any third party, on property
owned and/or occupied by Borrower, any environmental activity in violation of
any Environmental Law unless such environmental activity is pursuant to and in
compliance with the conditions of a permit issued by the appropriate federal,
state or local governmental authorities; shall furnish to Lender promptly and
in any event within thirty (30) days after receipt thereof a copy of any
notice, summons, lien, citation, directive, letter or other communication from
any governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower’s part in connection with any
environmental activity whether or not there is damage to the environment and/or other
natural resources.

 

Additional Assurances.  Make,
execute and deliver to Lender such promissory notes, mortgages, deeds of trust,
security agreements, assignments, financing statements, instruments, documents
and other agreements as Lender or its attorneys may reasonably request to
evidence and secure the Loans and to perfect all Security Interests.

 

LENDER’S EXPENDITURES.  If
any action or proceeding is commenced that would materially affect Lender’s
interest in the Collateral or if Borrower fails to comply with any provision of
this Agreement or any Related Documents, including but not limited to Borrower’s
failure to discharge or pay when due any amounts Borrower is required to
discharge or pay under this Agreement or any Related Documents, Lender on
Borrower’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 any Collateral and paying all costs for insuring,
maintaining and preserving any Collateral. All such expenditures incurred or
paid by Lender for such purposes will then bear interest at the rate charged
under the Note from the date incurred or paid by Lender to the date of
repayment by Borrower. All such expenses will become a part of the Indebtedness
and, at Lender’s option, will (A) be payable on demand; (B) be added to the
balance of the Note and be apportioned among and be payable with any
installment payments to become due during either (1) the term of any applicable
insurance policy; or (2) the remaining term of the Note; or (C) be treated as a
balloon payment which will be due and payable at the Note’s maturity.

 

NEGATIVE COVENANTS.  Borrower covenants and agrees with Lender that
while this Agreement is in effect, Borrower shall not, without the prior written
consent of Lender:

 

Indebtedness and Liens.  (1)
Except for trade debt incurred in the normal course of business and
indebtedness to Lender contemplated by this Agreement, create, incur or assume
additional indebtedness for borrowed money, including capital leases, in excess
of the aggregate amount of $200,000.00, (2) sell, transfer, mortgage; assign,
pledge, lease, grant a security interest in, or encumber any of Borrower’s
assets (except as allowed as Permitted Liens), or (3) sell with recourse any of
Borrower’s accounts, except to Lender.

 

Continuity of Operations.  (1)
Engage in any business activities substantially different than those in which
Borrower is presently engaged, (2) cease operations, liquidate, merge,
transfer, acquire or consolidate with any other entity, change its name,
dissolve or transfer or sell Collateral out of the ordinary course of business,
or (3) pay any dividends on Borrower’s stock (other than dividends payable in
its stock), provided, however that notwithstanding the foregoing, but only so
long as no Event of Default has occurred and is continuing or would result from
the payment of dividends, if Borrower is a “Subchapter S Corporation” (as
defined in the Internal Revenue Code of 1986, as amended), Borrower may pay
cash dividends on its stock to its shareholders from time to time in amounts
necessary to enable the shareholders to pay income taxes and make estimated
income tax payments to satisfy their liabilities under federal and state law
which arise solely from their status as Shareholders of a Subchapter S
Corporation because of their ownership of shares of Borrower’s stock, or
purchase or retire any of Borrower’s outstanding shares or alter or amend
Borrower’s capital structure.

 

Loans, Acquisitions and Guaranties.  (1)
Loan, invest in or advance money or assets to any other person, enterprise or
entity, (2) purchase, create or acquire any interest in any other enterprise or
entity, or (3) incur any obligation as surety or guarantor other than in the
ordinary course of business.

 

Agreements.  Borrower will not enter into any agreement
containing any provisions which would be violated or breached by the
performance of Borrower’s obligations under this Agreement or in connection
herewith.

 

CESSATION OF ADVANCES.  If
Lender has made any commitment to make any Loan to Borrower, whether under this
Agreement or under any other agreement, Lender shall have no obligation to make
Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is
in default under the terms of this Agreement or any of the Related Documents or
any other agreement that Borrower or any Guarantor has with Lender; (B)
Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files
a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C)
there occurs a material adverse change in Borrower’s financial condition, in
the financial condition of any Guarantor, or in the value of any Collateral
securing any Loan; or 

 

RIGHT OF SETOFF.  To the extent permitted by applicable law, Lender
reserves a right of setoff in all Borrower’s accounts with Lender (whether
checking, savings, or some other account). This includes all accounts Borrower
holds jointly with someone else and all accounts Borrower may open in the
future. However, this does not include any IRA or Keogh accounts, or any trust
accounts for which setoff would be prohibited by law. Borrower 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.

 

DEFAULT.  Each of the following shall constitute an
Event of Default under this Agreement:

 

Payment Default.  Borrower fails to make any payment when due
under the Loan.

 

Other Defaults.  Borrower 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 Borrower, and such failure shall continue for a period of 15 days.

 

Default in Favor of Third Parties.  Borrower
or any Grantor defaults 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 Borrower’s or any
Grantor’s property or Borrower’s or any Grantor’s ability to repay the Loans or
perform their respective obligations under this Agreement or any of the Related

 

3

 

Documents.

 

False Statements.  Any warranty, representation or statement made
or furnished to Lender by Borrower or on Borrower’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.

 

Insolvency.  The dissolution or termination of Borrower’s
existence as a going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower’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 Borrower.

 

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.

 

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 Borrower or by
any governmental agency against any collateral securing the Loan. This includes
a garnishment of any of Borrower’s accounts, including deposit accounts, with
Lender. However, this Event of Default shall not apply if there is a good faith
dispute by Borrower as to the validity or reasonableness of the claim which is
the basis of the creditor or forfeiture proceeding and if Borrower 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 of any of the
Indebtedness or any Guarantor dies or becomes incompetent, or revokes or
disputes the validity of, or liability under, any Guaranty of the Indebtedness.

 

Change in Ownership.  Any change in ownership of fifty-one
percent (51%) or more of the common
stock of Borrower.

 

Adverse Change.  A material adverse change occurs in Borrower’s
financial condition.

 

EFFECT OF AN EVENT OF DEFAULT.  If
any Event of Default shall occur, except where otherwise provided in this Agreement
or the Related Documents, all commitments and obligations of Lender under this
Agreement or the Related Documents or any other agreement immediately will
terminate (including any obligation to make further Loan Advances or
disbursements), and, at Lender’s option, all Indebtedness immediately will
become due and payable, all without notice of any kind to Borrower, except that
in the case of an Event of Default of the type described in the “Insolvency”
subsection above, such acceleration shall be automatic and not optional. In
addition, Lender shall have all the rights and remedies provided in the Related
Documents or available at law, in equity, or otherwise. Except as may be
prohibited by applicable law, all of Lender’s rights and remedies shall be cumulative
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 Borrower or of
any Grantor shall not affect Lender’s right to declare a default and to
exercise its rights and 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.  Borrower
agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s
reasonable attorneys’ fees and Lender’s legal expenses, incurred in connection
with the enforcement of this Agreement. Lender may hire or pay someone else to
help enforce this Agreement, and Borrower shall pay the costs and expenses of
such enforcement. Costs and expenses include Lender’s reasonable 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. Borrower 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.

 

Consent to Loan Participation.  Borrower
agrees and consents to Lender’s sale or transfer, whether now or later, of one
or more participation interests in the Loan to one or more purchasers, whether
related or unrelated to Lender. Lender may provide, subject to a confidentiality
agreement acceptable to Borrower to any one or more purchasers, or potential
purchasers, any information or knowledge Lender may have about Borrower or
about any other matter relating to the Loan, and Borrower hereby waives any
rights to privacy Borrower may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation interests, as
well as all notices of any repurchase of such participation interests. Borrower
also agrees that the purchasers of any such participation interests will be
considered as the absolute owners of such interests in the Loan and will have
all the rights granted under the participation agreement or agreements
governing the sale of such participation interests. Borrower further waives all
rights of offset or counterclaim that it may have now or later against Lender
or against any purchaser of such a participation interest and unconditionally
agrees that either Lender or such purchaser may enforce Borrower’s obligation
under the Loan irrespective of the failure or insolvency of any holder of any
interest in the Loan. Borrower further agrees that the purchaser of any such
participation interests may enforce its interests irrespective of any personal
claims or defenses that Borrower may have against Lender.

 

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, Borrower agrees upon
Lender’s request to submit to the jurisdiction of the courts of DU PAGE 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 Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender’s rights or of any of Borrower’s or any
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 sole 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 telefacsimile (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

 

4

 

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, Borrower agrees to keep Lender informed at all times of Borrower’s
current address. Unless otherwise provided or required by law, if there is more
than one Borrower, any notice given by Lender to any Borrower is deemed to be
notice given to all Borrowers.

 

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.

 

Subsidiaries and Affiliates of Borrower.  To
the extent the context of any provisions of this Agreement makes it
appropriate, including without limitation any representation, warranty or
covenant, the word “Borrower” as used in this Agreement shall include all of
Borrower’s subsidiaries and affiliates. Notwithstanding the foregoing however,
under no circumstances shall this Agreement be construed to require Lender to
make any Loan or other financial accommodation to any of Borrower’s
subsidiaries or affiliates.

 

Successors and Assigns.  All
covenants and agreements by or on behalf of Borrower contained in this
Agreement or any Related Documents shall bind Borrower’s successors and assigns
and shall inure to the benefit of Lender and its successors and assigns.
Borrower shall not, however, have the right to assign Borrower’s rights under
this Agreement or any interest therein, without the prior written consent of
Lender.

 

Survival of Representations and Warranties.  Borrower
understands and agrees that in extending Loan Advances, Lender is relying on
all representations, warranties, and covenants made by Borrower in this
Agreement or in any certificate or other instrument delivered by Borrower to
Lender under this Agreement or the Related Documents. Borrower further agrees
that regardless of any investigation made by Lender, all such representations,
warranties and covenants will survive the extension of Loan Advances and
delivery to Lender of the Related Documents, shall be continuing in nature,
shall be deemed made and redated by Borrower at the time each Loan Advance is
made, and shall remain in full force and effect until such time as Borrower’s
Indebtedness shall be paid in full, or until this Agreement shall be terminated
in the manner provided above, whichever is the last to occur.

 

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 Uniform
Commercial Code. Accounting words and terms not otherwise defined in this
Agreement shall have the meanings assigned to them in accordance with generally
accepted accounting principles as in effect on the date of this Agreement:

 

Advance.  The word “Advance” means a disbursement of
Loan funds made, or to be made, to Borrower or on Borrower’s behalf on a line
of credit or multiple advance basis under the terms and conditions of this
Agreement.

 

Agreement.  The word “Agreement” means this Business Loan
Agreement, as this Business Loan Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this Business
Loan 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 property and
assets granted as collateral security for a Loan, whether real or personal
property, whether granted directly or indirectly, whether granted now or in the
future, and whether granted in the form of a security interest, mortgage,
collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel
mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment
trust, conditional sale, trust receipt, lien, charge, lien or title retention
contract, lease or consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by law, contract, or
otherwise.

 

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, et seq. (“CERCLA”), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), 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 Agreement in the default section of this
Agreement.

 

GAAP.  The word “GAAP” means generally accepted
accounting principles.

 

Grantor.  The word “Grantor” means each and all of the
persons or entities granting a Security Interest in any Collateral for the
Loan, including without limitation all Borrowers granting such a Security
Interest.

 

Guarantor.  The word “Guarantor” means any guarantor,
surety, or accommodation party of any or all of the Loan.

 

Guaranty.  The word “Guaranty” means the guaranty from
Guarantor 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
Borrower is responsible under this Agreement or under any of the Related
Documents.

 

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

 

Loan.  The word “Loan” means any and all loans and
financial accommodations from Lender to Borrower whether now or hereafter
existing, and however evidenced, including without limitation those loans and
financial accommodations described herein or described on any exhibit or
schedule attached to this Agreement from time to time.

 

5

 

Note.  The word “Note” means the Note executed by
Advanced Life Sciences, Inc. in the principal amount of $4,000,000.00 dated
April 18, 2006, together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of, and substitutions for the note or credit
agreement.

 

Permitted Liens.  The words “Permitted Liens” mean (1) liens and
security interests securing Indebtedness owed by Borrower to Lender;  (2) liens for taxes, assessments, or similar
charges either not yet due or being contested in good faith;  (3)  liens
of materialmen, mechanics, warehousemen, or carriers, or other like liens
arising in the ordinary course of business and securing obligations which are
not yet delinquent; (4) purchase money liens or purchase money security
interests upon or in any property acquired or held by Borrower in the ordinary
course of business to secure indebtedness outstanding on the date of this
Agreement or permitted to be incurred under the paragraph of this Agreement
titled “Indebtedness and Liens”; (5) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the Lender
in writing; and (6) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of Borrower’s assets.

 

Related Documents.  The words “Related Documents” mean all
promissory notes, credit agreements, loan 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 Loan.

 

Security Agreement.  The words “Security Agreement” mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.

 

Security Interest.  The words “Security Interest” mean, without
limitation, any and all types of collateral security, present and future,
whether in the form of a lien, charge, encumbrance, mortgage, deed of trust,
security deed, assignment, pledge, crop pledge, chattel mortgage, collateral
chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional
sale, trust receipt, lien or title retention contract, lease or consignment
intended as a security device, or any other security or lien interest
whatsoever whether created by law, contract, or otherwise.

 

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN
AGREEMENT IS DATED APRIL 18, 2006.

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ADVANCED
  LIFE SCIENCES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John L. Flavin

  	
   

  
	
   

  	
   

  	
  John L.
  Flavin, President of Advanced Life

  Sciences, Inc.

  
	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE
  LEADERS BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James E. Lynch

  	
   

  
	
   

  	
   

  	
  Authorized
  Signer

  

 

6

 

	
   

  	
  F.R. U-1

  
	
   

  	
   

  
	
   

  	
  O.M.B. No. 7100-0115

  
	
   

  	
   

  
	
   

  	
  Approval expires March 30, 2008

  

 

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

 

Statement of Purpose for an Extension of Credit
Secured By Margin Stock

 

(Federal Reserve Form U-1)

 

THE LEADERS BANK

Name of Bank

 

	
  This report is required by
  law (15 U.S.C. 78g and 78w; 12 CFR 221).

   

  The
  Federal Reserve may not conduct or sponsor, and an organization (or a person)
  is not required to respond to, a collection of information unless it displays
  a currently valid OMB control number.

  	
   

  	
  Public
  reporting burden for this collection of information is estimated to average 10
  minutes per response, including the time to gather and maintain data in the required
  form and to review instructions and complete the information collection. Send
  comments regarding this burden estimate or any other aspect of this
  collection of information, including suggestions for reducing this burden, to
  Secretary, Board of Governors of the Federal Reserve System, 20th and C
  Streets, N.W., Washington, D.C. 20551; and to the Office of Management and
  Budget, Paperwork Reduction Project (7100-0115), Washington, D.C. 20503.

  

 

INSTRUCTIONS

 

1.     This form must be completed when a bank
extends credit in excess of $100,000 secured directly or indirectly, in whole
or in part, by any margin stock.

 

2.     The term “margin stock” is defined in
Regulation U (12 CFR 221) and includes, principally: (1) stocks that are
registered on a national securities exchange; (2) debt securities (bonds) that
are convertible into margin stocks; (3) any over-the-counter security
designated as qualified for trading in the National Market System under a
designation plan approved by the Securities and Exchange Commission (NMS
security); and (4) shares of most mutual funds, unless 95 percent of the assets
of the fund are continuously invested in U.S. government, agency, state, or
municipal obligations.

 

3.     Please print or type (if space is inadequate,
attach separate sheet).

 

PART I  To be completed by borrower(s)

 

	
  1.

  	
  What is the amount of the credit being extended?

  	
  $4,000,000

  	
   

  
	
   

  	
   

  
	
  2.

  	
  Will any part of this credit be used to purchase or
  carry margin stock?

  	
  o Yes         ý No

  
	
   

  	
   

  
	
  If the answer is “no”, describe the specific purpose
  of the credit.

  	
  general corporate purposes

  
	
   

  
	
   

  
	
   

  	
   

  
							

 

I (We) have read this form
and certify that to the best of my (our) knowledge and belief the information
given is true, accurate, and complete, and that the margin stock and any other
securities collateralizing this credit are authentic, genuine, unaltered, and
not stolen, forged, or counterfeit.

 

	
  Signed:

  	
   

  	
   

  	
  Signed:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/ John L. Flavin

  	
  4/18/06

  	
   

  	
   

  	
   

  
	
  Borrower’s Signature

  	
  Date

  	
   

  	
  Borrower’s Signature

  	
  Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  John
  L. Flavin, President

  	
   

  	
   

  	
   

  	
   

  
	
  Print or Type Name

  	
   

  	
   

  	
  Print or Type Name

  	
   

  

 

This form should not be signed if blank.

 

A borrower who falsely certifies the purpose of a
credit on this form or otherwise willfully or intentionally evades the
provisions of Regulation U will also violate Federal Reserve Regulation X, “Borrowers
of Securities Credit.”

 

 

PART II  To be completed by bank only if the purpose of the credit is to purchase
or carry margin securities (Part I (2) answered “yes”)

 

1.     List the margin stock securing this credit; do
not include debt securities convertible into margin stock. The maximum loan
value of margin stock is 50 percent of its current market value under the
current Supplement to Regulation U.

 

	
  No. of

  shares

  	
   

  	
  Issue

  	
   

  	
  Market price

  per share

  	
   

  	
  Date and source

  of valuation

  (See note below)

  	
   

  	
  Total market

  value per issue

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

2.     List the debt securities convertible into
margin stock securing this credit. The maximum loan value of such debt
securities is 50 percent of the current market value under the current
Supplement to Regulation U.

 

	
  Principal

  amount

  	
   

  	
  Issue

  	
   

  	
  Market price

  	
   

  	
  Date and source

  of valuation

  (See note below)

  	
   

  	
  Total market

  value per issue

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

3.     List other collateral including nonmargin
stock securing this credit.

 

	
  Describe briefly

  	
   

  	
  Market price

  	
   

  	
  Date and source

  of valuation

  (See note below)

  	
   

  	
  Good faith

  loan value

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Note: Bank need not
complete “Date and source of valuation” if the market value was obtained from
regularly published information in a journal of general circulation or an
automated quotation system.

 

PART III To be signed by a bank officer in all instances

 

I am a duly authorized
representative of the bank and understand that this credit secured by margin
stock may be subject to the credit restrictions of Regulation U. I have read
this form and any attachments, and I have accepted the customer’s statement in
Part I in good faith as required by Regulation U*; and I certify that to the
best of my knowledge and belief, all the information given is true, accurate,
and complete. I also certify that if any securities that directly secure the
credit are not or will not be registered in the name of the borrower or its
nominee, I have or will cause to have examined the written consent of the
registered owner to pledge such securities. I further certify that any
securities that have been or will be physically delivered to the bank in
connection with this credit have been or will be examined, that all validation
procedures required by bank policy and the Securities Exchange Act of 1934
(section 17 (f), as amended) have been or will be performed, and that I am
satisfied to the best of my knowledge and belief that such securities are
genuine and not stolen or forged and their faces have not been altered.

 

	
   

  	
   

  	
  Signed:

  
	
   

  	
   

  	
   

  
	
  4/20/06

  	
   

  	
  /s/ James E. Lynch

  
	
  Date

  	
   

  	
  Bank officer’s signature

  
	
   

  	
   

  	
   

  
	
  President

  	
   

  	
  James E. Lynch

  
	
  Title

  	
   

  	
  Print or type name

  

 

* To accept the customer’s
statement in good faith, the officer of the bank must be alert to the
circumstances surrounding the credit and, if in possession of any information
that would cause a prudent person not to accept the statement without inquiry,
must have investigated and be satisfied that the statement is truthful. Among
the facts which would require such investigation are receipt of the
statement through the mail or from a third party.

 

This
form must be retained by the lender for three years after the credit is
extinguished.

 

2

 

IRREVOCABLE STOCK OR BOND POWER OR ENTITLEMENT ORDER

 

	
  FOR VALUE RECEIVED, the undersigned hereby sell, assign
  and transfer to

  	
   

  
	
   

  
	
   

  
	
  Please insert Social Security

  or Taxpayer I.D. Number

  	
  33-1111300

  	
   

  
	
   

  
	
  FOR STOCKS, COMPLETE THIS PORTION:

  	
   

  	
   share(s) of the

  	
   

  	
   stock of

  	
   

  
	
   

  	
   

  	
   represented by Certificate No.

  	
   

  
	
   

  	
  , standing in the name of the undersigned on the
  books of the Company.

  
	
   

  
	
  FOR BONDS, COMPLETE THIS PORTION:

  	
   

  	
  bond(s) of

  	
   

  
	
  in the principal amount of $

  	
   

  	
  , No.

  	
   

  	
  , standing in the name of the undersigned on

  
	
  the books of said Company.

  
	
   

  
	
  FOR OTHER INVESTMENT COLLATERAL,
  COMPLETE THIS PORTION:

  
	
  Account No.

  	
   

  	
  , of

  	
   

  
	
   

  	
   

  	
   

  	
  (Name
  and address of intermediary or issuer)

  
	
   

  
	
   

  	
  , including all investment Collateral in the account
  and free credit balances.

  
	
   

  
	
  The undersigned hereby irrevocably constitute and
  appoint

  	
   

  	
  attorney to transfer the above stock

  
	
  or bond or other investment Collateral, as the case
  may be, on the books of said Company, with full power of substitution in the
  premises.

  
																								

 

	
  Dated

  	
  4/18/06

  	
   

  
	
   

  
	
  SIGNATURE(S):

  
	
   

  
	
   

  
	
   

  	
  ALS
  VENTURES, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael T. Flavin

  	
   

  
	
   

  	
   

  	
   Michael
  T. Flavin, Manager of ALS Ventures, LLC

  	
   

  
						

 

IMPORTANT - READ CAREFULLY

The signature(s) must correspond with the
name(s) as written upon the face of the certificate or bond in every particular
without alteration or enlargement or any change whatever, and must be
guaranteed by a bank or registered securities dealer.

 

SIGNATURE(S) GUARANTEED BY:

 

 

 

	
   

  	
  Number:

  	
   

  

 

COLLATERAL RECEIPT

 

	
  Borrower:

  	
  Advanced Life Sciences, Inc.

  	
  Lender:

  	
  THE LEADERS BANK

  
	
   

  	
  1440
  Davey Drive

  	
   

  	
  2001
  YORK ROAD, SUITE 150

  
	
   

  	
  Woodridge,
  IL 60517

  	
   

  	
  OAK
  BROOK, IL 60523

  
	
   

  	
   

  	
   

  	
   

  
	
  Grantor:

  	
  ALS Ventures, LLC

  	
   

  	
   

  
	
   

  	
  1440
  Davey Rd

  	
   

  	
   

  
	
   

  	
  Woodridge,
  IL 60517

  	
   

  	
   

  

 

	
  Description of Collateral

  	
   

  	
  Custody Control

  Signatures

  	
   

  	
  Date Released

  	
   

  
	
  2,540,000 Shares
  of Advanced Life Sciences Holdings, Inc. common stock

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Initial
  Delivery Acknowledgements:

  	
   

  	
  Return
  Receipt Acknowledgement:

  	
   

  	
  Instructions for Returning
  Collateral

  
	
   

  	
   

  	
   

  	
   

  	
  and  Disposition of Coupons:

  	
   

  
	
   

  	
   

  	
   

  	
  Grantor acknowledges
  the receipt of

  	
   

  	
   

  
	
  Grantor:

  	
  /s/ Michael T. Flavin

  	
   

  	
  all collateral,
  including all unmatured

  	
   

  	
   

  
	
   

  	
       (Grantor’s
  Signature)

  	
   

  	
  coupons,
  if any.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  THE
  LEADERS BANK

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ James E. Lynch

  	
   

  	
  X

  	
  /s/
  Michael T. Flavin

  	
   

  	
   

  
	
               (Authorized
  Officer)

  	
   

  	
             (Grantor’s
  Signature)

  	
   

  	
   

  
										

 

 

 

AGREEMENT TO PROVIDE INSURANCE

 

	
  Grantor:

  	
  Advanced Life Sciences, Inc.

  	
  Lender:

  	
  THE LEADERS BANK

  
	
   

  	
  1440
  Davey Drive

  	
   

  	
  2001
  YORK ROAD, SUITE 150

  
	
   

  	
  Woodridge,
  IL 60517

  	
   

  	
  OAK
  BROOK, IL 60523

  

 

INSURANCE REQUIREMENTS.  Grantor, Advanced Life Sciences,
Inc. (“Grantor”), understands that insurance coverage is required in connection
with the extending of a loan or the providing of other financial accommodations
to Grantor by Lender. These requirements are set forth in the security
documents for the loan. The following minimum insurance coverages must be
provided on the following described collateral (the “Collateral”):

 

Collateral:                  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; and 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..

Type:  All risks, including fire, theft
and liability.

Amount:  Full Insurable Value.

Basis:  Replacement value.

Endorsements:  The Leaders Bank, as loss payee; and further
stipulating that coverage will not be cancelled or diminished without a minimum
of 30 days prior written notice to Lender.

Latest Delivery Date:  By the loan closing date.

 

INSURANCE COMPANY.  Grantor may obtain insurance
from any insurance company Grantor may choose that is reasonably acceptable to
Lender. Grantor understands that credit may not be denied solely because
insurance was not purchased through Lender.

 

INSURANCE MAILING ADDRESS.  All documents and other
materials relating to insurance for this loan should be mailed, delivered or
directed to the following address:

 

The Leaders Bank

Post Office Box 3516

Oak Brook, IL 60522-3516

 

FAILURE TO PROVIDE INSURANCE.  Grantor agrees to deliver to Lender, on the
latest delivery date stated above, proof of the required insurance as provided
above, with an effective date of April 18, 2006, or earlier. UNLESS GRANTOR PROVIDES LENDER WITH EVIDENCE OF THE
INSURANCE COVERAGE REQUIRED BY GRANTOR’S AGREEMENT WITH LENDER, LENDER MAY
PURCHASE INSURANCE AT GRANTOR’S EXPENSE TO PROTECT LENDER’S INTERESTS IN THE
COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT GRANTOR’S INTERESTS. THE
COVERAGE THAT LENDER PURCHASES MAY NOT PAY ANY CLAIM THAT GRANTOR MAKES, OR ANY
CLAIM THAT IS MADE AGAINST GRANTOR IN CONNECTION WITH THE COLLATERAL. GRANTOR
MAY LATER CANCEL ANY INSURANCE PURCHASED BY LENDER, BUT ONLY AFTER PROVIDING
LENDER WITH EVIDENCE THAT GRANTOR HAS OBTAINED INSURANCE AS REQUIRED BY THEIR
AGREEMENT. IF LENDER PURCHASES INSURANCE FOR THE COLLATERAL, GRANTOR WILL BE
RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING INTEREST AND ANY OTHER
CHARGES 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 GRANTOR’S TOTAL OUTSTANDING BALANCE OR
OBLIGATION. THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE
GRANTOR MAY BE ABLE TO OBTAIN ON GRANTOR’S OWN.

 

IN
ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
RESPONSIBILITY LAWS.

 

AUTHORIZATION.  For purposes of insurance coverage on
the Collateral, Grantor authorizes Lender to provide to any person (including
any insurance agent or company) all information Lender deems appropriate,
whether regarding the Collateral, the loan or other financial accommodations,
or both.

 

GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
AGREEMENT TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
APRIL 18, 2006.

 

 

GRANTOR:

 

 

	
   

  	
  ADVANCED
  LIFE SCIENCES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John L. Flavin

  	
   

  
	
   

  	
   

  	
  John L.
  Flavin, President of Advanced Life

  Sciences, Inc.

  

 

 

FOR LENDER USE ONLY

INSURANCE VERIFICATION

 

	
  DATE:

  	
   

  	
   

  	
  PHONE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  
	
  AGENT’S NAME:

  	
   

  	
   

  
	
   

  
	
  AGENCY:

  	
   

  	
   

  
	
   

  
	
  ADDRESS:

  	
   

  
	
   

  
	
  INSURANCE COMPANY:

  	
   

  	
   

  
	
   

  
	
  POLICY NUMBER:

  	
   

  	
   

  
	
   

  
	
  EFFECTIVE DATES:

  	
   

  
	
   

  
	
   

  
	
  COMMENTS:

  	
   

  
	
   

  
																

 

2

 

CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL

 

	
   

  	
   

  	
  Lender:

  	
  THE LEADERS BANK

  
	
  Corporation:

  	
  Advanced Life Sciences, Inc.

  	
   

  	
  2001
  YORK ROAD, SUITE 150

  
	
   

  	
  1440
  Davey Drive

  	
   

  	
  OAK
  BROOK, IL 60523

  
	
   

  	
  Woodridge,
  IL 60517

  	
   

  	
   

  

 

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE CORPORATION’S EXISTENCE.  The
complete and correct name of the Corporation is Advanced Life Sciences, Inc. (“Corporation”).
The Corporation is a corporation for profit which is, and at all times shall
be, duly organized, validly existing, and in good standing under and by virtue
of the laws of the State of Illinois. The Corporation is duly authorized to
transact business in all other states in which the Corporation is doing
business, having obtained all necessary filings, governmental licenses and
approvals for each state in which the Corporation is doing business.
Specifically, the Corporation is, and at all times shall be, duly qualified as
a foreign corporation in all states in which the failure to so qualify would
have a material adverse effect on its business or financial condition. The
Corporation has the full power and authority to own its properties and to
transact the business in which it is presently engaged or presently proposes to
engage. The Corporation maintains an office at 1440 Davey Drive, Woodridge, IL
60517. Unless the Corporation has designated otherwise in writing, the
principal office is the office at which the Corporation keeps its books and
records. The Corporation will notify Lender prior to any change in the location
of The Corporation’s state of organization or any change in The Corporation’s
name. The Corporation shall do all things necessary to preserve and to keep in
full force and effect its existence, rights and privileges, and shall comply
with all regulations, rules, ordinances, statutes, orders and decrees of any
governmental or quasi-governmental authority or court applicable to the
Corporation and The Corporation’s business activities.

 

RESOLUTIONS ADOPTED.  At a meeting of the Directors of the
Corporation, or if the Corporation is a close corporation having no Board of
Directors then at a meeting of the Corporation’s shareholders, duly called and
held on                                          , at which a quorum was present and voting, or
by other duly authorized action in lieu of a meeting, the resolutions set forth
in this Resolution were adopted.

 

OFFICER.  The following named person is an officer of
Advanced Life Sciences, Inc.:

 

	
  NAMES

  	
   

  	
  TITLES

  	
   

  	
  AUTHORIZED

  	
   

  	
  ACTUAL
  SIGNATURES

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  John L. Flavin

  	
   

  	
  President

  	
   

  	
  Y

  	
   

  	
  X

  	
  /s/ John L.
  Flavin

  

 

ACTIONS AUTHORIZED.  The authorized person listed above may enter
into any agreements of any nature with Lender, and those agreements will bind
the Corporation. Specifically, but without limitation, the authorized person is
authorized, empowered, and directed to do the following for and on behalf of
the Corporation:

 

Borrow Money.  To borrow, as a cosigner or otherwise, from
time to time from Lender, on such terms as may be agreed upon between the
Corporation and Lender, such sum or sums of money as in his or her judgment
should be borrowed; however, not exceeding at any one time the amount of Four Million & 00/100 Dollars ($4,000,000.00), in
addition to such sum or sums of money as may be currently borrowed by the
Corporation from Lender.

 

Execute Notes.  To execute and deliver to Lender the promissory
note or notes, or other evidence of the Corporation’s credit accommodations, on
Lender’s forms, at such rates of interest and on such terms as may be agreed
upon, evidencing the sums of money so borrowed or any of the Corporation’s
indebtedness to Lender, and also to execute and deliver to Lender one or more
renewals, extensions, modifications, refinancings, consolidations, or
substitutions for one or more of the notes, any portion of the notes, or any
other evidence of credit accommodations.

 

Grant Security.  To mortgage, pledge, transfer, endorse,
hypothecate, or otherwise encumber and deliver to Lender any property now or
hereafter belonging to the Corporation or in which the Corporation now or
hereafter may have an interest, including without limitation all of the
Corporation’s real property and all of the Corporation’s personal property
(tangible or intangible), as security for the payment of any loans or credit
accommodations so obtained, any promissory notes so executed (including any
amendments to or modifications, renewals, and extensions of such promissory
notes), or any other or further indebtedness of the Corporation to Lender at
any time owing, however the same may be evidenced. Such property may be
mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the
time such loans are obtained or such indebtedness is incurred, or at any other
time or times, and may be either in addition to or in lieu of any property
theretofore mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered.

 

Execute Security Documents.  To
execute and deliver to Lender the forms of mortgage, deed of trust, pledge
agreement, hypothecation agreement, and other security agreements and financing
statements which Lender may require and which shall evidence the terms and
conditions under and pursuant to which such liens and encumbrances, or any of
them, are given; and also to execute and deliver to Lender any other written
instruments, any chattel paper, or any other collateral, of any kind or nature,
which Lender may deem necessary or proper in connection with or pertaining to
the giving of the liens and encumbrances.

 

Negotiate Items.  To draw, endorse, and discount with Lender all
drafts, trade acceptances, promissory notes, or other evidences of indebtedness
payable to or belonging to the Corporation or in which the Corporation may have
an interest, and either to receive cash for the same or to cause such proceeds
to be credited to the Corporation’s account with Lender, or to cause such other
disposition of the proceeds derived therefrom as he or she may deem advisable.

 

Further Acts.  In the case of lines of credit, to designate
additional or alternate individuals as being authorized to request advances
under such lines, and in all cases, to do and perform such other acts and
things, to pay any and all fees and costs, and to execute and deliver such
other documents and agreements, including
agreements waiving the right to a trial by jury and confessing judgment against
the Corporation, as
the officer may in his or her discretion deem reasonably necessary or proper in
order to carry into effect the provisions of this Resolution. The following
persons currently are authorized to request advances and authorize payments
under the line of credit until Lender receives from the Corporation, at Lender’s
address shown above, written notice of revocation of their authority: John L. Flavin; Michael T. Flavin; and Richard
Wieland.

 

ASSUMED BUSINESS NAMES.  The
Corporation has filed or recorded all documents or filings required by law
relating to all assumed business names used by the Corporation. Excluding the
name of the Corporation, the following is a complete list of all assumed
business names under which the Corporation does business:  None.

 

NOTICES TO
LENDER.  The Corporation 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 (A) change in the Corporation’s name; (B) change in the
Corporation’s assumed business name(s); (C) change in the management of the
Corporation; (D) change in the authorized signer (s); (E) change in the Corporation’s principal office address; (F) change in
the Corporation’s state of organization; (G) conversion of the Corporation to a
new or different type of business entity; or (H) change in any other aspect of
the Corporation that directly or indirectly relates to any agreements between
the Corporation and Lender. No change in the Corporation’s name or state of
organization will take effect until after Lender has received notice.

 

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS.  The
officer named above is duly elected, appointed, or employed by or for the

 

 

Corporation,
as the case may be, and occupies the position set opposite his or her
respective name. This Resolution now stands of record on the books of the
Corporation, is in full force and effect, and has not been modified or revoked
in any manner whatsoever.

 

NO CORPORATE SEAL.  The Corporation has no corporate seal, and
therefore, no seal is affixed to this Resolution.

 

CONTINUING VALIDITY.  Any and all acts authorized pursuant to this
Resolution and performed prior to the passage of this Resolution are hereby
ratified and approved. This Resolution shall be continuing, shall remain in
full force and effect and Lender may rely on it until written notice of its
revocation shall have been delivered to and received by Lender at Lender’s
address shown above (or such addresses as Lender may designate from time to
time). Any such notice shall not affect any of the Corporation’s agreements or
commitments in effect at the time notice is given.

 

IN TESTIMONY WHEREOF, I have hereunto set my hand and attest
that the signature set opposite the name listed above is his or her genuine
signature.

 

I have read all the provisions of this Resolution, and I
personally and on behalf of the Corporation certify that all statements and representations
made in this Resolution are true and correct. This Corporate Resolution to
Borrow / Grant Collateral is dated                                         .

 

	
   

  	
  CERTIFIED
  TO AND ATTESTED BY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  X

  	
  /s/ John L. Flavin

  
	
   

  	
   

  	
  John L.
  Flavin, President of Advanced Life Sciences,

  Inc.

  

 

 

NOTE:
 If the officer signing this Resolution
is designated by the foregoing document as one of the officers authorized to
act on the Corporation’s behalf, it is advisable to have this Resolution signed
by at least one non-authorized officer of the Corporation.

 

2Exhibit 10.2

 

FIRST AMENDMENT TO LEASE
AGREEMENT

 

This FIRST AMENDMENT
TO LEASE AGREEMENT (this “Amendment”) is entered into as of April 18,
2006 by and between Advanced Life Sciences, Inc., an Illinois corporation
(“Tenant”), and BioStart Property Group, LLC a Delaware Limited
Liability Company (“Landlord”) to amend the terms of that certain Lease
Agreement dated October 1, 2003 between Tenant and Landlord, the assignee
of Flavin Ventures, LLC (the “Lease”).

 

BACKGROUND

 

A.    Flavin Ventures, LLC and Tenant entered into the
Lease on October 1, 2003;

 

B.    Flavin Ventures, LLC assigned the Lease to Landlord
effective November 1, 2004.

 

C.    Landlord and Tenant wish to amend the lease to
allow Landlord to apply the rent and/or operating costs due by other tenants in
the Building as a credit toward the Base Rent due and/or Additional Rent due by
Tenant to Landlord.

 

1.     Incorporation of the Lease. All capitalized terms which are not
defined herein shall have the same meanings as set forth in the Lease, and the
Lease, to the extent not inconsistent with this Amendment, is incorporated
herein by this reference as though the same was set forth in its entirety. To
the extent any terms and provisions of the Lease are inconsistent with the
amendments set forth in Paragraph 2 below, such terms and provisions shall be
deemed superseded hereby. Except as specifically set forth herein, the Lease
shall remain in full force and effect and its provisions shall be binding on
the parties hereto.

 

2.     Amendment of the Lease. The Lease is hereby amended as follows:

 

a.     Section 4.1 of the Lease is hereby deleted in its entirety
and shall be replaced with the following:

 

“Tenant shall pay to
Landlord, without notice or demand, in lawful money of the United States of
America, at Landlord’s Address for Payment, or at such other place as Landlord
shall designate in writing from time to time: (a) the Base Rent, minus any
offset or deduction, in equal monthly installments, in advance, on the first
day of each calendar month during the Term, and (b) the Additional Rent,
minus any offset or deduction, at the respective times required hereunder. The
first monthly installment of Base Rent and the Additional Rent payable under Article 5
hereof shall be paid in advance on the date of Tenant’s execution of this Lease
and applied to the first installments of Base Rent and such Additional Rent
coming due under this Lease. Payment of Rent shall begin on the Commencement
Date; provided, however, that, if either the Commencement Date or the
Expiration Date falls on a date other than the first day of a calendar month,
the Rent due for such fractional month shall be prorated on a per diem basis
between Landlord and Tenant so as to charge Tenant only for the portion of such
fractional month falling within the Term.”

 

[Signature Page Follows]

 

 

[Signature Page of
First Amendment to Lease Agreement]

 

IN WITNESS WHEREOF, Landlord and Tenant have set their hands and seals hereunto and have
caused this Lease to be executed by duly authorized officials thereof, as of the
day and year set forth on the cover page hereof.

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  BioStart Property Group, LLC, a Delaware Limited

  Liability Company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/  John L. Flavin

  	
   

  
	
   

  	
   

  	
  John Flavin

  
	
   

  	
   

  	
  Member

  
	
   

  	
   

  
	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  ADVANCED LIFE SCIENCES, INC., an
  Illinois

  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/  Richard Wieland

  	
   

  
	
   

  	
   

  	
  R. Richard Wieland, II

  
	
   

  	
   

  	
  Executive Vice President and Chief Financial

  Officer

  

 

2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}]]