10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the Quarterly Period Ended: September 30, 2008

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No: 000-51436

ADVANCED LIFE SCIENCES HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	30-0296543
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification no.)

1440 Davey Road

Woodridge, IL 60517

(Address, including zip code of registrants principal executive offices)

Registrant’s telephone number: (630) 739-6744

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company x
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o     No x

As of November 3, 2008, the registrant had 40,805,932  shares of common stock, $0.01 par value per share, outstanding.

ADVANCED LIFE SCIENCES HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTITY)

INDEX

Form 10-Q

PART I — FINANCIAL INFORMATION (UNAUDITED)
Item 1.	Consolidated Financial Statements:
	Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007
	Consolidated Statements of Operations for the three and nine months ended September 30, 2008 and 2007 and for the period from inception (January 1, 1999) through September 30, 2008
	Consolidated Statements of Stockholders’ Equity (Deficit) for period from inception (January 1, 1999) through September 30, 2008
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007 and for the period from inception (January 1, 1999) through September 30, 2008
	Notes to Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
PART II — OTHER INFORMATION
Item 1A.	Risk Factors
Item 6.	Exhibits
Signatures
Exhibit Index

1

PART I — FINANCIAL INFORMATION

Item 1.    Consolidated Financial Statements (Unaudited)

ADVANCED LIFE SCIENCES HOLDINGS, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30,			December 31,
	2008			2007
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	7,766,597		$	18,324,991
Grant receivable	32,006			—
Prepaid insurance	329,363			251,493
Prepaid clinical trial expenses	—			926,168
Other prepaid expenses and deposits	211,874			140,359
Total current assets	8,339,840			19,643,011
PROPERTY AND EQUIPMENT:
Furniture and fixtures	237,907			221,417
Laboratory equipment	159,186			159,186
Computer software and equipment	253,851			242,707
Leasehold improvements	502,798			177,253
Total property and equipment—at cost	1,153,742			800,563
Less accumulated depreciation	(717,249		)	(542,032		)
Property and equipment—net	436,493			258,531
OTHER ASSETS:
Deferred financing costs	361,250			—
Other long-term assets	10,000			10,000
Total other assets	371,250			10,000
TOTAL ASSETS	$	9,147,583		$	19,911,542
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	273,140		$	2,685,751
Accrued milestone payable	10,000,000			—
Accrued clinical trial and NDA expenses	801,679			2,776,543
Other accrued expenses	1,411,523			330,441
Accrued interest payable	20,391			22,756
Short-term lease payable	8,142			7,259
Short-term notes payable - related party	2,000,000			—
Total current liabilities	14,514,875			5,822,750
Long-term lease payable	6,595			12,818
Long-term grant payable	500,000			500,000
Long-term notes payable - related party	—			2,000,000
Line of credit	3,915,000			3,915,000
Total liabilities	18,936,470			12,250,568
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST	—			—
STOCKHOLDERS’ EQUITY (DEFICIT):
Common stock, $0.01 par value—60,000,000 shares authorized; 40,805,932 issued and outstanding at September 30, 2008; 38,502,987 shares issued and outstanding at December 31, 2007	408,059			385,030
Additional paid-in capital	109,416,354			106,859,532
Deficit accumulated during the development stage	(119,613,300		)	(99,583,588		)
Total stockholders’ equity (deficit)	(9,788,887		)	7,660,974
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	9,147,583		$	19,911,542

See notes to unaudited consolidated financial statements.

2

ADVANCED LIFE SCIENCES HOLDINGS, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

													Period From
													Inception
													(January 1, 1999)
	Three months ended September 30,						Nine months ended September 30,						Through
	2008			2007			2008			2007			September 30, 2008
Revenue:
Management fees	$	—		$	—		$	—		$	—		$	1,161,180
Grants	32,006			—			32,006			—			1,067,577
Royalty—related party	—			—			—			—			45,238
Total revenue	32,006			—			32,006			—			2,273,995
Expenses:
Research and development	11,240,032			3,838,184			14,798,173			21,722,174			89,669,281
Contracted research and development—related party	—			—			—			—			7,980,299
Selling, general and administrative	1,828,607			2,004,357			5,237,579			5,362,769			25,169,667
Total expenses	13,068,639			5,842,541			20,035,752			27,084,943			122,819,247
Loss from operations	(13,036,633		)	(5,842,541		)	(20,003,746		)	(27,084,943		)	(120,545,252		)
Net other (income) expense:
Interest income	(51,244		)	(117,332		)	(284,330		)	(638,396		)	(2,926,346		)
Interest expense	103,277			116,998			310,296			350,268			2,933,446
Gain on sale of interest in Sarawak Medichem Pharmaceuticals joint venture	—			—			—			—			(939,052		)
Net other (income) expense	52,033			(334		)	25,966			(288,128		)	(931,952		)
Net loss	(13,088,666		)	(5,842,207		)	(20,029,712		)	(26,796,815		)	(119,613,300		)
Less accumulated preferred stock dividends of subsidiary for the period	43,750			43,750			131,250			131,250			1,626,042
Net loss available to common shareholders	$	(13,132,416	)	$	(5,885,957	)	$	(20,160,962	)	$	(26,928,065	)	$	(121,239,342	)
Net loss per share available to common shareholders - basic and diluted	$	(0.34	)	$	(0.21	)	$	(0.52	)	$	(0.95	)
Weighted average shares outstanding - basic and diluted	38,568,464			28,294,677			38,524,972			28,292,150

See notes to unaudited consolidated financial statements.

3

ADVANCED LIFE SCIENCES HOLDINGS, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

						Deficit
						Accumulated
						Additional			During the
	Common Stock					Paid-in			Development
	Shares		Amount			Capital			Stage			Total
BALANCE—January 1, 1999 (inception)	—		$	—		$	—		$	—		$	—
Issuance of stock (at inception)	1,588,000		250,000			—			—			250,000
Issuance of common stock, net of offering costs (August 2005)	6,721,814		67,218			29,210,558			—			29,277,776
Issuance of common stock, net of offering costs (March 2006)	10,233,464		102,335			33,266,653			—			33,368,988
Issuance of common stock, net of offering costs (December 2007)	10,191,083		101,911			17,750,327			—			17,852,238
Exchange of shares under recapitalization (December 2004)	(1,629,685	)	(256,563		)	—			—			(256,563		)
Issuance of shares under recapitalization (December 2004)	9,482,015		94,820			161,743			—			256,563
Capital contributions (December 2004)	—		—			12,711,330			—			12,711,330
Issuance of 14,887 warrants (December 2004)	—		—			11,898			—			11,898
Issuance of common stock in exchange for licenses (December 2004)	1,122,569		11,226			8,988,774			—			9,000,000
Issuance of common stock in exchange for reduction of milestones payable (August 2005)	600,000		6,000			3,000,000			—			3,006,000
Modification of 14,887 warrants (August 2005)	—		—			18,925			—			18,925
Issuance of stock related to option exercises (since inception)	193,727		8,083			27,192			—			35,275
Compensation expense related to stock options (since inception)	—		—			1,712,132			—			1,712,132
Net loss (since inception)	—		—			—			(99,583,588		)	(99,583,588		)
BALANCE—December 31, 2007	38,502,987		385,030			106,859,532			(99,583,588		)	7,660,974
Adjustment to net offering costs (December 2007)	—		—			(50,141		)	—			(50,141		)
Issuance of common stock, net of offering costs (September 2008)	1,888,606		18,886			1,661,793			—			1,680,679
Issuance of common stock as payment for commitment fees (September 2008)	393,339		3,933			296,067			—			300,000
Issuance of stock related to option exercises	21,000		210			3,087			—			3,297
Compensation expense related to stock options	—		—			646,016			—			646,016
Net loss	—		—			—			(20,029,712		)	(20,029,712		)
BALANCE—September 30, 2008	40,805,932		$	408,059		$	109,416,354		$	(119,613,300	)	$	(9,788,887	)

See notes to unaudited consolidated financial statements.

4

ADVANCED LIFE SCIENCES HOLDINGS, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

							Inception
	Nine months ended						(January 1, 1999)
	September 30,						Through
	2008			2007			September 30, 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(20,029,712	)	$	(26,796,815	)	$	(119,613,300	)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization	175,219			157,072			797,993
Non-cash interest expense	3,750			28,326			104,573
Stock compensation expense	646,016			549,476			2,358,148
Non-cash research and development	—			—			24,466,667
Non-cash settlement of milestone payment	—			—			6,000
Gain on sale of interest in Sarawak Medichem Pharmaceuticals (SMP)	—			—			(939,052		)
Loss on disposal	—			1,761			13,294
Changes in operating assets and liabilities:
Clinical supplies	—			—			533,333
Accounts receivable	(32,006		)	—			(32,006		)
Prepaid expenses	776,783			368,563			(549,785		)
Other assets	—			—			(1,452		)
Accounts payable	(2,412,611		)	2,487,884			273,140
Accrued expenses	(964,451		)	2,652,309			2,142,533
Accrued milestone payable	10,000,000			—			10,000,000
Licenses payable	—			—			(11,000,000		)
Accrued interest on debt	(2,365		)	(734		)	598,454
Net cash flows from operating activities	(11,839,377		)	(20,552,158		)	(90,841,460		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(346,687		)	(58,436		)	(1,077,035		)
Proceeds from the sale of SMP	—			—			939,052
Proceeds from the sales of investments	—			—			31,557,158
Purchase of investments	—			—			(31,557,158		)
Net cash flows from investing activities	(346,687		)	(58,436		)	(137,983		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock and capital contributions	1,664,713			—			89,373,290
Proceeds from issuance of note payable and line of credit	—			—			12,933,691
Payments on line of credit	—			—			(3,915,000		)
Proceeds from grants	—			—			500,000
Proceeds from stock options exercised	3,297			1,884			38,572
Payments of deferred financing fees	(35,000		)	—			(35,000		)
Payments on capital leases	(5,340		)	(16,753		)	(149,513		)
Net cash flows from financing activities	1,627,670			(14,869		)	98,746,040
NET (DECREASE) INCREASE IN CASH	(10,558,394		)	(20,625,463		)	7,766,597
CASH—Beginning of period	18,324,991			27,054,947			—
CASH—End of period	$	7,766,597		$	6,429,484		$	7,766,597
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for interest	$	318,910		$	310,077		$	2,231,716
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Noncash investment activity:
Purchase of property and equipment under capital leases	$	—		$	—		$	164,249
Capital expenses included in accrued expenses	6,494			—			6,494
Noncash financing activity:
Issuance of common shares for licenses	—			—			9,000,000
Issuance of common shares for reduction of milestone payment	—			—			3,000,000
Unpaid costs associated with the issuance of common stock	34,175			34,175
Debt discount	—			—			30,823
Deferred financing costs	$	330,000		$	—		$	360,000

See notes to unaudited consolidated financial statements.

5

ADVANCED LIFE SCIENCES HOLDINGS, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(UNAUDITED)

1.Summary of Significant Accounting Policies

Nature of Business- Advanced Life Sciences Holdings, Inc. and its subsidiary Advanced Life Sciences, Inc. (together, the “Company”) conduct new drug research and development in the fields of infectious disease, oncology and inflammation.  Since inception, the Company has devoted substantially all of its efforts to activities such as financial planning, capital raising and product development, and has not derived significant revenues from its primary business activity.  Accordingly, the Company is in the development stage, as defined by Statement of Financial Accounting Standards (“SFAS”) No. 7, Accounting and Reporting by Development Stage Enterprises.

Basis of Presentation- The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  However, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, unless otherwise noted herein, necessary to present fairly the results of operations, financial position and cash flows have been made.  Therefore, these consolidated financial statements should be read in conjunction with the Company’s most recent audited financial statements for the year ended December 31, 2007 and notes thereto. The consolidated financial statements include the accounts of the Advanced Life Sciences Holdings, Inc. and its wholly-owned subsidiary Advanced Life Sciences, Inc. (“ALS Inc.”)  All intercompany balances and transactions have been eliminated.  The results of operations for any interim period are not necessarily indicative of the results of operations expected for the full year.

The consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of operations and the realization of assets and liquidation of liabilities in the ordinary course of business.  However, as a result of the Company’s continued losses and current cash and financing position, such realization of assets or liquidation of liabilities, without substantial adjustments is uncertain.  Given this uncertainty, there is significant doubt as to the Company’s ability to continue as a going concern.

Revenue and Income Recognition- Revenue related to award grants from various government agencies is recognized as the related research and development costs are incurred and services performed are in accordance with the terms of the grant agreements.

Business and Credit Risks- The Company is subject to risks and uncertainties common to drug discovery companies, including technological change, potential infringement on intellectual property of third parties, new product development, regulatory approval and market acceptance of its products, activities of competitors and its limited operating history.  The Company has incurred losses since its incorporation in January 1999.  The Company has funded its operations to date primarily from debt financings and capital contributions from its founder and Chief Executive Officer, proceeds from the initial public offering of its common stock, the subsequent sale of its common stock in three private placements, including its commercial partnership agreement with Wyeth Pharmaceuticals (“Wyeth”) (See Note 2), and borrowings under its bank line of credit.  The Company will not be generating any product-based revenues or realizing cash flows from operations in the near term, if at all, and may not have sufficient cash or other funding available to complete its anticipated business activities during 2009.  In order to address its working capital shortfall the Company intends to raise additional capital by licensing its lead compound, cethromycin, to additional commercial partners.  The Company believes, based upon current market conditions, additional commercial partnership agreements would include a series of milestone payments, including up-front milestones that would fund the Company’s continued operations.  Although management believes the Company could secure additional commercial partnerships, there can be no assurances that such partnerships will be available at terms acceptable to the Company, if at all.   In addition, the Company has executed a Standby Equity Distribution Agreement (“SEDA”) which provides for the sale of up to $15.0 million of its common stock to an accredited investor, YA Global Investments, L.P. (“YA”), an affiliate of Yorkville Advisors (See Note 2).  Under the terms of the SEDA, the Company is not able to utilize the facility after receipt of a delisting notice from the principal trading market on which its common stock is traded.  The Company is currently working with YA to obtain a waiver to this covenant.  If the Company raises

6

additional capital by issuing equity securities, its shareholders could experience substantial dilution.

On October 1, 2008, the Company received notice from the Nasdaq Listing Qualifications Department stating that the market value of its listed securities was below $35.0 million for 10 consecutive days, and that the Company was in violation of the requirement for continued listing on the Nasdaq Capital Market under Marketplace Rule 4310(c)(3)(B) (the “Rule”).  Nasdaq also informed the Company that it is not in compliance with either of Marketplace Rules 4310(c)(3)(A) or 4310(c)(3)(C), which together require either minimum stockholders’ equity of $2.5 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years for listing eligibility.  The Company was not compliant with the Rule by the deadline of October 31, 2008 and received notice from the Nasdaq Listing Qualifications Department stating that it is in violation of the requirement for continued listing on the Nasdaq Capital Market.   The Company intends to appeal this decision with the Nasdaq Listing Qualifications Department.  The Company’s securities will remain listed on the Nasdaq Capital Market throughout the appeal process.  While the Company intends to appeal the determination by the Nasdaq staff to delist its common stock to a Nasdaq Listing Qualifications Panel, the Company may not be successful in its appeal, in which case its common stock will be delisted.  In the event of delisting, trading, if any, would be conducted in the over-the-counter market in the so-called “pink sheets” or on the OTC Bulletin Board.  Should this occur, existing stockholders will suffer decreased liquidity.

The accompanying financial statements do not include any adjustments that might result from the outcome of any uncertainties discussed in the Company’s Business and Credit Risks Summary.

7

2.Private Placements

In September 2008, the Company and Wyeth entered into a development and commercialization agreement for cethromycin in the Asia Pacific region excluding Japan. The Company will retain exclusive rights to cethromycin in the rest of the world, including North America and Europe and excluding Japan.  In addition to future royalty payments, the Company would receive milestone and regulatory payments based on successful achievement of clinical, regulatory and commercial objectives in specific markets. The Company and Wyeth will collaborate to develop additional clinical data in the Asia Pacific region to support regulatory filings in that region.  It is not anticipated that Wyeth would file for regulatory approval in the Asia Pacific region prior to the Company obtaining U.S. approval for cethromycin from the Food and Drug Administration (“FDA”).

In connection with the Company’s entry into a development and commercialization agreement, the Company entered into a stock purchase agreement with Wyeth.  Under the terms of the agreement, Wyeth made an up-front investment in the Company by purchasing 1,888,606 shares of its common stock at a price of $0.908 per share for approximately $1.7 million, net of offering expenses, representing approximately 4.9% of the Company’s total outstanding shares.

In September 2008, the Company also entered into a SEDA, with YA, for the sale of up to $15.0 million of shares of the Company’s common stock over a two-year commitment period.   In connection with entering into the SEDA, the Company also entered into a Registration Rights Agreement with YA. Under the terms of the SEDA, the Company may from time to time, in its discretion, sell newly-issued shares of its common stock to YA at a discount to market of 5%. The amount of each advance is limited to the greater of $400,000 or the average trading volume for the five trading days prior the advance notice date.  The Company is not obligated to utilize any of the $15.0 million available under the SEDA and there are no minimum commitments or minimum use penalties. Based upon the Company’s currently outstanding shares of common stock, and options and warrants to purchase common stock, the aggregate number of shares that the Company may sell under the SEDA without stockholder approval is currently limited to approximately 4.5 million shares. Unless stockholder approval is sought and obtained, the total amount of funds that ultimately can be raised under the SEDA over the two-year term will depend on the then-current price for the Company’s stock and the number of shares actually sold. The Company’s restructured credit facility with its lender (See Note 4) also contains a covenant limiting the Company’s utilization of the SEDA to $9.0 million without the bank’s prior consent. In addition, under the terms of the SEDA, the Company is not able to utilize the facility after receipt of a delisting notice from the principal trading market on which its common stock is being traded, which was received on October 1, 2008.  The Company is currently working with YA to obtain a waiver to this covenant.  In the event a waiver cannot be obtained, the Company will not be able to utilize this facility unless and until it meets certain listing requirements.  Pursuant to the terms of the SEDA, the Company paid to YA a commitment fee of $300,000 by issuing 393,339 shares of the Company’s common stock, and incurred $55,000 of other closing fees.

In December 2007, the Company raised approximately $17.8 million, net of underwriting discounts and offering expenses, in connection with the issuance of 10,191,083 shares and warrants to purchase 5,095,542 shares of its common stock at $1.96 per share.  The exercise price of the warrants is $2.15 per share and they expire in December 2012.

3.Related Party Transactions

The Company’s Chief Executive Officer, Michael T. Flavin Ph.D., loaned $2.0 million to the Company in 2001 (see Note 4).  Interest expense of $116,000 was recorded for the nine months ended September 30, 2008 and 2007, related to the loan.

The Company’s line of credit with a financial institution is secured by substantially all of the Company’s assets, except that the collateral specifically excludes any rights that the Company has as a result of its license agreement with Abbott Laboratories (“Abbott”) for cethromycin, and is further secured by 2.5 million shares of the Company’s stock held by ALS Ventures, LLC (See Note 4), which is beneficially owned by the Company’s Chief Executive Officer.

The Company leases facilities from the BioStart Property Group, LLC. (“BioStart”), a wholly-owned subsidiary of Flavin Ventures, which is owned by the Company’s Chief Executive Officer.  The operating lease expired in September of 2008 and the Company is currently in negotiations to renew the lease.  Following the expiration of the lease in September, the Company is making payments equal to its last payment under the previous agreement.  Lease payments totaled approximately $216,000 and $206,000 for the nine months ended September 30, 2008 and 2007, respectively.

8

4.Debt Obligations

In September 2001, the Company incurred indebtedness under a $2.0 million promissory note with the Chief Executive Officer of the Company, which bears interest at 7.75%.  Principal plus any accrued interest is due in a lump sum on January 5, 2009. As of September 30, 2008 and December 31, 2007, the Company had $2.0 million outstanding under the note.

The Company has a revolving line of credit with a financial institution under which the Company had $3.9 million outstanding as of September 30, 2008 and December 31, 2007.  In October 2008, the Company restructured its line of credit.  The terms of the new line of credit increased the availability under the facility from $4.0 million to $10.0 million, extended the maturity date one year to January 1, 2011, and changed the floating rate to a fixed interest rate of 8.5%.  The line of credit is secured by substantially all of the Company’s assets, except that the collateral specifically excludes any rights that the Company may have as a result of its license agreement with Abbott for cethromycin, and is further secured by 2.5 million shares of the Company’s common stock held by ALS Ventures, LLC.  The credit agreement contains a material adverse change clause, which is subject to the judgment of the lender and, if triggered, can accelerate the payment of the debt.  The terms also include a covenant limiting the use of the SEDA to $9.0 million without the bank’s consent.   The Company issued warrants for the purchase of 65,000 shares of its common stock at an exercise price of $1.00 per share to the lender as a closing fee.  The warrants became exercisable upon issuance and will expire five years from the date of the grant.  The Company borrowed $6.0 million on its new line of credit in October 2008, to partially fund the Abbott milestone payment made in October.

5.Commitments

Vendor Contracts- The Company administers its cethromycin program largely under contracts with third parties.  Through September 30, 2008, contracts totaling $47.2 million, net of expected savings of $3.2 million, have been executed related to the cethromycin program, which includes the development, commercialization and marketing of cethromycin as well as anthrax-related studies.  To date the Company has paid $41.5 million under these contracts and the remaining balance of $5.7 million is expected to be paid over the next nine months.  In October 2008, the Company entered into subcontractor arrangements to further study cethromycin as a potential broad-spectrum medical countermeasure.  These costs are expected to be approximately $1.5 million over a nine-month base period and $1.6 million for an option period that would extend the arrangements for an additional 15 months.  In addition, to date the Company has executed $1.2 million in contracts related to the ALS-357 program, of which the remaining balance of $882,000 is expected to be paid beyond 2008.

Grant Payable- In April 2005, the Company was awarded a $500,000 grant from the State of Illinois to fund expansion of its corporate headquarters in Woodridge, Illinois.  Under the terms of the grant, the Company is to create 100 full-time jobs at its corporate headquarters between January 31, 2005 and December 31, 2010 (“grant period”).  If the Company does not create the specified number of full-time jobs, it is required to repay the grant proceeds on a pro-rata basis of actual jobs created compared to the total defined in the grant.  As of December 31, 2007, the entire grant had been spent or obligated and therefore the $500,000 has been classified as a long-term liability as the Company must create and maintain positions created during the grant period through January 31, 2010.    Through September 30, 2008, eighteen new jobs have been created and retained since the grant was awarded.

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6.Stock Option Grants

For the nine months ended September 30, 2008 and 2007, the Company granted stock options to purchase up to 713,800 and 739,300 shares of common stock, respectively, to certain employees and directors. The exercise price of the options was the market price of the Company’s common stock on the date of grant.  The Company recognized compensation expense totaling approximately $646,000 and $549,000 for the nine months ended September 30, 2008 and 2007, respectively in accordance with SFAS No. 123 (R), Share-Based Payment.

7.Net Loss Per Share

Basic loss per share is computed by dividing net loss by the number of weighted average common shares outstanding during the reporting period.  Diluted loss per share is calculated to give effect to all potentially dilutive common shares that were outstanding during the reporting period.  The computation of diluted shares outstanding for the periods ended September 30, 2008 and 2007 excludes incremental shares of 12,643,993 and 6,995,119 respectively, related to employee stock options and warrants.  These shares are excluded due to their anti-dilutive effect as a result of the Company’s losses for the periods ended September 30, 2008 and 2007.

8.Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157 Fair Value Measurements (“SFAS 157”).  SFAS 157 provides a definition of fair value, establishes acceptable methods of measuring fair value and expands disclosures for fair value measurements.  The principles apply under accounting pronouncements which require measurement of fair value.  The adoption of SFAS 157 did not have a material impact on the Company’s statements of financial position, results of operations and cash flows.

In December 2007, the FASB issued SFAS No. 141 (revised 2007)  Business Combinations (“SFAS 141R”) and SFAS No. 160 Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulleting No. 51 (“SFAS 160”). SFAS 141R will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods.  SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interest and classified as a component of equity.  SFAS 141R and SFAS 160 are effective beginning the first fiscal quarter of 2010.  Early adoption is not permitted.  The Company does not expect the adoption of either SFAS 141R or SFAS 160 will have a material impact on its statements of financial position, results of operations and cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”).  SFAS 159 permits an entity to irrevocably elect fair value on a contract-by-contract basis as the initial and subsequent measurement attribute for many financial assets and liabilities and certain other items including insurance contracts.  Entities electing the fair value option would be required to recognize changes in fair value in earnings and to expense upfront cost and fees associated with the item for which the fair value option is elected.  The adoption of SFAS 159 did not have a material impact on the Company’s statements of financial position, results of operations and cash flows.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS 161”). SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. The application of SFAS 161 is required for fiscal years and interim periods beginning after November 15, 2008. The Company does not expect the adoption of SFAS 161 to have a material impact on its statements of financial position, results of operations and cash flows.

In 2007, the Emerging Issues Task Force (“EITF”) issued EITF 07-03, “Accounting for Advance Payments for Goods or Services to Be Used in Future Research and Development” and the FASB ratified the tentative conclusion.  EITF 07-03 addresses the diversity which exists with respect to the accounting for the non-refundable portion of a payment made by a research and development entity for future research and development activities. Under this conclusion, an entity would defer and capitalize non-refundable advance payments made for research and development activities until the related goods are delivered or the related services are performed. EITF 07-03 was effective for interim or annual reporting periods in fiscal years beginning after December 15, 2007. The adoption of EITF 07-03 did not have a material impact on the Company’s statements of financial position, results of operations and cash flows.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this quarterly report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

We are a biopharmaceutical company focused on the discovery, development and commercialization of novel drugs in the areas of infectious disease, oncology and inflammation. Using our internal discovery capabilities and our network of pharmaceutical and academic partners, we have assembled a promising pipeline of clinical and preclinical product candidates. Our most advanced product candidate, cethromycin, is a novel once-a-day oral antibiotic that recently completed two pivotal Phase III clinical trials in community acquired pneumonia (“CAP”) and a new drug application (“NDA”) of cethromycin has recently been submitted to the Food and Drug Administration (“FDA”). Cethromycin is also being developed as a bio-defense agent for use in the treatment of anthrax and other potential broad-spectrum medical countermeasures.  We also have product candidates in earlier stages of development for the treatment of indications including respiratory distress caused by inflammation-related tissue damage and malignant melanoma.

None of our product candidates has been approved by the FDA or any comparable foreign agencies, and we have not generated any significant revenues to date. Our ability to generate revenues in the future will depend on our ability to meet development or regulatory milestones under any license agreements that trigger payments to us, to enter into new license agreements for other products or territories and to receive regulatory approvals for, and successfully commercialize, our product candidates either directly or through commercial partners.

Development Update

In September 2008, we submitted a NDA for cethromycin.  The NDA submission is based on a full clinical development and manufacturing program for cethromycin. The program two global Phase III pivotal studies for the treatment of mild-to-moderate CAP in which cethromycin was dosed at 300 milligrams once daily for seven days compared to the standard of care therapy, Biaxin, which was dosed at 250 milligrams twice daily for seven days. The data from these trials showed that cethromycin was non-inferior to Biaxin with a similar safety profile. The most common adverse reactions for cethromycin were taste disturbance, diarrhea, nausea and headache.  No visual disturbances, loss of consciousness, exacerbation of myasthenia gravis and hepatotoxicity were reported from these studies.  More than 5,000 patients have been treated with cethromycin in 53 clinical trials to date. We hold the rights to cethromycin under an exclusive worldwide license (except in Japan) from Abbott Laboratories (“Abbott”).

There can be no assurance that the FDA will file our NDA application which has recently been submitted, or that once filed, it will be approved.  In addition, we do not expect to receive FDA approval for commercialization of cethromycin until 2009 at the earliest.  As of September 30, 2008, we estimate that our cethromycin development program will require an additional $41.3 million in expenditures which includes $40.0 million in additional milestone payments to Abbott, of which $10.0 million was expensed in September 2008 and paid in October 2008 upon submitting our NDA application, $300,000 to complete the cethromycin clinical trials and $1.0 million for the preparation of the cethromycin NDA and other pre-commercialization related costs.  The additional $30.0 million Abbott milestone payment is triggered upon receiving FDA approval for cethromycin.  Development timelines and related costs are difficult to estimate and may vary significantly from our current estimates.

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If cethromycin is approved for marketing by the FDA, we plan to sell cethromycin using commercial partners to access the primary care physician market and to build and utilize a focused internal sales force that will market directly to early adopters such as, but not limited to, pulmonary medicine and infectious disease physicians.  While we recently entered into a development and commercialization agreement for cethromycin with Wyeth Pharmaceuticals, (“Wyeth”) in the Asia Pacific region, excluding Japan (See below), discussions with other potential commercial partners focused on other geographical markets such as the European Union and the United States are ongoing.

In February 2008, we announced the results from Trial CL07-001, a thorough QT study of cethromycin.  This study was conducted to evaluate the cardiac safety of cethromycin.  The FDA usually requires thorough QT studies for all new chemical entities because prolongation in QT interval (corrected for changes in heart rate, or QTc) may signify an increased risk of developing cardiac arrhythmias.  Trial CL07-001 evaluated the potential of cethromycin to cause a prolongation in electrocardiographic QT interval in accordance with FDA and ICH E14 guidance.  At the therapeutic and supratherapeutic doses, cethromycin shows no signal of any electrocardiographic effects and hence supported its favorable cardiac safety profile.

In addition to its use in the treatment of CAP, cethromycin has also demonstrated significant in vitro activity against over 30 anthrax (Bacillus anthracis) strains.  During the third quarter of 2007, we concluded a study testing cethromycin’s efficacy in treating inhalation anthrax post-exposure for prophylaxis in non-human primates.  Results from this study demonstrated that a thirty (30) day course of oral cethromycin at a 16 mg/kg of once-daily dosing (the human equivalent dose of 300 mg) was 100% protective against a lethal dose of inhaled B. anthracis Ames strain spores.   We are collaborating with the National Institute of Allergy and Infectious Diseases to evaluate cethromycin’s potential in preventing inhalational anthrax and other high-priority bioterror agents.

In September 2008, we entered into a development and commercialization agreement for cethromycin with Wyeth, in the Asia Pacific region excluding Japan. We will retain exclusive rights to cethromycin in the rest of the world, including North America and Europe and excluding Japan.  In addition to future royalty payments, we would receive milestone and regulatory payments based on successful achievement of clinical, regulatory and commercial objectives in specific markets. We will collaborate with Wyeth to develop additional clinical data in the Asia Pacific region to support regulatory filings in that region.  It is not anticipated that Wyeth would file for regulatory approval in the Asia Pacific region prior to us obtaining U.S. approval for cethromycin from the FDA.

In August 2008, we signed a letter of intent with DSM Pharma Chemicals North America (“DSM”), Inc. to proceed with a proposal to purchase raw materials to produce commercial quantities of cethromycin.  Our intent is conditional upon the parties entering into a formal supply agreement which will govern the terms and conditions including but not limited to the timing of production and the milestone payment schedule.  While these conditions are pending, the parties recognize that there are lengthy lead times for the raw materials needed to be used to complete the production described in the proposal.  Therefore, we authorized DSM to procure the necessary raw materials to be used to complete the production in anticipation of entering into the formal supply agreement.  Upon execution of this agreement, we agreed to issue a purchase order to DSM for the necessary raw materials at an estimated cost of $4.2 million.  The cost of these raw materials are subject to changes in the Euro/US Dollar exchange rate. The hypothetical cost of these raw materials at September 30, 2008 was $3.9 million.

In August 2008, we announced that the Defense Threat Reduction Agency (“DTRA”) of the U.S. Department of Defense awarded us a two-year contract worth up to $3.8 million to further study cethromycin as a potential broad-spectrum medical countermeasure. The contract, part of the agency’s Transformational Medical Technologies Initiative (“TMTI”), will fund NDA-enabling studies evaluating cethromycin’s efficacy in combating Category A and B bioterror agents such as Fransicella tularensis (tularemia), Yersinia pestis (plague) and Burkholderia pseudomallei (melioidosis). Under the terms of the contract, $1.8 million of DTRA funds are available over a nine-month base period beginning in August 2008, to initiate NDA-enabling studies measuring cethromycin’s efficacy in treating tularemia and plague as well as studies to measure cethromycin’s efficacy in treating melioidosis. The remaining $2.0 million may be awarded over the ensuing 15 months to complete the project.

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Financial Update

Since our inception, we have incurred net losses each year. Our net loss for the nine months ended September 30, 2008 was $20.0 million.  As of September 30, 2008, we had an accumulated deficit of $119.6 million. We have funded operations to date primarily from debt financings and capital contributions from our founder and Chief Executive Officer, proceeds from the initial public offering of our common stock, the subsequent sale of our common stock in three private placements, including our commercial partnership agreement with Wyeth (See Note 2 of the consolidated financial statements) and borrowings under our bank line of credit.  We will not be generating any product-based revenues or realizing cash flows from operations in the near term, and may not have sufficient cash or other funding available to complete our anticipated business activities during 2009.  In order to address our working capital shortfall we intend to raise additional capital by licensing our lead compound, cethromycin, to commercial partners.  We believe, based upon current market conditions, additional commercial partnership agreements would include a series of milestone payments, including up-front milestones that would fund our continued operations.  Although management believes we could secure additional commercial partnerships, there can be no assurances that such partnerships will be available at terms acceptable to us, if at all.   In addition, we have executed a Standby Equity Distribution Agreement (“SEDA”) which provides for the sale of up to $15.0 million of our common stock to an accredited investor, YA Global Investments, L.P. (“YA”), an affiliate of Yorkville Advisors, subject to certain terms and conditions (See Note 2 of the consolidated financial statements).  If we raise additional capital by issuing equity securities, our shareholders could experience substantial dilution.  As a result of these uncertainties, there is significant doubt about our ability to continue as a going concern.

In September 2008, we raised approximately $1.7 million, net of offering expenses, through a stock purchase agreement in connection with our entry into a development and commercialization agreement with Wyeth.  We issued 1,888,606 shares of common stock at a price of $0.908 per share.

In September 2008, we entered into a SEDA, with YA, for the sale of up to $15.0 million of shares of our common stock over a two-year commitment period.   In connection with entering into the SEDA, we also entered into a Registration Rights Agreement with YA. Under the terms of the SEDA, we may from time to time, in our discretion, sell newly-issued shares of our common stock to YA at a discount to market of 5%. The amount of each advance is limited to the greater of $400,000 or the average trading volume for the five trading days prior to the advance notice date.  We are not obligated to utilize any of the $15.0 million available under the SEDA and there are no minimum commitments or minimum use penalties.  Based upon our currently outstanding shares of common stock, and options and warrants to purchase common stock, the aggregate number of shares that we may sell under the SEDA without stockholder approval is currently limited to approximately 4.5 million shares. Unless stockholder approval is sought and obtained, the total amount of funds that ultimately can be raised under the SEDA over the two-year term will depend on the then-current price for our stock and the number of shares actually sold.  The amendment to our credit facility contains a covenant limiting our utilization of the SEDA to $9.0 million without the bank’s prior consent. In addition, under the terms of the SEDA, we are not able to utilize the facility after receipt of a delisting notice from the principal trading market on which our common stock is being traded, which was received on October 1, 2008.  We are currently working with YA to obtain a waiver to this covenant.  In the event a waiver cannot be obtained, we will not be able to utilize this facility unless and until we meet certain listing requirements.  Pursuant to the terms of the SEDA, we paid to YA a commitment fee of $300,000 by issuing 393,339 shares of our common stock, and incurred $55,000 of other closing costs.

In October 2008, we restructured our line of credit.  The terms of the new line of credit increased the availability under the facility from $4.0 million to $10.0 million, extended the maturity date one year to January 1, 2011, and changed the floating rate to a fixed interest rate of 8.5%.  The line of credit is secured by substantially all of our assets, except that the collateral specifically excludes any rights that we may have as a result of our license agreement with Abbott for cethromycin, and is further secured by 2.5 million shares of our common stock held by ALS Ventures, LLC.  The credit agreement contains a material adverse change clause, which is subject to the judgment of the lender and, if triggered, can accelerate the payment of the debt.  The terms also include a covenant limiting the use of the SEDA to $9.0 million without the bank’s consent.   We have issued warrants for the purchase of 65,000 shares of our common stock at an exercise price of $1.00 per share to the lender as a closing fee.  The warrants became exercisable upon issuance and will expire five years from the date of the grant.  We borrowed $6.0 million on our new line of credit in October 2008, to partially fund the Abbott milestone payment made in October.

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On October 1, 2008, we received notice from the Nasdaq Listing Qualifications Department stating that the market value of our listed securities was below $35.0 million for 10 consecutive days, and that we were in violation of the requirement for continued listing on the Nasdaq Capital Market under Marketplace Rule 4310(c)(3)(B) (the “Rule”).  Nasdaq also informed us that we are not in compliance with either of Marketplace Rules 4310(c)(3)(A) or 4310(c)(3)(C), which together require either minimum stockholders’ equity of $2.5 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years for listing eligibility.

We were not compliant with the Rule by the deadline of October 31, 2008 and received notice from the Nasdaq Listing Qualifications Department stating that we are in violation of the requirement for continued listing on the Nasdaq Capital Market.   We intend to appeal this decision with the Nasdaq Listing Qualifications Department.  Our securities will remain listed on the Nasdaq Capital Market throughout the appeal process.  While we intend to appeal the determination by the Nasdaq staff to delist our common stock to a Nasdaq Listing Qualifications Panel, we may not be successful in our appeal, in which case our common stock will be delisted.  In the event of delisting, trading, if any, would be conducted in the over-the-counter market in the so-called “pink sheets” or on the OTC Bulletin Board.  Should this occur, existing stockholders will suffer decreased liquidity.

In December 2007, we raised approximately $17.8 million, net of underwriting discounts and offering expenses, in connection with the issuance of 10,191,083 shares and warrants to purchase 5,095,542 shares of our common stock at $1.96 per share.  The exercise price of the warrants is $2.15 per share and they expire in December 2012.

Results of Operations

Three months ended September 30, 2008 compared to three months ended September 30, 2007

Revenue.  The Company reported revenue of $32,006 for the three months ended September 30, 2008 compared to $0 for the three months ended September 30, 2007.  Revenue in 2008 was derived from a grant awarded by the DTRA of the U.S. Department of Defense.  The terms of the grant agreement include a nine-month base period, beginning in August 2008, totaling $1.8 million and an option period totaling $2.0 million that would extend the grant for an additional 15 months.

Research and development expense.  Research and development expense increased $7.4 million to $11.2 million for the three months ended September 30, 2008.  The entire increase is attributable to costs incurred for our cethromycin development program.  Included in this amount is a $10.0 million milestone expense incurred under our license agreement for cethromycin with Abbott.  The milestone was triggered upon submission of the cethromycin NDA to the FDA, which occurred on September 30, 2008.  Clinical trial expenses declined $2.6 million when compared to the same period last year, the result of the completion of our second clinical trial in November 2007.

General and administrative expense.  General and administrative expenses declined $0.2 million to $1.8 million for the three months ended September 30, 2008.  The decrease was attributable to marketing expenses incurred in connection with our attendance at the annual meeting of the Interscience Conference of Antimicrobial Agents and Chemotherapy (“ICAAC”) which was held in the third quarter in 2007 and the fourth quarter in 2008.  The Company will be in attendance this year and expects to incur a similar level of marketing expenses related to the conference during the fourth quarter.

Interest income.  Interest income declined $0.1 million to $0.1 million for the three months ended September 30, 2008, the result of a lower average cash balance and associated interest rates in the third quarter of 2008 as compared to the same period in 2007.

Interest expense.  Interest expense declined $14,000 in the three months ended September 30, 2008 as compared to the same period last year, the result of a renewal of our line of credit at a lower interest rate.

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Nine months ended September 30, 2008 compared to the nine months ended September 30, 2007

Revenue.  Revenue for the nine months ended September 30, 2008 was $32,006 compared to $0 for the nine months ended September 30, 2007.  Revenue in 2008 was derived from a grant awarded by the DTRA of the U.S. Department of Defense.   The terms of the grant agreement include a nine-month base period, beginning in August 2008, totaling $1.8 million and an option period totaling $2.0 million that would extend the grant for an additional 15 months.

Research and development expense.  Research and development expense decreased $6.9 million to $14.8 million for the nine months ended September 30, 2008 as compared to the same period in 2007.  Included in the 2008 amount is a $10.0 million milestone expense incurred under our license agreement for cethromycin with Abbott.  The largest component of the total decline was cethromycin clinical trial expenses which were $12.0 million lower than the same period last year.  Data from the second of two pivotal Phase III clinical trials was released in November of 2007 effectively bringing the trials to their natural conclusion.  Expenses incurred to compile our NDA totaled $2.0 million for the nine months ended September 30, 2008 and represented a decline of $4.5 million when compared to the same period last year.  The majority of this decrease is attributable to our cethromycin bulk-scale manufacturing program that was successfully concluded during the third quarter of 2007.  Manufacturing expenses incurred in relation to process optimization activities of cethromycin totaled $0.6 million for the nine months ended September 30, 2008 and were entirely incremental to the same period in the previous year. Expenses related to our study testing cethromycin’s efficacy in treating inhalation anthrax post-exposure for the prophylaxis in non-human primates declined $1.1 million to $0 for the nine months ended September 30, 2008 as compared to the same period last year.  This study was completed during the third quarter of 2007.

General and administrative expense.  General and administrative expense decreased $0.1 million to $5.2 million for the nine months ended September 30, 2008 as compared to the same period in 2007.  Minor increases in salary and benefit, facilities and marketing expenses were offset by decreases in marketing and insurance expenses resulting in a net decrease of $0.1 million.

 Interest income.  Interest income declined $0.4 million to $0.3 million for the nine months ended September 30, 2008, the result of a lower average cash balance and associated interest rates in the first half of 2008 as compared to the same period in 2007.

Interest expense.  Interest expense declined $40,000 in the nine months ended September 30, 2008 as compared to the same period last year, the result of a renewal of our line of credit at a lower interest rate.

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Liquidity and Capital Resources

We have devoted substantially all of our cash resources to research and development and general and administrative expenses.  To date, we have not generated any revenues from the sale of products, and we do not expect to generate any such revenues in the near term, if at all.  As a result, we have incurred an accumulated deficit of $119.6 million as of September 30, 2008 and we expect to incur significant operating losses for the foreseeable future.  Cash and cash equivalents were $7.8 million as of September 30, 2008.  Since our inception in 1999 to August 2005, we financed our operations primarily through debt and capital contributions from our founder and controlling stockholder and borrowings under our bank line of credit.  In August 2005 we completed our initial public offering in which we raised $28.7 million, net of underwriters discount and offering costs.  Since that time, we have completed three private placements in which we raised $52.8 million, net of underwriters’ discounts and offering costs.  As of September 30, 2008 we had negative working capital of $6.2 million, the result of the $10.0 million milestone obligation payable to Abbott upon submission of our NDA for cethromycin.   We funded this obligation in October 2008 using our existing cash resources and borrowings under our restructured line of credit (See Note 4 to the consolidated financial statements).

In September 2001, our Chief Executive Officer made a $2.0 million loan to us. The loan accrues interest at the rate of 7.75%, and is due and payable on January 5, 2009.  The balance of the loan was $2.0 million as of September 30, 2008.

We have a line of credit with a local financial institution under which we had $3.9 million outstanding as of September 30, 2008.  In October 2008, we restructured our line of credit.  The terms of the new line of credit increased the availability under the facility from $4.0 million to $10.0 million, extended the maturity date one year to January 1, 2011, and changed the floating rate to a fixed interest rate of 8.5%.  The line of credit is secured by substantially all of our assets, except that the collateral specifically excludes any rights that we may have as a result of our license agreement with Abbott for cethromycin, and is further secured by 2.5 million shares of our common stock held by ALS Ventures, LLC.  The credit agreement contains a material adverse change clause, which is subject to the judgment of the lender and, if triggered, can accelerate the payment of the debt.  The terms also include a covenant limiting the use of the SEDA to $9.0 million without the bank’s consent.   We issued warrants for the purchase of 65,000 shares of common stock at an exercise price of $1.00 per share to the lender as a closing fee.  The warrants became exercisable upon issuance and will expire five years from the date of the grant.  We borrowed $6.0 million on our new line of credit in October 2008, to partially fund the Abbott milestone payment made in October.

During the nine months ended September 30, 2008, cash used in operating activities totaled $11.8 million.  Approximately $7.1 million was used for the development of cethromycin, $0.3 million for anthrax trials, $0.3 million for research activities related to our proprietary portfolio of compounds and $4.1 million for general operations net of $0.3 million in interest income.

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Contractual Obligations

As of September 30, 2008, the annual amounts of future minimum payments under debt obligations, interest, lease obligations and other long term liabilities consisting of executed research, development, license and commercialization agreements are as follows:

	Payments Due by December 31,
	2008		2009		2010		2011		2012		Total
Notes payable	$	—	$	2,000,000	$	3,915,000	$	—	$	—	$	5,915,000
Interest	100,529		246,321		304		—		—		347,154
Abbott milestone payment	10,000,000		—		—		—		—		10,000,000
Cethromycin clinical & NDA costs	462,717		853,827		—		—		—		1,316,544
Commercialization costs	27,459		4,385,154		—		—		—		4,412,613
ALS-357 clinical trial	12,018		869,965		—		—		—		881,983
Capital leases	1,918		8,468		4,350		—		—		14,736
Total	$	10,604,641	$	8,363,735	$	3,919,654	$	—	$	—	$	22,888,030

In October 2008, we restructured our line of credit.  The terms of the new line of credit increased the availability under the facility from $4.0 million to $10.0 million, extended the maturity date one year to January 1, 2011, and changed the floating rate to a fixed interest rate of 8.5%. The line of credit is secured by substantially all of our assets, except that the collateral specifically excludes any rights that we may have as a result of our license agreement with Abbott for cethromycin, and is further secured by 2.5 million shares of our common stock held by ALS Ventures, LLC.  The credit agreement contains a material adverse change clause, which is subject to the judgment of the lender and, if triggered, can accelerate the payment of the debt. The terms also include a covenant limiting the use of the SEDA to $9.0 million without the bank’s consent.   We issued warrants for the purchase of 65,000 shares of common stock at an exercise price of $1.00 per share to the lender as a closing fee. The warrants became exercisable upon issuance and will expire five years from the date of the grant.  We borrowed $6.0 million on our new line of credit in October 2008, to partially fund the Abbott milestone payment made in October.  The table above reflects our existing line of credit as of September 30, 2008.

In October 2008, we made a $10.0 million milestone payment to Abbott triggered by our NDA submission for cethromycin. The above table does not include the potential $30.0 million product based milestone payment under our license agreement with Abbott which we will owe Abbott if and when the FDA approves the NDA, which we estimate will occur in 2009.   Thereafter, we would owe Abbott an additional $2.5 million upon reaching $200.0 million in aggregate net sales of cethromycin and $5.0 million upon reaching $400.0 million in aggregate net sales.  The periods in which milestone obligations become payable, if at all, are only estimates due to uncertainties associated with the completion of the clinical studies and related regulatory filings.

In the first ten months of 2008 we executed cethromycin development-related contracts totaling $1.5 million.  Of the total contracts executed, $0.8 million related to the compilation of our cethromycin NDA and NDA directed studies, $0.6 million related to process optimization of our commercial manufacturing program, and $0.1 million related to the development of an intravenous formulation for cethromycin.

In the third quarter of 2008, we entered into contracts totaling $4.4 million related to the commercialization and marketing of cethromycin.  This includes a letter of intent for the procurement and synthesis of raw materials to be used in the commercial scale production of cethromycin.    The lead time for acquiring these raw materials is expected to be six to eight months, therefore we do not expect cash payment associated with this agreement to be made until the second quarter of 2009.  The cost of these raw materials are subject to changes in the Euro/US Dollar exchange rate. The hypothetical cost of these raw materials (reflected in the table above) at September 30, 2008 was $3.9 million.  The remaining $0.5 million of contracts executed related to the marketing of cethromycin.

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We also executed a contract during the second quarter to initiate a Phase I/II clinical trial of our anti-melanoma compound ALS-357.  This trial will assess the safety, tolerability, and preliminary efficacy of ALS-357 when administered topically to patients with cutaneous metastatic melanoma.  The contract totals approximately $0.9 million which represents the upper limit of cost if the maximum number of patients is enrolled.  To the extent fewer patients are required as determined by the protocol; expenses related to the trial could be lower.  Enrollment will be based upon a number of factors which are difficult to forecast and therefore we cannot reasonably estimate the true cost of the trial beyond what is defined as the maximum limit per the contract.

Our commitments under operating leases consist of payments made to a related party relating to our facility lease in Woodridge, Illinois, which expired in September of 2008.  We are currently in negotiations with our current landlord to renew the lease and therefore have not reflected any lease commitments as of September 30, 2008.  Following the expiration of the lease in September, we are making payments equal to our last payment under the previous agreement.

In conjunction with the grant awarded by the DTRA, we entered into subcontractor arrangements to further study cethromycin as a potential broad-spectrum medical countermeasure.  These costs, which are not included in the table above, are expected to be approximately $1.5 million over a nine-month base period and $1.6 million for an option period that would extend the arrangements for an additional 15 months.  The subcontractor arrangements were entered into in the fourth quarter of 2008.

In October 2008, we restructured our line of credit in order to increase the amount available under the facility.  We also borrowed $6.0 million on our new line of credit in October 2008.  This, along with existing cash resources funded the $10.0 million milestone payment to Abbott made in October 2008, triggered upon submission of the cethromycin NDA to the FDA. We believe our current cash and cash equivalents are sufficient to fund our existing and anticipated development commitments, indebtedness and general operating expenses through the end of 2008.  We will not be generating any product-based revenues or realizing cash flows from operations in the near term, if at all, and may not have sufficient cash or other funding available to complete our anticipated business activities during 2009. In order to address our working capital shortfall we intend to raise additional capital by licensing our lead compound, cethromycin, to commercial partners.  We believe, based upon current market conditions, additional commercial partnership agreements would include a series of milestone payments, including up-front milestones that would fund our continued operations.  Although management believes we could secure additional commercial partnerships, there can be no assurances that such partnerships will be available at terms acceptable to us, if at all.   In addition, we have executed a SEDA which provides for the sale of up to $15.0 million of our common stock to an accredited investor, YA, subject to certain terms and conditions (See Note 2 of the consolidated financial statements).  If we raise additional capital by issuing equity securities, our shareholders could experience substantial dilution.  As a result of these uncertainties, there is significant doubt about our ability to continue as a going concern.

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Our future capital uses and requirements depend on numerous forward-looking factors.  These factors include, but are not limited to, the following:

·progress in our clinical development programs, as well as the magnitude of these programs;

·the timing, receipt and amount of milestone and other payments, if any, from present and future collaborators;

·our ability to raise additional debt or equity financing or the receipt of milestone payments that would be paid to us as a result of our entering into a commercial partnership for cethromycin, or a combination of both;

·our ability to establish and maintain additional collaborative arrangements;

·the resources, time and costs required to successfully initiate and complete our preclinical and clinical trials, obtain regulatory approvals, protect our intellectual property and obtain and maintain licenses to third-party intellectual property;

·the cost of preparing, filing, prosecuting, maintaining and enforcing patent claims; and

·the timing, receipt and amount of sales and royalties, if any, from our potential products.

If, at any time, our prospects for financing our clinical development programs are limited, we may decide to reduce research and development expenses by delaying or discontinuing certain programs.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities.  We review our estimates on an ongoing basis.  We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.  Actual results may differ from these estimates under different assumptions or conditions.  While our significant accounting policies are described in more detail in the notes to our financial statements included in this quarterly report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements.

Research and Development

Research and development expenses consist of internal research costs and fees paid for contract research in conjunction with the research and development of our proprietary product portfolio.  All such costs are expensed as incurred.  Clinical trial costs incurred by third parties are expensed as the contracted work is performed.  We estimate both the total cost and time period of the trials and the percent completed as of that accounting date.  We believe that the estimates made as of September 30, 2008 are reflective of the actual expenses incurred as of that date.

Stock-based Compensation

We account for stock-based awards to employees and non-employees using the accounting provisions of Statement of Financial Accounting Standards No. 123(R) Share-Based Payments which provides for the use of the fair value based method to determine compensation for all arrangements where shares of stock or equity instruments are issued for compensation.  We use a Black-Scholes options-pricing model to determine the fair value of each option grant as of the date of grant for expense incurred.  The Black-Scholes model requires inputs for risk-free interest rate, dividend yield, volatility and expected lives of the options.  Expected volatility is based on historical volatility of our stock since August 5, 2005, the date our stock began to trade publicly.  The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.  The expected lives for options granted represents the period of time that options granted are expected to be outstanding and is derived from the contractual terms of the options granted.  We estimate future forfeitures of options based upon historical forfeiture rates.

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Forward-Looking Statements and Risk Factors

This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.   Forward-looking statements often are proceeded by words such as “believes,” “expects,” “may,” “anticipates,” “plans,” “intends,” “assumes,” “will” or similar expressions.  Forward-looking statements reflect management’s current expectations, as of the date of this report, and involve certain risks and uncertainties.   Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors.   Some of the factors that could cause future results to materially differ from the recent results or those projected in forward-looking statements include the “Risk Factors” described in our Annual Report on Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk is currently confined to our cash, cash equivalents, line of credit and certain contract manufacturing agreements. We currently do not hedge interest rate exposure. We have not used derivative financial instruments for speculation or trading purposes. Because of the short-term maturities of our cash and cash equivalents, we do not believe that an increase in market rates would have any significant impact on their realized value.

Our most liquid assets are cash and cash equivalents. Because of their liquidity, these assets are not directly affected by inflation. We also believe that we have intangible assets in the value of our intellectual property. In accordance with generally accepted accounting principles, we have not capitalized the value of this intellectual property on our balance sheet. Due to the nature of this intellectual property, we believe that these intangible assets are not affected by inflation. Because we intend to retain and continue to use our equipment, furniture and fixtures and leasehold improvements, we believe that the incremental inflation related to replacement costs of such items will not materially affect our operations. However, the rate of inflation affects our expenses, such as those for employee compensation and contract services, which could increase our level of expenses and the rate at which we use our resources.  The fluctuation in the exchange rate between the U.S. Dollar and the Euro could affect amounts due under certain contract manufacturing agreements.  A hypothetical increase in the exchange rate between the Euro and the U.S. Dollar as of September 30, 2008 of ten percent, would increase contract manufacturing costs $391,000.

Item 4. Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report.  Based on that evaluation, our CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control

During the period covered by this report, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1A. Risk Factors

Our business, financial condition, operating results and cash flows may be impacted by a number of factors, including those set forth in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.  Set forth below are material changes in our risk factors since the 2007 Form 10-K.  The information presented below updates, and should be read in conjunction with, the risk factors and other information disclosed in our 2007 Form 10-K and this Quarterly Report on Form 10-Q.

We may not be able to continue as a going concern or fund our existing capital needs.

Our independent registered public accounting firm included an explanatory paragraph in the report on our 2007 financial statements related to the uncertainty in our ability to continue as a going concern.  The paragraph stated that we do not have sufficient cash on-hand or other funding available to meet our obligations and sustain our operations, which raises substantial doubt about our ability to continue as a going concern.   We currently believe that our current cash and cash equivalents are only sufficient to fund our existing and anticipated development commitments, indebtedness and general operating expenses through the end of 2008.  We will not be generating any product-based revenues or realizing cash flows from operations in the near term, if at all, and may not have sufficient cash or other funding available to complete our anticipated business activities during 2009.  In order to address our working capital shortfall we intend to raise additional capital by licensing our lead compound, cethromycin, to commercial partners.  There can be no assurances that such partnerships will be available on terms acceptable to us, if at all. 

In order to provide access to needed capital, we executed a Standby Equity Distribution Agreement (“SEDA”) that allows us to sell shares of our common stock to an accredited investor, YA Global Investments, L.P. (“YA”), subject to certain terms and conditions.  Although we have not yet done so, any shares of our common stock that we determine to sell pursuant to the SEDA will have a dilutive impact on our stockholders. The SEDA terms also provide that YA may promptly re-sell the shares we issue to them under the SEDA and such re-sales could cause the market price of our common stock to decline significantly with advances under the SEDA. To the extent of any such decline, any subsequent advances would require us to issue a greater number of shares of common stock to YA in exchange for each dollar of the advance. Under these circumstances our existing stockholders would experience greater dilution. The sale of our common stock under the SEDA could encourage short sales by third parties, which could contribute to the further decline of our stock price.  There can be no assurance that we will be able to obtain adequate capital funding in the future, under the SEDA or otherwise, to continue operations and implement our strategy.  As a result of these uncertainties, there is significant doubt about our ability to continue as a going concern.

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Item 6. Exhibits

The following is a list of exhibits filed as part of this Form 10-Q:

Number	Description
3.1	Amended and Restated Certificate of Incorporation of Advanced Life Sciences Holdings, Inc. (as filed in our Registration Statement on Form S-1/A as exhibit 3.2 on July 1, 2005)
3.2	Certificate of Incorporation of Advanced Life Sciences, Inc. (as filed in our Amended Registration Statement on Form S-1/A as exhibit 3.1 on June 3, 2005)
3.3	Amended By-laws of Advanced Life Sciences Holdings, Inc. (as filed in our Annual Report on Form 10-K as exhibit  3.3 on February 19, 2008)
4.1*	Warrant issued to The Leaders Group, Inc. to purchase 65,000 shares of Advanced Life Sciences Holdings Common stock at $1 per share, dated as of October 23, 2008.
10.1*	Amended and Restated Business Loan Agreement between Advanced Life Sciences, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.2*	Amended and Restated Promissory Note between Advanced Life Sciences, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.3*	Commercial Pledge Agreement between Advanced Life Sciences, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.4*	Commercial Guaranty between Advanced Life Sciences Holdings, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.5*	Commercial Security Agreement between Advanced Life Sciences Holdings, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.6*	Amended and Restated Commercial Security Agreement between Advanced Life Sciences, Inc. and The Leaders Bank, dated as of October 23, 2008
10.7*	Intellectual Property Security Agreement between Advanced Life Sciences, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.8*	Commercial Guaranty between Advanced Life Sciences Holdings Inc. and The Leaders Bank, dated as of October 23, 2008.
10.9*	Amended and Restated Commercial Pledge Agreement between ALS Ventures, LLC, Advanced Life Sciences, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.10*	Agreement to Provide Insurance between Advanced Life Sciences, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.11*+	Development and Commercialization Agreement by and between Wyeth acting through its Wyeth Pharmaceuticals Division and Advanced Life Sciences Holdings, Inc., dated as of September 23, 2008.
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*  Filed herewith.

+  Certain information in this exhibit has been omitted and filed separately with the SEC pursuant to a confidential treatment request under Rule 24b-2 of the Exchange Act. Omitted portions are indicated in this exhibit with [***].

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Advanced Life Sciences Holdings, Inc.
By:	/s/ Michael T. Flavin, Ph.D.
	Michael T. Flavin, Ph.D.
	Chairman of the Board
	and Chief Executive Officer
By:	/s/ John L. Flavin
	John L. Flavin
	President and
	Chief Financial Officer

Dated: November 6, 2008

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EXHIBIT INDEX

Number	Description
3.1	Amended and Restated Certificate of Incorporation of Advanced Life Sciences Holdings, Inc. (as filed in our Registration Statement on Form S-1/A as exhibit 3.2 on July 1, 2005)
3.2	Certificate of Incorporation of Advanced Life Sciences, Inc. (as filed in our Amended Registration Statement on Form S-1/A as exhibit 3.1 on June 3, 2005)
3.3	Amended By-laws of Advanced Life Sciences Holdings, Inc. (as filed in our Annual Report on Form 10-K as exhibit 3.3 on February 19, 2008)
4.1*	Warrant issued to The Leaders Group, Inc. to purchase 65,000 shares of Advanced Life Sciences Holdings Common stock at $1 per share, dated as of October 23, 2008.
10.1*	Amended and Restated Business Loan Agreement between Advanced Life Sciences, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.2*	Amended and Restated Promissory Note between Advanced Life Sciences, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.3*	Commercial Pledge Agreement between Advanced Life Sciences, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.4*	Commercial Guaranty between Advanced Life Sciences Holdings, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.5*	Commercial Security Agreement between Advanced Life Sciences Holdings, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.6*	Amended and Restated Commercial Security Agreement between Advanced Life Sciences, Inc. and The Leaders Bank, dated as of October 23, 2008
10.7*	Intellectual Property Security Agreement between Advanced Life Sciences, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.8*	Commercial Guaranty between Advanced Life Sciences Holdings Inc. and The Leaders Bank, dated as of October 23, 2008.
10.9*	Amended and Restated Commercial Pledge Agreement between ALS Ventures, LLC, Advanced Life Sciences, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.10*	Agreement to Provide Insurance between Advanced Life Sciences, Inc. and The Leaders Bank, dated as of October 23, 2008.
10.11*+	Development and Commercialization Agreement by and between Wyeth acting through its Wyeth Pharmaceuticals Division and Advanced Life Sciences Holdings, Inc., dated as of September 23, 2008.
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*  Filed herewith.

+  Certain information in this exhibit has been omitted and filed separately with the SEC pursuant to a confidential treatment request under Rule 24b-2 of the Exchange Act. Omitted portions are indicated in this exhibit with [***].

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EX-4.1

Exhibit 4.1

THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OFFERED FOR SALE UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

Dated: October 23, 2008

WARRANT

To Purchase 65,000 Shares of  Common Stock

of ADVANCED LIFE SCIENCES HOLDINGS, INC.

Expiring October 23, 2013

THIS TO CERTIFY THAT, for value received, THE LEADERS GROUP, INC., an Illinois corporation or any registered assigns (“Holder”) is entitled to purchase from ADVANCED LIFE SCIENCES HOLDINGS, INC., a Delaware corporation (the “Company”), at any time or from time to time after 9:00 a.m., Chicago time, on the date hereof and prior to 5:00 p.m., Chicago time, on October 23, 2013, at the place where the Warrant Agency is located, at the Exercise Price, the number of shares of Common Stock, par value $.01 per share, of the Company (the “Common Stock”) shown above, subject to adjustment as provided in Articles IV and V hereof, and upon the terms and conditions hereinafter provided, and is entitled also to exercise the other appurtenant rights, powers and privileges hereinafter described.

This Warrant entitles the holder initially to purchase up to an aggregate of 65,000 shares of Common Stock.  This Warrant has been issued by the Company pursuant to the Amended and Restated Business Loan Agreement dated as of October 23, 2008 (as amended from time to time, the “Loan Agreement”) between the Company and Holder, in consideration of a loan to the Company by the Holder.  The Holder is entitled to certain benefits as set forth therein.  The Company shall keep a copy of the Loan Agreement, and any amendments thereto, at the Warrant Agency, and shall furnish, without charge, copies thereof to the Holder upon request.

Certain terms used in this Warrant are defined in Article VI.

ARTICLE I

EXERCISE OF WARRANTS

I.1.Method of Exercise.  To exercise this Warrant in whole or in part, the Holder shall deliver on any Business Day to the Company at the Warrant Agency (a) this Warrant, (b) a written notice of the Holder’s election to exercise this Warrant, which notice shall specify the number of shares of Common Stock to be purchased (which shall be a whole number of shares if for less than all the shares then issuable hereunder), the denominations of the share certificate or

certificates desired and the name or names in which such certificates are to be registered, and (c) payment of the Exercise Price with respect to such shares.  Such payment may be made by cash, certified or bank cashier’s check or wire transfer in an amount equal to the product of (i) the Exercise Price times (ii) the number of Warrant Shares as to which this Warrant is being exercised.

The Company shall, as promptly as practicable and in any event within seven days after receipt of such notice and payment, execute and deliver or cause to be executed and delivered, in accordance with such notice, a certificate or certificates representing the aggregate number of shares of Common Stock specified in said notice together with cash in lieu of any fractions of a share as provided in Section 1.3.  The share certificate or certificates so delivered shall be in such denominations as may be specified in such notice, and shall be issued in the name of the Holder or such other name or names as shall be designated in such notice.  This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and such Holder or any other Person so designated to be named therein shall be deemed for all purposes to have become a holder of record of shares, as of the date the aforementioned notice and payment is received by the Company.  If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of such certificate or certificates, deliver to the Holder a new Warrant evidencing the right to purchase the remaining shares of Common Stock called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant, or, at the request of the Holder, appropriate notation may be made on this Warrant which shall then be returned to the Holder.  The Company shall pay all expenses, taxes and other charges payable in connection with the preparation, issuance and delivery of share certificates and new Warrants, except that, if share certificates or new Warrants shall be registered in a name or names other than the name of the Holder, funds sufficient to pay all transfer taxes payable as a result of such transfer shall be paid by the Holder at the time of delivery of the aforementioned notice of exercise or promptly upon receipt of a written request of the Company for payment.

I.2.Shares to be Fully Paid and Nonassessable.  All shares of Common Stock issued upon the exercise of this Warrant shall be validly issued, fully paid and nonassessable.

I.3.No Fractional Shares Required to be Issued.  The Company shall not be required to issue fractions of shares of Common Stock upon exercise of this Warrant.  If any fraction of a share would, but for this Section, be issuable upon final exercise of this Warrant, in lieu of such fractional share, the Company shall pay to the Holder in cash an amount equal to the same fraction of the Fair Market Value of the Company per share of outstanding Common Stock on the Business Day immediately prior to the date of such exercise.

I.4.Legend.  Each certificate for shares of Common Stock issued upon exercise of this Warrant, unless at the time of exercise such shares are registered under the Securities Act, shall bear the following legend:

“This security has not been registered under the Securities Act of 1933 and may not be sold or offered for sale unless registered under said Act and any applicable state securities laws or unless an exemption from such registration is available.”

2

Any certificate issued at any time in exchange or substitution for any certificate bearing such legend (except a new certificate issued upon completion of a public offering pursuant to a registration statement under the Securities Act) shall also bear such legend unless, in the opinion of counsel selected by the Holder of such certificate (who may be an employee of such holder) and reasonably acceptable to the Company, the securities represented thereby need no longer be subject to restrictions on resale under the Securities Act.

I.5.Reservation.  The Company has duly reserved, and will keep available for issuance upon exercise of the Warrants, the total number of Warrant Shares deliverable from time to time upon exercise of all Warrants from time to time outstanding.  The Company will not take any actions during the term of this Warrant that would result in any adjustment of the number of shares of Common Stock issuable upon the exercise of the Warrant if (i) the total number of shares of Common Stock issuable after such action upon exercise of this Warrant, (ii) all shares of Common Stock issued and outstanding and (iii) all shares then issuable (y) upon the exercise of all Options and (z) upon the conversion or exchange of all Convertible Securities, would exceed the total number of shares of Common Stock then authorized for issuance by the Company.  The Company will not change the Common Stock from par value $.01 per share to any higher par value which exceeds the Exercise Price then in effect, and will reduce the par value of the Common Stock upon any event described in Article IV that provides for an increase in the number of shares of Common Stock subject to purchase upon exercise of this Warrant, in inverse proportion to and effective at the same time as such number of shares is increased.  As of the date hereof, the Company had outstanding (i) 40,805,932 shares of Common Stock, (ii) [11,347,648] Options to purchase Common Stock, and no other shares of capital stock or any securities convertible into or exchangeable for shares of capital stock or any rights, options or warrants to purchase any shares of capital stock or any securities convertible into or exchangeable for shares of capital stock.  Neither the issuance of this Warrant nor the issuance of Warrant Shares upon exercise of this Warrant violates or conflicts with the Company’s certificate of incorporation or bylaws or any agreement to which the Company is a party.

ARTICLE II

WARRANT AGENCY;

TRANSFER, EXCHANGE AND REPLACEMENT OF WARRANTS

II.1.Warrant Agency.  As long as any Warrant remains outstanding, the Company shall perform the obligations of and be the warrant agency with respect to the Warrants (the “Warrant Agency”) at its address set forth in the Loan Agreement or at such other address as the Company shall specify by notice to the Holder.

II.2.Ownership of Warrant.  The Company may deem and treat the person in whose name this Warrant is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by any person other than the Company) for all purposes and shall not be affected by any notice to the contrary, until due presentment of this Warrant for registration of transfer as provided in this Article II.

II.3.Transfer of Warrant.  The Company agrees to maintain at the Warrant Agency books for the registration of transfers of the Warrants, and transfer of this Warrant and all rights

3

hereunder shall be registered, in whole or in part, on such books, upon surrender of this Warrant at the Warrant Agency, together with a written assignment of this Warrant duly executed by the Holder or its duly authorized agent or attorney, with (if the Holder is a natural person) signatures guaranteed by a bank or trust company or a registered broker or dealer, and funds sufficient to pay any transfer taxes payable upon such transfer.  Upon surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in the instrument of assignment (which shall be whole numbers of shares only) and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be canceled.

II.4.Division or Combination of Warrants.  This Warrant may be divided or combined with other Warrants upon presentment hereof and of any Warrant or Warrants with which this Warrant is to be combined at the Warrant Agency, together with a written notice specifying the names and denominations (which shall be whole numbers of shares only) in which the new Warrant or Warrants are to be issued, signed by the holders hereof and thereof or their respective duly authorized agents or attorneys.  Subject to compliance with Section 2.3 as to any transfer or assignment which may be involved in the division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

II.5.Loss, Theft, Destruction of Warrant Certificates.  Upon receipt of evidence satisfactory to the Company of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to the Company (it being understood and agreed that if the holder of such Warrant is Leaders Bank, then a written agreement of indemnity given by Leaders Bank alone shall be satisfactory to the Company and no further security shall be required) or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of shares of Common Stock.

II.6.Expenses of Delivery of Warrants.  The Company shall pay all expenses, taxes (other than transfer taxes) and other charges payable in connection with the preparation, issuance and delivery of Warrants hereunder.

ARTICLE III

CERTAIN RIGHTS

III.1.Determination of Fair Market Value.  Each determination of Fair Market Value hereunder shall be made in good faith by the Company.  Upon each determination of Fair Market Value by the Company hereunder, the Company shall promptly give notice thereof to the Holder, setting forth in reasonable detail the calculation of such Fair Market Value and the method and basis of determination thereof (the “Company Determination”).

III.2.Financial Statements and Other Information.  Promptly upon transmission thereof, to the extent required under the Loan Agreement, the Company will deliver to the

4

Holder copies of any and all financial statements, proxy statements, notices and other reports as it may send to its public stockholders and copies of all registration statements and all reports which it files with the Securities and Exchange Commission (or any governmental body or agency succeeding to its functions).

ARTICLE IV

ANTIDILUTION PROVISIONS

IV.1.General.  The Exercise Price and the number of shares of Common Stock (or other securities or property) issuable upon exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events as provided in this Article IV; provided that notwithstanding anything to the contrary herein, the Exercise Price shall not be less than the par value of the Common Stock, as such par value is reduced from time to time in accordance with Section 1.5.

IV.2.Common Stock Reorganization.  If the Company shall subdivide its outstanding shares of Common Stock (or any class thereof) into a greater number of shares or consolidate its outstanding shares of Common Stock (or any class thereof) into a smaller number of shares (any such event being called a “Common Stock Reorganization”), then (a) the Exercise Price shall be adjusted, effective immediately after the effective date of such Common Stock Reorganization, to a price determined by multiplying the Exercise Price in effect immediately prior to such effective date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such effective date before giving effect to such Common Stock Reorganization and the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such Common Stock Reorganization, and (b) the number of shares of Common Stock subject to purchase upon exercise of this Warrant shall be adjusted, effective at such time, to a number determined by multiplying the number of shares of Common Stock subject to purchase immediately before such Common Stock Reorganization by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding after giving effect to such Common Stock Reorganization and the denominator of which shall be the number of shares of Common Stock outstanding immediately before such Common Stock Reorganization.

IV.3.Common Stock Distribution.  (a) If the Company shall issue, sell or otherwise distribute any shares of Common Stock, other than pursuant to this Agreement or a Common Stock Reorganization (which is governed by Section 4.2 hereof) (any such event, including any event described in paragraphs (b) and (c) below, being herein called a “Common Stock Distribution”), for a consideration per share less than the Fair Market Value of the Company per share of outstanding Common Stock on a Fully Diluted Basis on the date of such Common Stock Distribution (before giving effect to such Common Stock Distribution), then, effective upon such Common Stock Distribution, the Exercise Price shall be reduced, if such consideration per share shall be less than such Fair Market Value per share, to the lowest of the prices (calculated to the nearest one thousandth of one cent) determined as provided in clauses (i), (ii) and (iii) below:

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(i)if the Company shall receive any consideration for the Common Stock issued, sold or distributed, in such Common Stock Distribution, the consideration per share of Common Stock received by the Company upon such issue, sale or distribution;

(ii)by dividing (A) an amount equal to the sum of (1) the number of shares of Common Stock outstanding immediately prior to such Common Stock Distribution multiplied by the then existing Exercise Price, plus (2) the consideration, if any, received by the Company upon such Common Stock Distribution by (B) the total number of shares of Common Stock outstanding immediately after such Common Stock Distribution; and

(iii)by multiplying the Exercise Price in effect immediately prior to such Common Stock Distribution by a fraction, the numerator of which shall be the sum of (A) the number of shares of Common Stock outstanding immediately prior to such Common Stock Distribution multiplied by such Fair Market Value per share on the date of such Common Stock Distribution, plus (B) the consideration, if any, received by the Company upon such Common Stock Distribution, and the denominator of which shall be the product of (1) the total number of shares of Common Stock outstanding immediately after such Common Stock Distribution multiplied by (2) such Fair Market Value per share on the date of such Common Stock Distribution.

If any Common Stock Distribution shall require an adjustment to the Exercise Price pursuant to the foregoing provisions of this paragraph (a), including by operation of paragraph (b) or (c) below, then, effective at the time such adjustment is made, the number of shares of Common Stock subject to purchase upon exercise of this Warrant shall be increased to a number determined by multiplying the number of shares of Common Stock subject to purchase immediately before such Common Stock Distribution by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately after giving effect to such Common Stock Distribution and the denominator of which shall be the sum of the number of shares outstanding immediately before giving effect to such Common Stock Distribution (both calculated on a Fully Diluted Basis) plus the number of shares of Common Stock which the aggregate consideration received by the Company with respect to such Common Stock Distribution would purchase at the Fair Market Value of the Company per share of outstanding Common Stock on a Fully Diluted Basis on the date of such Common Stock Distribution (before giving effect to such Common Stock Distribution).  In computing adjustments under this paragraph, fractional interests in Common Stock shall be taken into account to the nearest one-thousandth of a share.

The provisions of this paragraph (a), including by operation of paragraph (b) or (c) below, shall not operate to increase the Exercise Price or reduce the number of shares of Common Stock subject to purchase upon exercise of this Warrant.

(b)If the Company shall issue, sell, distribute or otherwise grant in any manner (including by assumption) any rights to subscribe for or to purchase, or any warrants or options for the purchase of Common Stock or any stock or securities convertible into or exchangeable for Common Stock (such rights, warrants or options being herein called “Options” and such convertible or exchangeable stock or securities being herein called “Convertible Securities’’), whether or not such Options or the rights to convert or exchange any such

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Convertible Securities in respect of such Options are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options or upon conversion or exchange of such Convertible Securities in respect of such Options (determined by dividing (i) the aggregate amount, if any, received or receivable by the Company as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus, in the case of Options to acquire Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issuance or sale of such Convertible Securities and upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options) shall be less than the Fair Market Value of the Company per share of outstanding Common Stock on a Fully Diluted Basis on the date of granting such Options (before giving effect to such grant), then, for purposes of paragraph (a) above, the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued as of the date of granting of such Options and thereafter shall be deemed to be outstanding and the Company shall be deemed to have received as consideration such price per share, determined as provided above, therefor.  Except as otherwise provided in paragraph (d) below, no additional adjustment of the Exercise Price shall be made upon the actual exercise of such Options or upon conversion or exchange of such Convertible Securities.

(c)If the Company shall issue, sell or otherwise distribute (including by assumption) any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (i) the aggregate amount received or receivable by the Company as consideration for the issuance, sale or distribution of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Fair Market Value of the Company per share of outstanding Common Stock on a Fully Diluted Basis on the date of such issuance, sale or distribution (before giving effect to such issuance, sale or distribution) of such Convertible Securities, then, for purposes of paragraph (a) above, the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued as of the date of the issuance, sale or distribution of such Convertible Securities and thereafter shall be deemed to be outstanding and the Company shall be deemed to have received as consideration such price per share, determined as provided above, therefor.  Except as otherwise provided in paragraph (d) below, no additional adjustment of the Exercise Price shall be made upon the actual conversion or exchange of such Convertible Securities.

(d)If (i) the purchase price provided for in any Option referred to in paragraph (b) above or the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in paragraph (b) or (c) above or the rate at which any Convertible Securities referred to in paragraph (b) or (c) above are convertible into or exchangeable for Common Stock shall change at any time (other than under or by reason of

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provisions designed to protect against dilution upon an event which results in a related adjustment pursuant to this Article IV), or (ii) any of such Options or Convertible Securities shall have terminated, lapsed or expired, then the Exercise Price then in effect shall forthwith be readjusted (effective only with respect to any exercise of this Warrant after such readjustment) to the Exercise Price which would then be in effect had the adjustment made upon the issuance, sale, distribution or grant of such Options or Convertible Securities been made based upon such changed purchase price, additional consideration or conversion rate, as the case may be (in the case of any event referred to in clause (i) of this paragraph (d)) or had such adjustment not been made (in the case of any event referred to in clause (ii) of this paragraph (d)).

(e)If the Company shall pay a dividend or make any other distribution upon any capital stock of the Company payable in Common Stock, Options or Convertible Securities, then, for purposes of paragraph (a) above, such Common Stock, Options or Convertible Securities shall be deemed to have been issued or sold without consideration.

IV.4.Special Dividends.  If the Company shall issue or distribute to any holder or holders of shares of Common Stock evidences of indebtedness, any other securities of the Company or any cash, property or other assets (excluding a Common Stock Reorganization or a Common Stock Distribution), whether or not accompanied by a purchase, redemption or other acquisition of shares of Common Stock (any such nonexcluded event being herein called a “Special Dividend”), (a) the Exercise Price shall be decreased, effective immediately after the effective date of such Special Dividend, to a price determined by multiplying the Exercise Price then in effect by a fraction, the numerator of which shall be the Fair Market Value of the Company per share of outstanding Common Stock as of such effective date less any cash and the then Fair Market Value of any evidences of indebtedness, securities or property or other assets issued or distributed in such Special Dividend with respect to one share of Common Stock, and the denominator of which shall be such Fair Market Value per share and (b) the number of shares of Common Stock subject to purchase upon exercise of this Warrant shall be increased to a number determined by multiplying the number of shares of Common Stock subject to purchase immediately before such Special Dividend by a fraction, the numerator of which shall be the Exercise Price in effect immediately before such Special Dividend and the denominator of which shall be the Exercise Price in effect immediately after such Special Dividend.  A reclassification of Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Company to the holders of such Common Stock of such shares of such other class of stock and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as part of such reclassification, a Common Stock Reorganization.

IV.5.Capital Reorganizations.  If there shall be any consolidation or merger to which the Company is a party, other than a consolidation or a merger of which the Company is the continuing corporation and which does not result in any reclassification of, or change (other than a Common Stock Reorganization) in, outstanding shares of Common Stock, or any sale or conveyance of the property of the Company as an entirety or substantially as an entirety, or any recapitalization of the Company (any such event being called a “Capital Reorganization”), then, effective upon the effective date of such Capital Reorganization, the Holder shall no longer have the right to purchase Common Stock, but shall have instead the right to purchase, upon

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exercise of this Warrant, the kind and amount of shares of stock and other securities and property (including cash) which the Holder would have owned or have been entitled to receive pursuant to such Capital Reorganization if this Warrant had been exercised immediately prior to the effective date of such Capital Reorganization.  As a condition to effecting any Capital Reorganization, the Company or the successor or surviving corporation, as the case may be, shall (a) execute and deliver to the Holder and to the Warrant Agency an agreement as to the Holder’s rights in accordance with this Section 4.5, providing, to the extent of any right to purchase equity securities hereunder, for subsequent adjustments as nearly equivalent as may be practicable to the adjustments provided for in this Article IV and (b) provide each Regulation Y Holder with an opinion of counsel reasonably satisfactory to such Regulation Y Holder and such other assurances as any Regulation Y Holder may reasonably request to the effect that the ownership and exercise by any Regulation Y Holder of this Warrant after giving effect to such Capital Reorganization shall not be prohibited by the BHC Act or the regulations thereunder.  The provisions of this Section 4.5 shall similarly apply to successive Capital Reorganizations.

IV.6.Adjustment Rules.  Any adjustments pursuant to this Article IV shall be made successively whenever an event referred to herein occurs, except that, notwithstanding any other provision of this Article IV, no adjustment shall be made to the number of shares of Common Stock to be delivered to the Holder (or to the Exercise Price) if such adjustment represents less than 1% of the number of shares previously required to be so delivered, but any lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which together with any adjustments so carried forward shall amount to 1% or more of the number of shares to be so delivered.  No adjustment shall be made pursuant to this Article IV:  (a) in respect of the issuance from time to time of shares of Common Stock upon the exercise of any Warrants (b) with respect to issuance of shares of Common Stock pursuant to any Public Offering, (c) upon exercise of any of the Options outstanding on the Date of Issuance or with respect to issuance of any additional options to purchase Common Stock to officers, employees and independent directors of the Company (“Additional Options”) (or issuance of Common Stock upon exercise of any such Additional Options), (d) with respect to other rights granted to a Person which is not an Affiliate (as defined in the Loan Agreement) as consideration for the issuance of loans or extensions of credit to the Company as long as the board of directors of the Company has determined in good faith that the total consideration received from such Person is fair value for the loans or extensions of credit received by the Company, provided that the Loan Agreement shall have been terminated and all obligations thereunder paid in full, or (e) with respect to any issuance of shares of Common Stock or Options of the Company in a Third Party Transaction (or issuance of Common Stock upon exercise of such Options).  If the Company takes a record of the holders of its Common Stock for any purpose referred to in this Article IV, then (i) such record date shall be deemed to be the date of the issuance, sale, distribution or grant in question and (ii) if the Company shall legally abandon such action prior to effecting such action, no adjustment shall be made pursuant to this Article IV in respect of such action.

IV.7.Proceedings Prior to Any Action Requiring Adjustment.  As a condition precedent to the taking of any action which would require an adjustment pursuant to this Article IV, the Company shall take any action which may be necessary, including obtaining regulatory approvals or exemptions, in order that (a) the Company may thereafter validly and legally issue as fully paid and nonassessable all shares of Common Stock which the Holder is

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entitled to receive upon exercise of a Warrant and (b) the ownership and exercise of any Warrant by any Regulation Y Holder shall not be prohibited by the BHC Act or the regulations thereunder.

IV.8.Notice of Adjustment.  Not less than 10 nor more than 30 days prior to the record date or effective date, as the case may be, of any action which requires or might require an adjustment or readjustment pursuant to this Article IV, the Company shall give notice to the Holder of such event, describing such event in reasonable detail and specifying the record date or effective date, as the case may be, and, if determinable, the required adjustment and the computation thereof.  If the required adjustment is not determinable at the time of such notice, the Company shall give notice to the Holder of such adjustment and computation promptly after such adjustment becomes determinable.

ARTICLE V

PURCHASE, REDEMPTION AND

CANCELLATION OF WARRANTS

V.1.Purchase of Warrants by the Company.  The Company shall have the right to purchase or otherwise acquire Warrants at such times, in such manner and for such consideration as set forth below.

V.2.Optional Redemption.  At any time and from time to time after the earliest of (a) the third anniversary of the Closing Date (as defined in the Loan Agreement) and (b) at any time after the date on which all outstanding amounts under the Loan Agreement have been paid in full and the Commitments thereunder shall have terminated, the Company shall have the right to redeem all, but not less than all, of the outstanding Warrants at the Optional Redemption Price, determined as of the day preceding the notice of redemption.  Irrevocable notice of such right of redemption shall be given by the Company to the Holder not more than 30 days nor less than 5 days prior to the date scheduled for redemption, stating the date and price, including a reasonably detailed description of the method of calculation thereof, of redemption.  The Holder may exercise Warrants until 5:00 p.m., Chicago time, on the Business Day preceding the date of redemption set forth in a valid notice of redemption, at which time the right to purchase shares of Common Stock theretofore represented by this Warrant shall terminate, and this Warrant shall represent the right of the Holder to receive the Optional Redemption Price from the Company in immediately available funds upon surrender of this Warrant at the Warrant Agency.

V.3.Cancellation of Warrants.  All Warrants purchased, redeemed or otherwise acquired by the Company shall thereupon be canceled and retired.  The Warrant Agency shall cancel any Warrant surrendered for exercise or registration of transfer or exchange and deliver such canceled Warrants to the Company.

V.4.Notice of Refinancing.  The Company shall give notice to the Holder of any intent by the Company to refinance in their entirety the Notes (as defined in the Loan Agreement) not less than 5 days prior to the proposed closing date of such refinancing, setting forth such proposed closing date (such notice, the “Refinancing Notice”).

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ARTICLE VI

DEFINITIONS

The following terms, as used in this Warrant, have the following meanings:

“BHC Act” means the Bank Holding Company Act of 1956, as amended.

“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in Chicago, Illinois are authorized by law to close, unless there has been an offering of Common Stock registered under the Securities Act, in which case “Business Day” means (a) if Common Stock is listed or admitted to trading on a national securities exchange, a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for business or (b) if Common Stock is not so listed or admitted to trading, a day on which the New York Stock Exchange is open for business.

“Capital Reorganization” has the meaning set forth in Section 4.5.

“Common Stock” means the Common Stock, par value $.01 per share, of the Company.

“Closing Price” on any day means (a) if Common Stock is listed or admitted for trading on a national securities exchange, the reported last sales price regular way or, if no such reported sale occurs on such day, the average of the closing bid and asked prices regular way on such day, in each case on the principal national securities exchange on which Common Stock is listed or admitted to trading, or (b) if Common Stock is not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices in the over-the-counter market on such day as reported by NASDAQ or any comparable system or, if not so reported, as reported by any New York Stock Exchange member firm selected by the Company for such purpose.

“Common Stock Distribution” has the meaning set forth in Section 4.3(a).

“Common Stock Reorganization” has the meaning set forth in Section 4.2.

“Company” has the meaning set forth in the first paragraph of this Warrant.

“Company Determination” has the meaning set forth in Section 3.1.

“Convertible Securities” has the meaning set forth in Section 4.3(b).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor Federal statute, and the rules and regulations of the Securities and Exchange Commission (or its successor) thereunder, all as the same shall be in effect at the time.

“Exercise Price” means $1.00 per share of the Common Stock, subject to adjustment pursuant to Article IV.

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“Fair Market Value” as at any date of determination means the Market Price on such date multiplied by the number of shares of Common Stock then outstanding.  Determination of the Fair Market Value of the Company per share of Common Stock, shall be made without giving effect to any discount for (i) minority interests or (ii) the voting status of the Common Stock.

“Fully Diluted Basis” means, with respect to any determination or calculation, that such determination or calculation is performed on a fully diluted basis determined in accordance with generally accepted accounting principles as in effect from time to time.

“Holder” has the meaning set forth in the first paragraph of this Warrant.

“Loan Agreement” has the meaning set forth in the second paragraph of this Warrant.

“Market Price” as at any date of determination means the average of the daily Closing Prices of a share of Common Stock for the shorter of (i) the 20 consecutive Business Days ending on the most recent Business Day prior to the Time of Determination and (ii) the period commencing on the date next succeeding the first public announcement of the issuance, sale, distribution, grant or exercise in question through such most recent Business Day prior to the Time of Determination.  “Time of Determination” means the time and date of the earliest of (x) the determination of the stockholders entitled to receive such issuance, sale, distribution or grant, (y) the determination of the Holders or the Company to exercise their respective rights set forth in Section 5.2 or 5.3 hereof, and (z) the commencement of “ex-dividend” trading in respect thereof.

“NASDAQ” means The National Association of Securities Dealers, Inc. Automated Quotation System.

“Options” has the meaning set forth in Section 4.3(b).

“Optional Redemption Price” means, as of any date of determination, a price for each share of Common Stock issuable upon exercise of the Warrants equal to 105% of the Redemption Price, determined as of such date.

“Person” means any natural person, corporation, limited liability company, limited partnership, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any government agency or political subdivision thereof.

“Redemption Price” means, as of any date of determination, a price for each share of Common Stock issuable upon exercise of the Warrants equal to the excess of (a)(i) the Fair Market Value of the Company plus the aggregate Exercise Price of all Warrants either being redeemed or then outstanding and not being redeemed divided by (ii) the number of shares of Common Stock outstanding on a Fully Diluted Basis over (b) the Exercise Price then in effect.

“Refinancing Notice” has the meaning set forth in Section 5.4 hereof.

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“Regulation Y Holder” means the Holder or a holder of Warrant Shares, if such Holder or holder of Warrant Shares is a bank holding company within the meaning of the BHC Act or a subsidiary thereof subject to Regulation Y under the BHC Act.

“Securities Act” means the Securities Act of 1933, as amended, and any successor Federal statute and the rules and regulations of the Securities and Exchange Commission (or its successors) thereunder, all as the same shall be in effect from time to time.

“Special Dividend” has the meaning set forth in Section 4.4.

“Subsidiary” of any Person means any corporation, partnership, joint venture, association or other business entity of which more than 50% of the total voting power of shares of stock or other interests therein entitled to vote in the election of members of the board of directors, partnership committee, board of managers or trustees or other managerial body thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof.

“Third Party Transaction” shall mean a bona-fide negotiated transaction approved by the Board of Directors of the Company in good faith involving the purchase or sale of assets and/or stock (whether by sale of stock, assets, merger, consolidation, or otherwise) of the Company by another Person or an acquisition by the Company of assets or stock (whether by sale of stock, assets, merger, consolidation, or otherwise) of another Person if such Person is not an Affiliate of the Company.

“Warrant Agency” has the meaning set forth in Section 2.1.

“Warrant Shares” means the shares of Common Stock issuable upon the exercise of the Warrants.

“Warrants” has the meaning set forth in the second paragraph of this Warrant.

All references herein to “days” shall mean calendar days unless otherwise specified.

ARTICLE VII

MISCELLANEOUS

VII.1.Notices.  Notices and other communications provided for herein must be in writing and may be given by mail, courier, confirmed telex or facsimile transmission and shall, unless otherwise expressly required, be deemed given when received or, if mailed, four Business Days after being deposited in the United States mail with postage prepaid and properly addressed.  In the case of the Holder, such notices and communications shall be addressed to its address as shown on the books maintained by the Warrant Agency, unless the Holder shall notify the Warrant Agency that notices and communications should be sent to a different address (or telex or facsimile number), in which case such notices and communications shall be sent to the address (or telex or facsimile number) specified by the Holder.

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VII.2.Waivers; Amendments.  No failure or delay of the Holder in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power.  No notice or demand on the Company in any case shall entitle the Company to any other or future notice or demand in similar or other circumstances.  The rights and remedies of the Holder are cumulative and not exclusive of any rights or remedies which it would otherwise have.  The provisions of this Warrant may be amended, modified or waived with (and only with) the written consent of the Company and the holders of Warrants entitling such holders to purchase a majority of the Common Stock subject to purchase upon exercise of such Warrants at the time outstanding (exclusive of Warrants then owned by the Company or any Subsidiary (as defined in the Loan Agreement) or Affiliate (as defined in the Loan Agreement) thereof); provided, however, that no such amendment, modification or waiver shall, without the written consent of the holders of all Warrants at the time outstanding, (a) change the number of shares of Common Stock subject to purchase upon exercise of this Warrant, the Exercise Price or provisions for payment thereof or (b) amend, modify or waive the provisions of this Section or Article III or IV or Section 1.5, 5.2 or 5.4.  The provisions of the Loan Agreement may be amended, modified or waived only in accordance with the respective provisions thereof.

Any such amendment, modification or waiver effected pursuant to and in accordance with the provisions of this Section or the applicable provisions of the Loan Agreement shall be binding upon the holders of all Warrants and Warrant Shares, upon each future holder thereof and upon the Company.  In the event of any such amendment, modification or waiver, the Company shall give prompt notice thereof to all holders of Warrants and Warrant Shares and, if appropriate, notation thereof shall be made on all Warrants thereafter surrendered for registration of transfer or exchange.

VII.3.GOVERNING LAW.  THIS WARRANT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW).

VII.4.Transfer; Covenants to Bind Successor and Assigns.  All covenants, stipulations, promises and agreements in this Warrant contained by or on behalf of the Company or the Holder shall bind its successors and assigns, whether so expressed or not.  This Warrant shall be transferable and assignable by the Holder hereof in whole or from time to time in part to any other Person and the provisions of this Warrant shall be binding upon and inure to the benefit of the Holder hereof and its successors and assigns.

VII.5.Severability.  In case any one or more of the provisions contained in this Warrant shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.  The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

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VII.6.Section Headings.  The section headings used herein are for convenience of reference only, are not part of this Warrant and are not to affect the construction of or be taken into consideration in interpreting this Warrant.

VII.7.Right to Specific Performance.  The Company acknowledges and agrees that in the event of any breach of the foregoing covenants and agreements, the Holder would be irreparably harmed and could not be made whole only by the award of monetary damages. Accordingly, the Company agrees that the Holder, in addition to any other remedy to which the Holder may be entitled at law or equity, will be entitled to seek and obtain an award of specific performance of any of the foregoing covenants and agreements.

[signature page follows]

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed in its corporate name by one of its officers thereunto duly authorized as of the day and year first above written.

ADVANCED LIFE SCIENCES HOLDINGS, INC.
By:	/s/ Michael T. Flavin
	Michael T. Flavin
	Chairman and Chief Executive Officer

EX-10.1

Exhibit 10.1

AMENDED AND RESTATED BUSINESS LOAN AGREEMENT

Borrower:	Advanced Life Sciences, Inc.	Lender:	The Leaders Bank
	1440 Davey Road		2001 York Road, Suite 150
	Woodridge, IL 60517		Oak Brook, IL 60523

THIS AMENDED AND RESTATED BUSINESS LOAN AGREEMENT, dated October 23, 2008, is made and executed by and between ADVANCED LIFE SCIENCES, INC., an Illinois corporation (“Borrower”) and THE LEADERS BANK (“Lender”).

RECITALS

This Amended and Restated Loan and Security Agreement amends and restates in its entirety that certain Business Loan Agreement, dated April 18, 2006, by and between the Borrower and the Lender.  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.  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.

ACCORDINGLY, in consideration of the mutual covenants and agreements herein contained, Borrower and Lender hereby agree as follows:

AGREEMENT

TERM.  This Agreement shall be effective as of October 23, 2008, 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 Michael J. Cogan.

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 and such documents shall be in full force and effect:  (1) the Note; (2); Parent’s Guaranty (3) Borrower’s Security Agreement; (4) Parent’s Security Agreement; (5) Parent’s Pledge Agreement; (6) ALS Pledge Agreement; (7) Borrower’s Collateral Assignment of Patents; (8) Flavin’s Personal Undertaking; (9) Landlord’s Estoppel Certificate; (10) Borrower’s Agreement to Provide Insurance; (11) Parent’s Agreement to Provide Insurance; (12) financing statements and all other documents perfecting Lender’s Security Interests; and (13) evidence of insurance as required below; 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.  Borrower shall have caused its counsel and counsel to its Parent to deliver an opinion letter with respect to the transactions contemplated herein, in form and substance satisfactory to Lender and Lender’s counsel.

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.  Borrower shall cause Parent to issue to Lender or its designee warrants representing 65,000 shares of Parent’s common stock, in form and substance satisfactory to Lender and Lender’s counsel.

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 (the “Principal Office”).  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.

Ownership.  Borrower owns all of the Borrower’s Collateral clear of all liens, claims, interests and encumbrances (except for Permitted Liens).  Borrower is the owner of all of the Patents and such Patents are all of the patents that are part of Borrower’s business.  Parent does not have any ownership interest in nor contractual or other right to such Patents or any other patents.  Parent owns one hundred percent (100%) of the equity interests of Borrower, and Borrower has not and will not issue any additional capital stock whether pursuant to warrants, options or otherwise.

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 Borrower’s articles of incorporation, bylaws or 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.

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Legal Effect.  This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute, a legal, valid, and binding obligation 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 properly 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; and (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 warranty contained herein are based on Borrower’s due diligence in investigating the Collateral for hazardous waste and Hazardous Substances.  Borrower hereby (i) 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 (ii) 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.   Borrower will not cause nor permit any lien, claim, interest or encumbrance on the Collateral that would adversely affect or take priority over the Lender’s Security Interests.  At all times, Borrower

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shall take all actions necessary to ensure that Lender will have a first priority Security Interest on the 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.

Key Contracts and SEDA.  Borrower has provided to Lender true, correct and complete copies of Borrower’s Key Contracts and the SEDA and, if executed in the future, Borrower will provided to Lender true, correct and complete copies of any amendments, modifications or other changes thereto.  Borrower’s Key Contracts and the SEDA currently are and at all times shall be in full force and effect and Borrower is not in default thereunder.  The funds and proceeds received by the Borrower and/or Parent pursuant to the SEDA may be used to repay the Loans, and such repayment is permitted without restriction or limitation under the terms and conditions of the SEDA.

SEC Reporting.  All of the information and reports filed by the Parent with the United States Securities and Exchange Commission and/or any other governmental authority shall be true and accurate and shall not be misleading in any material respect.  The Parent shall comply with all applicable securities laws and rules.

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 or Parent’s financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower, Parent or any Guarantor which could materially affect the financial condition of Borrower, the financial condition of Parent or the financial condition of 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 and/or Parent’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 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 Parent 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

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such appraisal shall be paid by Borrower.

Other Agreements.  Comply with all terms and conditions of all other agreements in all material respects, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection 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, and 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 of 1990.  Borrower may contest in good faith any such law, ordinance, or 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 sale 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.  (1) Comply in all respects with any and all Environmental Laws; (2) 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; and (3) 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

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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 tile environment and/or other natural resources.

Key Contracts and SEDA.  Will perform its obligations under its Key Contracts, and will promptly notify Lender of any default thereunder whether by Borrower or any other party thereto; and will cause Parent to perform its obligations under the SEDA and will promptly notify Lender of any default thereunder whether by Parent or any other party thereto.

SEC Reporting.  Will cause all of the information and reports filed by the Parent with the United States Securities and Exchange Commission and/or any other governmental authority to be true and accurate and not misleading in any material respect; and will cause the Parent to comply with all applicable securities laws and rules.

Patents.  Will keep in full force and effect its Patents, and will use commercially reasonable efforts to prosecute and defend its rights therender

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, including but not limited to filings required to be made in foreign jurisdictions with respect to the Patents.

LENDER’S EXPENDITURES.  If any action or proceeding is commenced that would materially affect Lender’s Interest in the Collateral or if Borrower falls 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 (1) be payable on demand; (2) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (A) the term of any applicable insurance policy or (B) the remaining term of the Note; or (3) be treated as a balloon payment which will be due and payable at the Note’s maturity.

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 property or assets (except as allowed as Permitted Liens) including but not limited the Key Contracts and Patents, 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

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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.

Key Contracts.  Borrower will not amend, modify, or change in any material respect, or terminate, any Key Contract without the prior written notice to Lender.  In no event shall Borrower assign, transfer, or convey to any party any right, title or interest in the Key Contracts, including any collateral assignment thereof.

SEDA.  Borrower will not amend, modify, or change in any material respect, or terminate the SEDA, nor shall Borrower permit the Parent to draw down more than $9 million in aggregate funds under the SEDA (it being understood that this is intended to maintain availability of at least $6 million under the SEDA at all times).

Distributions and Dividends.  Borrower shall not make distributions and/or dividends to its Parent, nor make other payments to its Parent outside the ordinary course of business.

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 any Advances or to disburse Loan proceeds if: (1) an Event of Default has occurred or the Borrower, Parent or any Guarantor is otherwise in default under the terms of this Agreement, any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (2) Borrower, Parent or any Guarantor dies, becomes incompetent, or becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; or (3) there occurs a material adverse change in Borrower’s financial condition, in the financial condition of Parent or any Guarantor, or in the value of any Collateral securing any loan.

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; provided, 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.

Note Default.  Any Event of Default under the Note or any Related Document.

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 fifteen (15) days.

Default in Favor of Third Parties.  Borrower, Parent 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, Parent’s or any Grantor’s property or

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Borrower’s, Parent’s or any Grantor’s ability to repay the Loans 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 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.  The commencement of foreclosure or forfeiture proceedings against any collateral securing the Loan, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency.  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 Guarantor of any of the Indebtedness, or Guarantor revokes or disputes the validity of, or liability under, the Guaranty.

Change in Ownership.  Any change in ownership of fifty-one percent (51%) or more of the common stock of Borrower or Parent, or any other change in control transaction involving the Borrower or Parent. DISCUSS

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

Key Contracts.  Any default or material breach by any party to a Key Contract, or any amendment, modification or change in any material respect to, or termination of, any Key Contract effectuated without the prior consent of Lender (which consent may be withheld in Lender’s sole and absolute discretion).

SEDA.  Any default or material breach by any party to the SEDA, or any amendment, modification or change to or termination of the SEDA effectuated without the prior consent of Lender (which consent may be withheld in Lender’s sole and absolute discretion).

Flavin’s Personal Undertaking.  Any revocation, termination, invalidity or breach of Flavin’s Personal Undertaking.

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, 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; provided, however, 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

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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 upon any Event of Default.  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 anyone 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 (each, a “Participation Agreement”).  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, subject to the terms and conditions of any Participation Agreement, 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 any additional rights that Lender may have against Borrower, subject to the terms of any Participation 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, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of DuPage County, State of Illinois.

No Waiver by Lender.  Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender.  No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right.  A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Agreement.  No prior waiver by Lender, nor any course of dealing between Lender and 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

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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 facsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement.  Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address.  For notice purposes, 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 lime 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 of the State of Illinois.  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:

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Abbott License Agreement.  The words “Abbott License Agreement” shall mean that certain License Agreement, dated as of December 13, 2004, by and between Abbott Labs and Borrower, as amended and modified from time to time.

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 Amended and Restated Business Loan Agreement, as this Amended and Restated Business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Amended and Restated Business Loan Agreement from time to time.

ALS Pledge Agreement.  The words “ALS Pledge Agreement” mean that certain amended and restated commercial pledge agreement dated as of the date hereof by and between ALS Ventures, LLC and Lender, as amended or modified from time to time.

Borrower.  The word “Borrower” has the meaning set forth in the Preamble to this Agreement.

Borrower’s Agreement to Provide Insurance.  The words “Agreement to Provide Insurance” mean that certain agreement to provide insurance dated as of the date hereof by and between Borrower and Lender, as amended and restated from time to time

Borrower’s Collateral Assignment of Key Contracts.  The words “Borrower’s Collateral Assignment of Key Contracts” mean that certain collateral assignment of key contracts dated as of the date hereof by and between Borrower and Lender, as amended or modified from time to time.

Borrower’s Collateral Assignment of Patents.  The words “Borrower’s Collateral Assignment of Patents” mean that certain collateral assignment of patents dated as of the date hereof by and between Borrower and Lender, as amended or modified from time to time.

Borrower’s Security Agreement.  The words “Borrower Security Agreement” mean that certain amended and restated commercial security agreement dated as of the date hereof by and between Borrower and Lender, as amended or modified from time to time.

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., the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499, 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.

Flavin’s Personal Undertaking.  The words “Flavin’s Personal Undertaking” mean that certain personal undertaking of Dr. Michael Flavin dated as of the date hereof with respect to the SEDA and the

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maintenance of available funds.

GAAP.  The word “GAAP” means generally accepted accounting principles in effect from time to time in the United States, consistently applied.

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” shall mean the Parent pursuant to the Parent’s Guaranty as well as any other party that guarantees the Indebtedness of the Borrower.

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 a 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.

Key Contracts.  The words “Key Contracts” mean the Abbott License Agreement, the Wyeth License Agreement, and the Office Lease.

Landlord.  The word “Landlord” means BioStart Property Group, LLC.

Landlord’s Estoppel Certificate.  The words “Landlord’s Estoppel Certificate” means that certain estoppel certificate dated as of the date hereof executed by the Landlord with respect to the Office Property.

Landlord’s SNDA.  The words “Landlord’s SNDA” mean that certain subordination and non-disturbance agreement dated as of the dated hereof by and between the Landlord, Borrower and Lender.

Lender.  The word “Lender” has the meaning set forth in the Preamble to this Agreement.

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.

Loan Advance or Advance.  The words “Loan Advance” or “Advance” mean any Advance on any Loan.

Note.  The word “Note” means that certain Amended and Restated Promissory Note, dated as of even date herewith executed by Borrower in favor of Lender in the principal amount of $10,000,000.00, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the Note.

Office Lease.  The words “Office Lease” mean that certain lease dated as of July 7, 2003 by and between Landlord and Borrower with respect to the Office Property, as amended or modified from time to time.

Office Property.  The words “Office Property” mean the Borrower’s offices located at 1440 Davey Road, Woodridge, Illinois 60517

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Parent.  The word “Parent” means Advance Life Sciences Holdings, Inc., a Delaware corporation and its successors in interest.

Parent’s Agreement to Provide Insurance.  The words “Parent’s Agreement to Provide Insurance” means that certain agreement to provided insurance dated as of the date hereof by the between the Parent and Lender, as amended or modified from time to time.

Parent’s Guaranty.  The words “Parent’s Guaranty” mean that certain commercial guaranty dated as of the date hereof issued by the Parent in favor of the Lender, as amended or modified from time to time.

Patents.  The word “Patents” means any patent or patent application of Borrower including those patents reference on Schedule A attached hereto.

Parent’s Pledge Agreement.  The words “Parent’s Pledge Agreement” means that certain commercial pledge agreement dated as of the date hereof by and among the Parent, Borrower and Lender, as amended or modified from time to time.

Parent’s Security Agreement.  The words “Parent’s Security Agreement” mean that certain commercial security agreement dated as of the date hereof by and between Parent and Lender, as amended or modified from time to time.

Participation Agreement.  The words “Participation Agreement” have the meaning set forth in the “Consent to Loan Participation” section of this 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.

Principal Office.  The words “Principal Office” has the meaning set forth in the “Organization” 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 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.

SEDA.  The word “SEDA” means that certain Standby Equity Distribution Agreement dated as of

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September 29, 2008 by and between Parent and YA Global Investments, L.P.

Warrants.  The word “Warrants” means those certain warrants to be issued by Parent to Lender or its designee.

Wyeth License Agreement.  The words “Wyeth License Agreement” mean that certain license agreement dated as of September 29, 2008 by and between Wyeth Labs and Borrower, as amended and restated form time to time.

YA Global Investment’s Consent.  The words “YA Global Investment’s Consent and Acknowledgement” means that certain consent and acknowledgement dated as of the date hereof by YA Global Investments, L.P. with respect to the Borrower’s obligation to maintain excess borrowings under the SEDA.

[SIGNATURE PAGE FOLLOWS]

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

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

EX-10.2

Exhibit 10.2

AMENDED AND RESTATED PROMISSORY NOTE

Principal		Loan Date	Maturity	Loan No.	Call/Coll	Account	Officer	Initials
$	10,000,000.00	10-23-2008	01-01-2011	1001234	4A/415		JJP

References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.  Any item above containing “***” has been omitted due to text length limitations.

Borrower:	Advanced Life Sciences, Inc.	Lender:	The Leaders Bank
	1440 Davey Road		2001 York Road, Suite 150
	Woodridge, IL 60517		Oak Brook, IL 60523

Principal Amount: $10,000,000.00 Interest Rate: 8.50% Date of Note: October 23, 2008

RECITALS

This Amended and Restated Promissory Note amends and restates in its entirety that certain Promissory Note, dated January 31, 2008, made by Advanced Life Sciences, Inc. (“Borrower”) in favor of The Leaders Bank (“Lender”), in the original principal amount of Four Million and 00/100 Dollars ($4,000,000.00) (“Original Note”), which Original Note was executed and delivered by Borrower to Lender pursuant to that that certain Business Loan Agreement, dated April 18, 2006, by and between Borrower and Lender (the “Original Loan Agreement”).  The Original Loan Agreement is being amended and restated by that certain Amended and Restated Loan Agreement, dated as of even date herewith (the “Amended Loan Agreement”).  Capitalized words not otherwise defined herein shall have the meaning ascribed to them in the Amended Loan Agreement.

AGREEMENT

PROMISE TO PAY.  Borrower promises to pay Lender, or order, in lawful money of the United States of America, the principal amount of Ten Million & 00/100 Dollars ($10,000,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each Advance.  Interest shall be calculated from the date of each Advance until repayment of each Advance.

PAYMENT.  Borrower shall pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on January 1, 2011.  Until an Event of Default, interest shall accrue on all amounts owned hereunder at the rate of 8.50% per annum.  Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning December 1, 2008, 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.

CREDIT FACILITY.  Lender has approved a Revolving Facility to Borrower in a principal amount not to exceed the face amount of this Note.  The credit facility is in the form of advances made from time to time to Borrower as more particularly described in the Loan Agreement.  This Note evidences the Borrower’s obligation to repay those advances.  The aggregate principal amount of debt evidenced by this Note is the amount reflected from time to time in the records of the Bank but shall not exceed the face amount of this Note.  Until Maturity, the Borrower may borrow, pay down and reborrow under this Note.

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.  In the event 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 ten (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 an Event of Default, including failure to pay upon final maturity, the interest rate on this Note shall be immediately increased by adding a 4.000 percentage point margin to the stated interest rate (“Default Rate”).  Upon an Event of Default, interest shall accrue at the Default Rate on all amounts owed hereunder and shall be immediately due and payable.  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.

Loan Agreement Default.  The occurrence of an Event of Default under the Loan Agreement or any Loan Document.

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 fifteen (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.  The commencement of foreclosure or forfeiture proceedings against any collateral securing the loan, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency.  This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender; provided, however, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity to 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 sale 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 Amended and Restated Commercial Pledge Agreement, dated as of even date herewith, by and among Borrower, Lender and ALS Ventures, LLC.

Events Affecting Guarantor.  Any of the preceding events occurs with respect the Guarantor or any other guarantor, endorser, surety, or accommodation party of any of the indebtedness or the Guarantor or any

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other 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.

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

LENDER’S RIGHTS.  Upon an Event of 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.  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 Note upon any Event of Default.  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.

REMEDIES.  In addition to its rights and remedies provided for herein, Lender shall have all the rights and remedies provided under the Loan Agreement, the other Loan Documents and/or applicable law.  Except as may be prohibited by applicable law, all of Lender’s rights and remedies, whether evidenced by this Note, the Loan Agreement, any of the Loan 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 Borrower, after Borrower’s failure to perform, shall not affect Lender’s right to declare a default and exercise its remedies.

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 DuPage 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 judgment 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; provided, 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

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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 that this Note is secured by the Security Agreement as defined in the Loan Agreement, and any other security, pledge or collateral agreement executed by Borrower or other party for the benefit of Lender.

LINE OF CREDIT.  This Note evidences a revolving line of credit.  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 person or persons 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 such authority:  John L. Flavin, Michael T. Flavin, and Michael Cogan.  Borrower agrees to be liable for all sums either:  (1) advanced in accordance with the instructions of an authorized person or (2) 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 requirements 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 obtain, 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.

RENEWAL AND EXTENSION.  This Note amends and restates, but does not extinguish the indebtedness evidenced by, the Original Note.  The indebtedness evidenced by the Original Note is continuing indebtedness evidenced by this Note, and nothing contained herein shall be deemed to constitute a repayment, settlement or novation of the Original Note, or to release or otherwise adversely affect any lien, mortgage or security interest securing such indebtedness or any rights of the Lender against any guarantor, surety or other party primarily or secondarily liable for such indebtedness.

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.

NOTIFICATION OF INACCURATE INFORMATION REPORTED TO CONSUMER REPORTING AGENCIES.  Borrower agrees to notify Lender if any information reported by Lender to a consumer reporting agency regarding the account of Borrower is inaccurate.  Borrower’s written notice describing the specific inaccuracy(ies) should be sent to the Lender 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, and 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 slated 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

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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.

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

[SIGNATURE PAGE FOLLOWS]

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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.

EX-10.3

Exhibit 10.3

COMMERCIAL PLEDGE AGREEMENT

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

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

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, the following:

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

In addition, the word “Collateral” includes all of Grantor’s property (however owned), in 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 DESCRIPTION section, whether in the form of a writing, microfilm, microfiche, or electronic media.

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

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 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; provided, however, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law.  Grantor authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this RIGHT OF SETOFF section.

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.  Grantor owns one hundred percent (100%) of the equity interests of the Borrower, and the Borrower has not issued any additional capital stock, including warrants and options to purchase stock, to any other person or entity.

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

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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 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 or any other documents necessary to perfect Lender’s security interest as Lender may desire.

Income and Proceeds from the Collateral.  Lender may receive all Income and Proceeds (including dividends) 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 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 (A) extend time for payment or other performance, (B) grant a renewal or change in terms or conditions, or (C) compromise, compound or release any obligation, with anyone 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 Borrower obtained Borrower’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

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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 rights 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 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 falls to make any payment when due under the Indebtedness.

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

Loan Agreement Default.  The occurrence of an Event of Default under the Loan Agreement or any other

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Loan Document (as defined in the Loan Agreement).

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, Grantor or any guarantor, endorser, surety, or accommodation party of any of the Indebtedness 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 garnishment of any of Borrower’s or Grantor’s accounts, including deposit accounts, with Lender.  However, this Event of Default shall not apply if (A) 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 (B) 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 sale discretion, as being an adequate reserve or bond for the dispute.

Insufficient Market Value of Securities.  [Intentionally Omitted]

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 anyone 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.

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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; provided, 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 malls notice by ordinary mall 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 it is unable to sell the securities in an open market transaction, Grantor agrees that (A) Lender will have no obligation to delay sale until the securities can be registered, and (B) 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 granted under this Agreement and under applicable law, Lender may exercise any or all of the following rights and remedies: (A) register with any issuer or broker or other securities intermediary any of the Collateral consisting of investment property or financial assets (collectively, “Investment Property”) in Lender’s sole name or in the name of Lender’s broker, agent or nominee; (B) 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; (C) 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; (D) execute any such control agreement on Grantor’s behalf and in Grantor’s name, and Grantor 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; (E) exercise any and all rights of Lender under any such control agreement or power of attorney; (F) exercise any voting, conversion, registration, purchase, option, or other rights with respect to any Collateral; (G) 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:

(1)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.

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(2)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.

Additionally, 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 of the State of Illinois (the “UCC”), 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 UCC.

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 UCC, 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 upon any Event of Default.  Lender may hire or pay someone else to help enforce this Agreement, and Grantor shall pay the costs and expenses of such enforcement.  Costs and expenses include Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit, including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services.  Grantor also shall pay all court costs and such additional fees as may be directed by the court.

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

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

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

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 of Lender.

Notices.  Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by facsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States man, 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 currant address.  Unless otherwise provided or required by law, if there are 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.

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

Agreement.  The word “Agreement” means this Commercial Pledge Agreement, as this Commercial Pledge Agreement may be amended or modified from time to time, together with all exhibits and schedule’s 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 the DEFAULT section of this Agreement.

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 Holdings, Inc.

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

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

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hereafter existing, executed In connection with the Indebtedness.

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

[SIGNATURE PAGE FOLLOWS]

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BORROWER AND GRANTOR HAVE READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL PLEDGE AGREEMENT AND AGREE TO ITS TERMS.

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

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

EX-10.4

Exhibit 10.4

COMMERCIAL GUARANTY

Principal		Loan Date	Maturity	Loan No.	Call/Coll	Account	Officer	Initials
$	10,000,000.00	10-23-2008	01-01-2011	1001234	4A/415		JPP

References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.  Any item above containing “***” has been omitted due to text length limitations.

Borrower:	Advanced Life Sciences, Inc.1440 Davey RoadWoodridge, IL 60517	Lender:	THE LEADERS BANK2001 YORK ROAD, SUITE 150OAK BROOK, IL 60523
Guarantor:	Advanced Life Sciences Holdings, Inc.1440 Davey RoadWoodridge, IL 60517

CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE.  For good and valuable consideration, Guarantor absolutely and unconditionally guarantees full and punctual payment and satisfaction of the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrower’s obligations under the Note and the Related Documents.  This Guaranty is being entered into in connection with that certain Amended and Restated Business Loan Agreement, dated as of even date herewith, by and between the Lender and the Borrower, whereby the Lender has agreed to provide a loan of Ten Million Dollars and 00/100 ($10,000,000.00) to Borrower (“Loan Agreement”).  The Guarantor acknowledges and agrees that the Lender would not have entered into the Loan Agreement but for the Guarantor’s agreement to enter into this Guaranty.  This is a guaranty of payment and performance and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has not exhausted Lender’s remedies against anyone else obligated to pay the Indebtedness or against any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness.  Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and will otherwise perform Borrower’s obligations under the Note and Related Documents.  Under this Guaranty, Guarantor’s liability is unlimited and Guarantor’s obligations are continuing.

INDEBTEDNESS.  The word “Indebtedness” as used in this Guaranty means all of the principal amount outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, attorneys’ fees, arising from any and all debts, liabilities and obligations of every nature or form, now existing or hereafter arising or acquired, that Borrower individually or collectively or interchangeably with others, owes or will owe Lender.  “Indebtedness” includes, without limitation, loans, advances, debts, overdraft indebtedness, credit card indebtedness, lease obligations, liabilities and obligations under any interest rate protection agreements or foreign currency exchange agreements or commodity price protection agreements, other obligations, and liabilities of Borrower, and any present or future judgments against Borrower, future advances, loans or transactions that renew, extend, modify, refinance, consolidate or substitute these debts, liabilities and obligations whether:  (1) voluntarily or involuntarily incurred; (2) due or to become due by their terms or acceleration; (3) absolute or contingent; (4) liquidated or unliquidated; (5) determined or undetermined; (6) direct or indirect; (7) primary or secondary in nature or arising from a guaranty or surety; (8) secured or unsecured; (9) joint or several or joint and several; (10) evidenced by a negotiable or non-negotiable instrument or writing; (11) originated by Lender or another or others; (12) barred or unenforceable against Borrower for any reason whatsoever; (13) for any transactions that may be voidable for any reason (such as infancy, insanity, ultra vires or otherwise); and (14) originated then reduced or extinguished and then afterwards increased or reinstated.

If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lender’s rights under all guaranties shall be cumulative.  This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties.  Guarantor’s liability will be Guarantor’s aggregate liability under the terms of this Guaranty and any such other unterminated guaranties.

CONTINUING GUARANTY.  THIS IS A “CONTINUING GUARANTY” UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF THE INDEBTEDNESS OF BORROWER TO LENDER, NOW EXISTING OR HEREAFTER ARISING OR ACQUIRED, ON AN OPEN AND CONTINUING BASIS.  ACCORDINGLY, ANY PAYMENTS MADE ON THE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTOR’S OBLIGATIONS AND LIABILITY UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAY BE A ZERO BALANCE FROM TIME TO TIME.

DURATION OF GUARANTY.  This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all the Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied, and all of Guarantor’s other obligations under this Guaranty shall have been performed in full.  If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing.  Guarantor’s written notice of revocation must be mailed to Lender, by certified mail, at Lender’s address listed above or such other place as Lender may designate in writing.  Written revocation of this Guaranty will apply only to New Indebtedness created after actual receipt by Lender of Guarantor’s written revocation.  For this purpose and without limitation, the term “New Indebtedness” does not include the Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due.  For this purpose and without limitation, “New Indebtedness” does not include all or part of the Indebtedness that is:  (1) incurred by Borrower prior to revocation; (2) incurred under a commitment that became binding before revocation; and (3) incurred under any renewals, extensions, substitutions, and modifications of the Indebtedness.  This Guaranty shall bind Guarantor’s estate as to the Indebtedness created both before and after Guarantor’s death or incapacity, regardless of Lender’s actual notice of Guarantor’s death.  Subject to the foregoing, Guarantor’s executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect.  Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty.  Any revocation Lender receives from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty.  It is anticipated that fluctuations may occur in the aggregate amount of the Indebtedness covered by this Guaranty, and Guarantor specifically acknowledges and agrees that reductions in the amount of the Indebtedness, even to Zero Dollars ($0.00), shall not constitute a termination of this Guaranty.  This Guaranty is binding upon Guarantor and Guarantor’s heirs, successors and assigns so long as any of the Indebtedness remains unpaid and even though the Indebtedness may from time to time be Zero Dollars ($0.00).

GUARANTOR’S AUTHORIZATION TO LENDER.  Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand and without lessening Guarantor’s liability under this Guaranty, from time to time:  (1) prior to revocation as set forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (2) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness (extensions may be repeated and may be for longer than the original loan term); (3) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral; (4) to release, substitute, agree not to sue, or deal with anyone or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (5) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (6) to apply such security and direct the order or manner of sale thereof, including without limitation, any non judicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (7) to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and (8) to assign or transfer this Guaranty in whole or in part.

GUARANTOR’S REPRESENTATIONS AND WARRANTIES.  Guarantor represents and warrants to Lender that (1) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (2) this Guaranty is executed at Borrower’s request and not at the request of Lender; (3) Guarantor has full power, right and authority to enter into this Guaranty; (4) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor

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and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (5) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein; (6) upon Lender’s request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantor’s financial condition as of the dates the financial information is provided; (7) no material adverse change has occurred in Guarantor’s financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantor’s financial condition; (8) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes against Guarantor) is pending or threatened; (9) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (10) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower’s financial condition.  Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no Obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower. Guarantor further represents, warrants and covenants to Lender that all of the information and reports filed by the Guarantor with the United States Securities and Exchange Commission and/or any other governmental authority will be true and accurate and not misleading in any material respect; and that the Guarantor will comply with all applicable securities laws and rules.  Guarantor agrees that all of the Borrower’s representations and warranties set forth in the Loan Agreement shall be incorporated herein as though the Guarantor had expressly made such representations and warranties herein.

GUARANTOR’S WAIVERS.  Except as prohibited by applicable law, Guarantor waives any right to require Lender (1) to continue lending money or to extend other credit to Borrower; (2) to make any presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the Indebtedness or in connection with the creation of new or additional loans or obligations; (3) to resort for payment or to proceed directly or at once against any person, including Borrower or any other guarantor; (4) to proceed directly against or exhaust any collateral held by Lender from Borrower, any other guarantor, or any other person; (5) to give notice of the terms, time, and place of any public or private sale of personal property security held by Lender from Borrower or to comply with any other applicable provisions of the Uniform Commercial Code of the State of Illinois, as amended (“UCC”); (6) to pursue any other remedy within Lender’s power; or (7) to commit any act or omission of any kind, or at any time, with respect to any matter whatsoever.

Guarantor also waives any and all rights or defenses based on suretyship or impairment of collateral including, but not limited to, any rights or defenses arising by reason of (A) any “one action” or “anti-deficiency” law or any other law which may prevent Lender from bringing any action, including a claim for deficiency, against Guarantor, before or after Lender’s commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; (B) any election of remedies by Lender which destroys or otherwise adversely affects Guarantor’s subrogation rights or Guarantor’s rights to proceed against Borrower for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason of any law limiting, qualifying, or discharging the Indebtedness; (C) any disability or other defense of Borrower, of any other guarantor, or of any other person, or by reason of the cessation of Borrower’s liability from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness; (D) any right to claim discharge of the Indebtedness on the basis of unjustified impairment of any collateral for the Indebtedness; (E) any statute of limitations, if at any time any action or suit brought by Lender against Guarantor is commenced, there is outstanding Indebtedness which is not barred by any applicable statute of limitations; or (F) any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness.  If payment is made by Borrower, whether voluntarily or otherwise, or by any third party, on the Indebtedness and thereafter Lender is forced to remit the amount of that payment to Borrower’s trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, the Indebtedness shall be considered unpaid for the purpose of the enforcement of this Guaranty.

Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor, or both.

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GUARANTOR’S UNDERSTANDING WITH RESPECT TO WAIVERS.  Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor’s full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law.  If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.

SUBORDINATION OF BORROWER’S DEBTS TO GUARANTOR.  Guarantor agrees that the Indebtedness, whether now existing or hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent.  Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower.  In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness.  Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided, however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness.  If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender.  Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to time to file financing statements and continuation statements and to execute documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.

CONFESSION OF JUDGMENT.  Guarantor hereby irrevocably authorizes and empowers any attorney-at-law to appear in any court of record and to confess judgment against Guarantor for the unpaid amount of this Guaranty 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 Guaranty, 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. Guarantor 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 Guaranty have been paid in full.  Guarantor hereby waives and releases any and all claims or causes of action which Guarantor might have against any attorney acting under the terms of authority which Guarantor has granted herein arising out of or connected with the confession of judgment hereunder.

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

Amendments.  This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty.  No alteration of or amendment to this Guaranty 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.  Guarantor 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 Guaranty upon any Event of Default.  Lender may hire or pay someone else to help enforce this Guaranty, and Guarantor 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.  Guarantor also shall pay all court costs and such additional fees as may be directed by the court.

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

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Governing Law. This Guaranty 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.

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

Integration.  Guarantor further agrees that (1) Guarantor has read and fully understands the terms of this Guaranty; (2) Guarantor has had the opportunity to be advised by Guarantor’s attorney with respect to this Guaranty; and (3) the Guaranty fully reflects Guarantor’s intentions and parol evidence is not required to interpret the terms of this Guaranty.  Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (including Lender’s attorneys’ fees) suffered or incurred by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of this paragraph.

Interpretation.  In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require, and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words “Borrower” and “Guarantor” respectively shall mean all and anyone or more of them.  The words “Guarantor,” “Borrower,” and “Lender” include the heirs, successors, assigns, and transferees of each of them.  If a court finds that any provision of this Guaranty is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or enforced; therefore, a court will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid or unenforceable.  If any one or more of Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.

Notices.  Any notice required to be given under this Guaranty shall be given in writing, and, except for revocation notices by Guarantor, 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 Guaranty.  All revocation notices by Guarantor shall be in writing and shall be effective upon delivery to Lender as provided in the section of this Guaranty entitled “DURATION OF GUARANTY.”  Any party may change its address for notices under this Guaranty 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, Guarantor agrees to keep Lender informed at all times of Guarantor’s current address.  Unless otherwise provided or required by law, if there is more than one Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all Guarantors.

No Waiver by Lender.  Lender shall not be deemed to have waived any rights under this Guaranty 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.  Any waiver by Lender of a provision of this Guaranty 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 Guaranty.  No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lender’s rights or of any of Guarantor’s obligations as to any future transactions.  Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sale discretion of Lender.

Successors and Assigns.  Subject to any limitations stated in this Guaranty on transfer of Guarantor’s interest, this Guaranty shall be binding upon and inure to the benefit of the parties, their successors and assigns.

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Waive Jury.  Lender and Guarantor hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Guarantor against the other.

THE FOLLOWING NOTICE IS REQUIRED BY ILLINOIS LAW: Unless Guarantor provides Lender with evidence of the insurance coverage required by Guarantor’s agreement with Lender, Lender may purchase Insurance at Guarantor’s expense to protect Lender’s interests in the collateral.  This insurance may, but need not, protect Guarantor’s interests.  The coverage that Lender purchases may not pay any claim that Guarantor makes or any claim that is made against Guarantor in connection with the collateral.  Guarantor may later cancel any insurance purchased by Lender, but only after providing Lender with evidence that Guarantor has obtained insurance as required by their agreement.  If Lender purchases insurance for the collateral, Guarantor 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 Guarantor’s total outstanding balance or obligation.  The costs of the insurance may be more than the cost of insurance Guarantor may be able to obtain on Guarantor’s own.

DEFINITIONS.  The following capitalized words and terms shall have the following meanings when used in this Guaranty.  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 Guaranty shall have the meanings attributed to such terms in the UCC:

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.

Guarantor. The word “Guarantor” means everyone signing this Guaranty, including without limitation Advanced Life Sciences Holdings, Inc., and in each case, any signer’s successors and assigns.

Guaranty.  The word “Guaranty” means this guaranty from Guarantor to Lender.

Indebtedness.  The word “Indebtedness” means Borrower’s indebtedness to Lender as more particularly described in this Guaranty.

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

Note.  The word “Note” means and includes without limitation all of Borrower’s promissory notes and/or credit agreements evidencing Borrower’s loan obligations in favor of Lender, together with all renewals of, extensions of, modifications of, refinancing of, consolidations of and substitutions for promissory notes or credit agreements.

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.

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

[SIGNATURE PAGE FOLLOWS]

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EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS.  IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”.  NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE.  THIS GUARANTY IS DATED OCTOBER 23, 2008.

GUARANTOR:

ADVANCED LIFE SCIENCES HOLDINGS, INC.

By:	/s/ John L. Flavin
	John L. Flavin, President and Chief Financial Officer

[Signature Page to Commercial Guaranty]

EX-10.5

Exhibit 10.5

COMMERCIAL SECURITY AGREEMENT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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of the exact location of the Collateral.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Defective Collateralization.  This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.

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

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

Events Affecting Guarantor.  Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the Indebtedness or guarantor, endorser, surety, or accommodation party dies or becomes incompetent or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.

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

Insecurity.  Lender in good faith believes itself insecure.

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

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

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

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

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

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

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

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

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

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and may be exercised singularly or concurrently.  Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under this Agreement, after Grantor’s failure to perform, shall not affect Lender’s right to declare an Event of Default and exercise its remedies.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Agreement in the DEFAULT section of this Agreement.

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

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

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

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

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

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

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

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

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

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

[Signature Page Follows]

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

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

GRANTOR:
ADVANCED LIFE SCIENCES HOLDINGS, INC.
By:	/s/ John L. Flavin
	John L. Flavin, President and Chief Financial Officer
LENDER:
THE LEADERS BANK
By:	/s/ John Prosia
	John Prosia, Executive Vice President

EX-10.6

Exhibit 10.6

AMENDED AND RESTATED COMMERCIAL SECURITY AGREEMENT

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

THIS AMENDED AND RESTATED COMMERCIAL SECURITY AGREEMENT dated October 23, 2008, is made and executed between Advanced Life Sciences, Inc., an Illinois corporation (“Grantor”) and THE LEADERS BANK (“Lender”).  This Agreement amends and restates in its entirety that certain Commercial Security Agreement, dated April 18, 2006, by and between Grantor and Lender (“Original Security Agreement”).  The security interest evidenced by the Original Security Agreement is a continuing security interest evidenced by this Agreement, and nothing contained herein shall be deemed to constitute a release or otherwise adversely affect any lien, mortgage or security interest represented by the Original Security Agreement.  This Agreement is entered into pursuant to that certain Amended and Restated Business Loan Agreement, dated as of even date herewith, by and between the Grantor and the Lender (“Loan Agreement”), whereby the Lender has agreed to lend Ten Million and 00/100 Dollars ($10,000,000.00) to the Grantor subject to the terms and conditions of the Loan Agreement.

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

COLLATERAL DESCRIPTION.  The word “Collateral” as used in this Agreement means the following described property, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever located, in which Grantor is giving to Lender a security interest for the payment of the Indebtedness and performance of all other obligations 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; all supporting obligations relating to the foregoing property, all whether now existing or hereafter arising, whether now owned or hereafter acquired or whether now or hereafter subject to any rights in the foregoing property; and all products and proceeds (including but not limited to “all insurance payments”) of or relating to the foregoing property.

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

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

jointly with someone else and all accounts Grantor may open in the future; provided, however, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law.  Grantor authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and .setoff rights provided in this paragraph.

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

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

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

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

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

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

Removal of the Collateral.  Except in the ordinary course of Grantor’s business, including the sales of inventory, Grantor shall not remove the Collateral from its existing location without Lender’s prior written

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consent. To the extent that the Collateral consists of vehicles or other tilled property, Grantor shall not take or permit any action which would require application for certificates of title for the vehicles outside the State of Illinois without Lender’s prior written consent.  Grantor shall, whenever requested, advise Lender of the exact location of the Collateral.

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

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

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

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

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

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

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Hazardous Substances.  Grantor represents and warrants that the Collateral never has been and never will be used, so long as this Agreement remains a lien on the Collateral, in violation of any Environmental Laws or for the generation, manufacture, storage, transportation, treatment, disposal, release or threatened release of any Hazardous Substance.  The representations and warranties contained herein are based on Grantor’s due diligence in investigating the Collateral for Hazardous Substances.  Grantor hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Grantor becomes liable for cleanup or other costs under any Environmental Laws, and (2) agrees to indemnify and hold harmless Lender against any and all claims and losses resulting from a breach of this provision of this Agreement.  This obligation to indemnify shall survive the payment of the Indebtedness and the satisfaction of this Agreement.

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

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

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

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

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

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

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

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

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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.

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

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

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

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

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

Defective Collateralization.  This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.

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

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

Events Affecting Guarantor.  Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the Indebtedness or guarantor, endorser, surety, or accommodation party dies or becomes incompetent or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.

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

Insecurity.  Lender in good faith believes itself insecure.

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

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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.

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

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

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

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

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

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

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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 an Event of Default and exercise its remedies.

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

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

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

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

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

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

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

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

Power of Attorney.  Grantor hereby appoints Lender as Grantor’s irrevocable attorney-in-fact for the

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purpose of executing any documents necessary to perfect, amend, or to continue the security interest granted in this Agreement or to demand termination of filings of other secured parties.  Lender may at any tine, and without further authorization from Grantor, file a carbon, photographic or other reproduction of any financing statement or of this Agreement for use as a financing statement.  Grantor will reimburse Lender for all expenses for the perfection and the continuation of the perfection of Lender’s security interest in the Collateral.

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

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

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

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

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

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

Agreement.  The word “Agreement” means this Amended and Restated Commercial Security Agreement, as this Amended and Restated Commercial Security Agreement may be amended or modified from time to tine, together with all exhibits and schedules attached to this Amended and Restated 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 Grantors right, title and interest in and to all the Collateral as described in the COLLATERAL DESCRIPTION section of this Agreement.

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

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

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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 any guaranty from any guarantor, endorser, surety, or accommodation party of any of the Indebtedness to Lender, including without limitation a guaranty of all or part of the Note.

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

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

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

Note.  The word “Note” means the Amended and Restated Promissory Note executed by Grantor in the principal amount of Ten Million and 00/100 Dollars ($10,000,000.00), dated as of even date herewith, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note 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, Joan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness.

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

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

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

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

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

EX-10.7

Exhibit 10.7

INTELLECTUAL PROPERTY SECURITY AGREEMENT

THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT (this “Agreement”), is made and entered into as of October 23, 2008, by ADVANCED LIFE SCIENCES, INC., an Illinois corporation (the “Grantor”), in favor of THE LEADERS BANK (in such capacity, the “Lender”).

RECITALS

A.The Grantor has entered into that certain Amended and Restated Business Loan Agreement dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) with Lender, pursuant to which Lender has agreed to make loans to Grantor and/or its affiliates and pursuant to which certain obligations owed to the Lender are secured.

B.Pursuant to the terms of the Loan Agreement and that certain Amended and Restated Commercial Security Agreement, dated as of even date herewith, by and between the Grantor and the Lender (the “Security Agreement”), Grantor has granted to the Lender a security interest in substantially all the assets of the Grantor, which includes all right, title and interest of the Grantor in, to and under all now owned and hereafter acquired patents, patent applications, patent licenses and all products and proceeds thereof, to secure the payment of all amounts owing by the Grantor under the Loan Agreement.

C.Pursuant to the terms of the Security Agreement, the Grantor is required to execute and deliver this Agreement to the Lender.

In consideration of the mutual agreements set forth herein and in the Loan Agreement, the Grantor does hereby grant to the Lenders a continuing security interest in all of Grantor’s right, title and interest in, to and under the following, whether presently existing or hereafter created or acquired:

(1)each patent and patent application, including, without limitation, each patent and patent application referred to in Schedule 1 attached hereto and incorporated herein, together with any reissues, continuations or extensions thereof and all goodwill associated therewith;

(2)each patent license, including, without limitation, each patent license listed on Schedule 1, together with all goodwill associated therewith;

(3)all products and proceeds of the foregoing, including, without limitation, any claim by the Grantor against third parties for past, present or future infringement of any patent, including, without limitation, any patent referred to in Schedule 1, any patent issued pursuant to a patent application referred to in Schedule 1 and any patent licensed under any patent license listed on Schedule 1, (items 1 through 3 being herein collectively referred to as the “Patent Collateral”).

This security interest is granted in conjunction with the security interests granted to the Lender pursuant to the Loan Agreement and the Security Agreement, and is subject to limitations set

forth therein.  The Grantor hereby acknowledges and affirms that the rights and remedies of the Lender with respect to the security interest in the Patent Collateral made and granted hereby are more fully set forth in the Loan Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein, and Grantor represents, warrants and agrees that it is the exclusive owner of the Patent Collateral free of all encumbrances, security interests, liens and interests of third parties whatsoever (except Lender’s security interest and Authorized Security Interests).  Grantor authorizes Lender to file Uniform Commercial Code financing statements, any amendments thereto, and/or a copy of this Agreement to perfect Lender’s security interest with any and all applicable governmental authorities.  Capitalized terms used but not defined herein have the respective meanings ascribed thereto in the Loan Agreement.

[Signature Page Follows]

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The Grantor has caused this Patent Security Agreement to be duly executed by its duly authorized officer thereunto as of the date first set forth above.

GRANTOR:
ADVANCED LIFE SCIENCES, INC.,
an Illinois corporation
By:	/s/ John L. Flavin
	John L. Flavin, President

Acknowledged and agreed:

LENDER:

THE LEADERS BANK

By:	/s/ John Prosia
	John Prosia, Executive Vice President

[Signature Page to Intellectual Property Security Agreement]

STATE OF ILLINOIS	)
	) ss
COUNTY OF DUPAGE   )

On this 23rd day of October, 2008, before me personally appeared the person whose signature is set forth above, to me known, who, being duly sworn, did depose and say that he is the above-indicated officer of the Grantor, and which executed the above instrument; and that he signed his name thereto by authority of the board of directors or similar governing of said entity.

/s/ Irene M. Driscoll

Notary Public

[Signature Page to Intellectual Property Security Agreement]

SCHEDULE 1

Patents, Patent Applications and Patent Licenses

Patent Number	Patent Application Number	Date Patent Issued	Date of Patent Application
6,677,350	09/667,131	January 13, 2004	September 21, 2000
6,670,383	10/099,726	December 30, 2003	March 15, 2002
6,605,596	10/057,260	August 12, 2003	October 29, 2001
6,399,654	09/060,839	June 4, 2002	April 15, 1998
6,225,481	09/137,767	May 1, 2001	August 21, 1998
6,175,816	09/443,987	January 16, 2001	November 19, 1999
6,044,212	08/862,840	March 28, 2000	May 23, 1997
n/a	11/728,284	n/a	March 23, 2007
n/a	10/765,582	n/a	January 12, 2004
n/a	10/610,290	n/a	June 30, 2003

EX-10.8

Exhibit 10.8

COMMERCIAL GUARANTY

Principal		Loan Date	Maturity	Loan No.	Call/Coll	Account	Officer	Initials
$	10,000,000.00	10-23-2008	01-01-2011	1001234	4A/415		JPP

References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.  Any item above containing “***” has been omitted due to text length limitations.

Borrower:	Advanced Life Sciences, Inc.1440 Davey RoadWoodridge, IL 60517	Lender:	THE LEADERS BANK2001 YORK ROAD, SUITE 150OAK BROOK, IL 60523
Guarantor:	Advanced Life Sciences Holdings, Inc.1440 Davey RoadWoodridge, IL 60517

CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE.  For good and valuable consideration, Guarantor absolutely and unconditionally guarantees full and punctual payment and satisfaction of the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrower’s obligations under the Note and the Related Documents.  This Guaranty is being entered into in connection with that certain Amended and Restated Business Loan Agreement, dated as of even date herewith, by and between the Lender and the Borrower, whereby the Lender has agreed to provide a loan of Ten Million Dollars and 00/100 ($10,000,000.00) to Borrower (“Loan Agreement”).  The Guarantor acknowledges and agrees that the Lender would not have entered into the Loan Agreement but for the Guarantor’s agreement to enter into this Guaranty.  This is a guaranty of payment and performance and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has not exhausted Lender’s remedies against anyone else obligated to pay the Indebtedness or against any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness.  Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and will otherwise perform Borrower’s obligations under the Note and Related Documents.  Under this Guaranty, Guarantor’s liability is unlimited and Guarantor’s obligations are continuing.

INDEBTEDNESS.  The word “Indebtedness” as used in this Guaranty means all of the principal amount outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, attorneys’ fees, arising from any and all debts, liabilities and obligations of every nature or form, now existing or hereafter arising or acquired, that Borrower individually or collectively or interchangeably with others, owes or will owe Lender.  “Indebtedness” includes, without limitation, loans, advances, debts, overdraft indebtedness, credit card indebtedness, lease obligations, liabilities and obligations under any interest rate protection agreements or foreign currency exchange agreements or commodity price protection agreements, other obligations, and liabilities of Borrower, and any present or future judgments against Borrower, future advances, loans or transactions that renew, extend, modify, refinance, consolidate or substitute these debts, liabilities and obligations whether:  (1) voluntarily or involuntarily incurred; (2) due or to become due by their terms or acceleration; (3) absolute or contingent; (4) liquidated or unliquidated; (5) determined or undetermined; (6) direct or indirect; (7) primary or secondary in nature or arising from a guaranty or surety; (8) secured or unsecured; (9) joint or several or joint and several; (10) evidenced by a negotiable or non-negotiable instrument or writing; (11) originated by Lender or another or others; (12) barred or unenforceable against Borrower for any reason whatsoever; (13) for any transactions that may be voidable for any reason (such as infancy, insanity, ultra vires or otherwise); and (14) originated then reduced or extinguished and then afterwards increased or reinstated.

If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lender’s rights under all guaranties shall be cumulative.  This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties.  Guarantor’s liability will be Guarantor’s aggregate liability under the terms of this Guaranty and any such other unterminated guaranties.

CONTINUING GUARANTY.  THIS IS A “CONTINUING GUARANTY” UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF THE INDEBTEDNESS OF BORROWER TO LENDER, NOW EXISTING OR

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HEREAFTER ARISING OR ACQUIRED, ON AN OPEN AND CONTINUING BASIS.  ACCORDINGLY, ANY PAYMENTS MADE ON THE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTOR’S OBLIGATIONS AND LIABILITY UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAY BE A ZERO BALANCE FROM TIME TO TIME.

DURATION OF GUARANTY.  This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all the Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied, and all of Guarantor’s other obligations under this Guaranty shall have been performed in full.  If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing.  Guarantor’s written notice of revocation must be mailed to Lender, by certified mail, at Lender’s address listed above or such other place as Lender may designate in writing.  Written revocation of this Guaranty will apply only to New Indebtedness created after actual receipt by Lender of Guarantor’s written revocation.  For this purpose and without limitation, the term “New Indebtedness” does not include the Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due.  For this purpose and without limitation, “New Indebtedness” does not include all or part of the Indebtedness that is:  (1) incurred by Borrower prior to revocation; (2) incurred under a commitment that became binding before revocation; and (3) incurred under any renewals, extensions, substitutions, and modifications of the Indebtedness.  This Guaranty shall bind Guarantor’s estate as to the Indebtedness created both before and after Guarantor’s death or incapacity, regardless of Lender’s actual notice of Guarantor’s death.  Subject to the foregoing, Guarantor’s executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect.  Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty.  Any revocation Lender receives from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty.  It is anticipated that fluctuations may occur in the aggregate amount of the Indebtedness covered by this Guaranty, and Guarantor specifically acknowledges and agrees that reductions in the amount of the Indebtedness, even to Zero Dollars ($0.00), shall not constitute a termination of this Guaranty.  This Guaranty is binding upon Guarantor and Guarantor’s heirs, successors and assigns so long as any of the Indebtedness remains unpaid and even though the Indebtedness may from time to time be Zero Dollars ($0.00).

GUARANTOR’S AUTHORIZATION TO LENDER.  Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand and without lessening Guarantor’s liability under this Guaranty, from time to time:  (1) prior to revocation as set forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (2) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness (extensions may be repeated and may be for longer than the original loan term); (3) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral; (4) to release, substitute, agree not to sue, or deal with anyone or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (5) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (6) to apply such security and direct the order or manner of sale thereof, including without limitation, any non judicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (7) to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and (8) to assign or transfer this Guaranty in whole or in part.

GUARANTOR’S REPRESENTATIONS AND WARRANTIES.  Guarantor represents and warrants to Lender that (1) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (2) this Guaranty is executed at Borrower’s request and not at the request of Lender; (3) Guarantor has full power, right and authority to enter into this Guaranty; (4) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (5) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein; (6) upon Lender’s

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request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantor’s financial condition as of the dates the financial information is provided; (7) no material adverse change has occurred in Guarantor’s financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantor’s financial condition; (8) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes against Guarantor) is pending or threatened; (9) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (10) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower’s financial condition.  Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no Obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower. Guarantor further represents, warrants and covenants to Lender that all of the information and reports filed by the Guarantor with the United States Securities and Exchange Commission and/or any other governmental authority will be true and accurate and not misleading in any material respect; and that the Guarantor will comply with all applicable securities laws and rules.  Guarantor agrees that all of the Borrower’s representations and warranties set forth in the Loan Agreement shall be incorporated herein as though the Guarantor had expressly made such representations and warranties herein.

GUARANTOR’S WAIVERS.  Except as prohibited by applicable law, Guarantor waives any right to require Lender (1) to continue lending money or to extend other credit to Borrower; (2) to make any presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the Indebtedness or in connection with the creation of new or additional loans or obligations; (3) to resort for payment or to proceed directly or at once against any person, including Borrower or any other guarantor; (4) to proceed directly against or exhaust any collateral held by Lender from Borrower, any other guarantor, or any other person; (5) to give notice of the terms, time, and place of any public or private sale of personal property security held by Lender from Borrower or to comply with any other applicable provisions of the Uniform Commercial Code of the State of Illinois, as amended (“UCC”); (6) to pursue any other remedy within Lender’s power; or (7) to commit any act or omission of any kind, or at any time, with respect to any matter whatsoever.

Guarantor also waives any and all rights or defenses based on suretyship or impairment of collateral including, but not limited to, any rights or defenses arising by reason of (A) any “one action” or “anti-deficiency” law or any other law which may prevent Lender from bringing any action, including a claim for deficiency, against Guarantor, before or after Lender’s commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; (B) any election of remedies by Lender which destroys or otherwise adversely affects Guarantor’s subrogation rights or Guarantor’s rights to proceed against Borrower for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason of any law limiting, qualifying, or discharging the Indebtedness; (C) any disability or other defense of Borrower, of any other guarantor, or of any other person, or by reason of the cessation of Borrower’s liability from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness; (D) any right to claim discharge of the Indebtedness on the basis of unjustified impairment of any collateral for the Indebtedness; (E) any statute of limitations, if at any time any action or suit brought by Lender against Guarantor is commenced, there is outstanding Indebtedness which is not barred by any applicable statute of limitations; or (F) any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness.  If payment is made by Borrower, whether voluntarily or otherwise, or by any third party, on the Indebtedness and thereafter Lender is forced to remit the amount of that payment to Borrower’s trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, the Indebtedness shall be considered unpaid for the purpose of the enforcement of this Guaranty.

Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor, or both.

GUARANTOR’S UNDERSTANDING WITH RESPECT TO WAIVERS.  Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor’s full knowledge of its significance and consequences

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and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law.  If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.

SUBORDINATION OF BORROWER’S DEBTS TO GUARANTOR.  Guarantor agrees that the Indebtedness, whether now existing or hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent.  Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower.  In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness.  Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided, however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness.  If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender.  Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to time to file financing statements and continuation statements and to execute documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.

CONFESSION OF JUDGMENT.  Guarantor hereby irrevocably authorizes and empowers any attorney-at-law to appear in any court of record and to confess judgment against Guarantor for the unpaid amount of this Guaranty 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 Guaranty, 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. Guarantor 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 Guaranty have been paid in full.  Guarantor hereby waives and releases any and all claims or causes of action which Guarantor might have against any attorney acting under the terms of authority which Guarantor has granted herein arising out of or connected with the confession of judgment hereunder.

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

Amendments.  This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty.  No alteration of or amendment to this Guaranty 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.  Guarantor 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 Guaranty upon any Event of Default.  Lender may hire or pay someone else to help enforce this Guaranty, and Guarantor 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.  Guarantor also shall pay all court costs and such additional fees as may be directed by the court.

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

Governing Law. This Guaranty 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.

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

Integration.  Guarantor further agrees that (1) Guarantor has read and fully understands the terms of this Guaranty; (2) Guarantor has had the opportunity to be advised by Guarantor’s attorney with respect to this Guaranty; and (3) the Guaranty fully reflects Guarantor’s intentions and parol evidence is not required to interpret the terms of this Guaranty.  Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (including Lender’s attorneys’ fees) suffered or incurred by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of this paragraph.

Interpretation.  In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require, and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words “Borrower” and “Guarantor” respectively shall mean all and anyone or more of them.  The words “Guarantor,” “Borrower,” and “Lender” include the heirs, successors, assigns, and transferees of each of them.  If a court finds that any provision of this Guaranty is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or enforced; therefore, a court will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid or unenforceable.  If any one or more of Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.

Notices.  Any notice required to be given under this Guaranty shall be given in writing, and, except for revocation notices by Guarantor, 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 Guaranty.  All revocation notices by Guarantor shall be in writing and shall be effective upon delivery to Lender as provided in the section of this Guaranty entitled “DURATION OF GUARANTY.”  Any party may change its address for notices under this Guaranty 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, Guarantor agrees to keep Lender informed at all times of Guarantor’s current address.  Unless otherwise provided or required by law, if there is more than one Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all Guarantors.

No Waiver by Lender.  Lender shall not be deemed to have waived any rights under this Guaranty 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.  Any waiver by Lender of a provision of this Guaranty 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 Guaranty.  No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lender’s rights or of any of Guarantor’s obligations as to any future transactions.  Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sale discretion of Lender.

Successors and Assigns.  Subject to any limitations stated in this Guaranty on transfer of Guarantor’s interest, this Guaranty shall be binding upon and inure to the benefit of the parties, their successors and assigns.

Waive Jury.  Lender and Guarantor hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Guarantor against the other.

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THE FOLLOWING NOTICE IS REQUIRED BY ILLINOIS LAW: Unless Guarantor provides Lender with evidence of the insurance coverage required by Guarantor’s agreement with Lender, Lender may purchase Insurance at Guarantor’s expense to protect Lender’s interests in the collateral.  This insurance may, but need not, protect Guarantor’s interests.  The coverage that Lender purchases may not pay any claim that Guarantor makes or any claim that is made against Guarantor in connection with the collateral.  Guarantor may later cancel any insurance purchased by Lender, but only after providing Lender with evidence that Guarantor has obtained insurance as required by their agreement.  If Lender purchases insurance for the collateral, Guarantor 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 Guarantor’s total outstanding balance or obligation.  The costs of the insurance may be more than the cost of insurance Guarantor may be able to obtain on Guarantor’s own.

DEFINITIONS.  The following capitalized words and terms shall have the following meanings when used in this Guaranty.  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 Guaranty shall have the meanings attributed to such terms in the UCC:

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.

Guarantor. The word “Guarantor” means everyone signing this Guaranty, including without limitation Advanced Life Sciences Holdings, Inc., and in each case, any signer’s successors and assigns.

Guaranty.  The word “Guaranty” means this guaranty from Guarantor to Lender.

Indebtedness.  The word “Indebtedness” means Borrower’s indebtedness to Lender as more particularly described in this Guaranty.

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

Note.  The word “Note” means and includes without limitation all of Borrower’s promissory notes and/or credit agreements evidencing Borrower’s loan obligations in favor of Lender, together with all renewals of, extensions of, modifications of, refinancing of, consolidations of and substitutions for promissory notes or credit agreements.

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.

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

[SIGNATURE PAGE FOLLOWS]

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EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS.  IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”.  NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE.  THIS GUARANTY IS DATED OCTOBER 23, 2008.

GUARANTOR:
ADVANCED LIFE SCIENCES HOLDINGS, INC.
By:	/s/ John L. Flavin
	John L. Flavin, President and CFO

[Signature Page to Commercial Guaranty]

INDIVIDUAL ACKNOWLEDGMENT

STATE OF ILLINOIS	)
	)ss
COUNTY OF DUPAGE	)

On this day before me, the undersigned Notary Public, personally appeared John L. Flavin, to me known to be the individual described in and who executed the Commercial Guaranty, and acknowledged that he or she signed the Guaranty as his or her free and voluntary act and deed, for the uses and purposes therein mentioned.

Given under my hand and official seal this 23rd day of October, 2008.

By	/s/ Irene M. Driscoll	Residing atCook County
Notary Public in and for the State ofIllinois
My commission expiresMay 24, 2010

[Acknowledgment to Commercial Guaranty]

EX-10.9

Exhibit 10.9

AMENDED AND RESTATED COMMERCIAL PLEDGE AGREEMENT

Borrower:	Advanced Life Sciences, Inc. 1440 Davey Road Woodridge, IL 60517	Lender:	THE LEADERS BANK 2001 YORK ROAD, SUITE 150 OAK BROOK, IL  60523
Grantor:	ALS Ventures, LLC 1440 Davey Rd Woodridge, IL 60517

THIS AMENDED AND RESTATED COMMERCIAL PLEDGE AGREEMENT dated October 23, 2008, is made and executed by and among ALS Ventures, LLC, a Delaware limited liability company (“Grantor”), Advanced Life Sciences, Inc., an Illinois corporation (“Borrower”), and THE LEADERS BANK (“Lender”).  This Agreement amends and restates in its entirety that certain Commercial Pledge Agreement, dated April 18, 2006, by and among Grantor, Borrower and Lender (“Original Pledge Agreement”).  The security interest evidenced by the Original Pledge Agreement is a continuing security interest evidenced by this Agreement, and nothing contained herein shall be deemed to constitute a release or otherwise adversely affect any lien, mortgage or security interest represented by the Original Pledge Agreement.  This Agreement is entered into pursuant to that certain Amended and Restated Business Loan Agreement, dated as of even date herewith, by and between the Borrower and the Lender (“Loan Agreement”), whereby the Lender has agreed to lend Ten Million and 00/100 Dollars to the Borrower subject to the terms and conditions of the Loan Agreement.

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, the following:

2,540,000 shares of common stock of Advanced Life Sciences Holdings, Inc., a Delaware corporation.

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 DESCRIPTION section, whether in the form of a writing, microfilm, microfiche, or electronic media.

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

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.

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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 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; provided, however, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law.  Grantor authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this RIGHT OF SETOFF section.

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

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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 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 or any other documents 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 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 (A) extend time for payment or other performance, (B) grant a renewal or change in terms or conditions, or (C) compromise, compound or release any obligation, with anyone 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 Borrower obtained Borrower’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

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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 rights 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 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 falls to make any payment when due under the Indebtedness.

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

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

Other Defaults.  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, Grantor or any guarantor, endorser, surety, or accommodation party of any of the Indebtedness 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 garnishment of any of Borrower’s or Grantor’s accounts, including deposit accounts, with Lender.  However, this Event of Default shall not apply if (A) 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 (B) 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 sale discretion, as being an adequate reserve or bond for the dispute.

Insufficient Market Value of Collateral.  The market value of the Collateral falls below $1,016,000.00, 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 (A) reduce the amount of the Indebtedness in this loan as required by Lender or (B) 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.

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RIGHTS AND REMEDIES ON DEFAULT.  If an Event of Default occurs under this Agreement, at any time thereafter, Lender may exercise anyone 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; provided, 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 malls notice by ordinary mall 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 it is unable to sell the securities in an open market transaction, Grantor agrees that (A) Lender will have no obligation to delay sale until the securities can be registered, and (B) 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 granted under this Agreement and under applicable law, Lender may exercise any or all of the following rights and remedies: (A) register with any issuer or broker or other securities intermediary any of the Collateral consisting of investment property or financial assets (collectively, “Investment Property”) in Lender’s sole name or in the name of Lender’s broker, agent or nominee; (B) 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; (C) 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; (D) execute any such control agreement on Grantor’s behalf and in Grantor’s name, and Grantor 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; (E) exercise any and all rights of Lender under any such control agreement or power of attorney; (F) exercise any voting, conversion, registration, purchase, option, or other rights with respect to any Collateral; (G) 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:

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(1)  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.

(2)  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.

Additionally, 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 of the State of Illinois (the “UCC”), 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 UCC.

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 UCC, 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 upon any Event of Default.  Lender may hire or pay someone else to help enforce this Agreement, and Grantor shall pay the costs and expenses of such enforcement.  Costs and expenses include Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit, including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any

7

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

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

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 of Lender.

Notices.  Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by facsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States man, 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 currant address.  Unless otherwise provided or required by law, if there are 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

8

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 UCC:

Agreement. The word “Agreement” means this Amended and Restated Commercial Pledge Agreement, as this Amended and Restated Commercial Pledge Agreement may be amended or modified from time to time, together with all exhibits and schedule’s attached to this Amended and Restated 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 the DEFAULT section of this Agreement.

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 any 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 that certain Amended and Restated Note, dated as of even date herewith, executed by Borrower in favor of the Lender in the principal amount of Ten Million and 00/100 Dollars ($10,000,000.00), together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the Note.

9

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.

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

[SIGNATURE PAGE FOLLOWS]

10

BORROWER AND GRANTOR HAVE READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL PLEDGE AGREEMENT AND AGREE TO ITS TERMS.

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

GRANTOR:
ALS VENTURES, LLC
By:	/s/ Michael T. Flavin
	Michael T. Flavin, Manager
BORROWER:
ADVANCED LIFE SCIENCES, INC.
By:	/s/ John L. Flavin
	John L. Flavin, President
LENDER:
THE LEADERS BANK
By:	/s/ John Prosia
	John Prosia, Executive Vice President

[Signature Page to Amended and Restated Commercial Pledge Agreement]

EX-10.10

Exhibit 10.10

AGREEMENT TO PROVIDE INSURANCE

Grantor: Advanced Life Sciences, Inc.
1440 Davey Drive
Woodridge, IL 60517 Lender: THE LEADERS BANK
2001 YORK ROAD, SUITE 150
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 October 23, 2008, 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

AGREEMENT TO PROVIDE INSURANCE

(Continued)

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 OCTOBER 23, 2008.

GRANTOR:
ADVANCED LIFE SCIENCES, INC.
By:	/s/ John L. Flavin
	John L. Flavin, President of Advanced
	Life Sciences, Inc.

2

AGREEMENT TO PROVIDE INSURANCE

(Continued)

FOR LENDER USE ONLY

INSURANCE VERIFICATION

DATE:	PHONE
AGENT’S NAME:
AGENCY:
ADDRESS:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:

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EX-10.11

Exhibit 10.11

REDACTED COPY

DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

by and between

WYETH

acting through its Wyeth Pharmaceuticals Division

and

ADVANCED LIFE SCIENCES HOLDINGS, INC.

September 29, 2008

REDACTED COPY

TABLE OF CONTENTS

			Page
1.	DEFINITIONS		1
	1.1.	ABBOTT AGREEMENT	1
	1.2.	ADDITIONAL THIRD PARTY LICENSE	1
	1.3.	ADLS INDEMNIFIED PARTY	1
	1.4.	ADLS KNOW-HOW	1
	1.5.	ADLS LICENSEE	1
	1.6.	ADLS PATENT RIGHTS	2
	1.7.	ADLS PRODUCT DATA OR FILINGS	2
	1.8.	ADLS STUDY	2
	1.9.	ADLS TECHNOLOGY	2
	1.10.	ADLS THIRD PARTY AGREEMENT(S)	2
	1.11.	AFFILIATE(S)	2
	1.12.	BANKRUPTCY CODE	2
	1.13.	CALENDAR QUARTER	2
	1.14.	CALENDAR YEAR	2
	1.15.	CAP	3
	1.16.	CHANGE OF CONTROL	3
	1.17.	[***] STUDY	3
	1.18.	COMBINATION PRODUCT	3
	1.19.	COMBINATION SALE	3
	1.20.	COMMERCIAL EVENTS	3
	1.21.	COMMERCIALIZATION	3
	1.22.	COMMERCIALLY REASONABLE EFFORTS	3
	1.23.	COMMERCIAL PAYMENT	4
	1.24.	COMPETING PRODUCT	4
	1.25.	COMPOUND	4
	1.26.	CONFIDENTIAL INFORMATION	4
	1.27.	CONTINUING PARTY	4
	1.28.	CONTROL	5
	1.29.	CONTROL LIMITATION AGREEMENT	5
	1.30.	CURRENT PRODUCT	5
	1.31.	DEBTOR	5
	1.32.	DECLINING PARTY	5
	1.33.	DEVELOP	5

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1.34.	DEVELOPMENT PROGRAM	5
1.35.	DISCLOSING PARTY	5
1.36.	DIVESTED ASSET	5
1.37.	EFFECTIVE DATE	5
1.38.	EXECUTIVE OFFICERS	6
1.39.	FDA	6
1.40.	FD&C ACT	6
1.41.	FIRST COMMERCIAL SALE	6
1.42.	FIRST PARTY	6
1.43.	GAAP	6
1.44.	GENERIC PRODUCT	6
1.45.	GLOBAL DEVELOPMENT PLAN	6
1.46.	IND	6
1.47.	INDEMNIFIED PARTY	6
1.48.	INDEMNIFYING PARTY	6
1.49.	JOINT INVENTION(S)	6
1.50.	JOINT KNOW-HOW	7
1.51.	JOINT PATENT RIGHT(S)	7
1.52.	JOINT TECHNOLOGY	7
1.53.	KNOW-HOW	7
1.54.	LABEL	7
1.55.	LAUNCH EVENTS	7
1.56.	LAUNCH PAYMENT	7
1.57.	LEADING PARTY	7
1.58.	LIABILITY	7
1.59.	LICENSED RIGHTS	7
1.60.	LICENSEE TRADEMARK	7
1.61.	MAJOR MARKET	7
1.62.	MANUFACTURING	7
1.63.	NET COMBINATION SALE AMOUNT	7
1.64.	NET SALES	7
1.65.	NON-DISCLOSURE AGREEMENT	10
1.66.	OFFER	10
1.67.	PATENT RIGHTS	10
1.68.	PERMITTED DEDUCTIONS	10
1.69.	PERSON	10
1.70.	PRODUCT	11

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1.71.	PRODUCT DATA OR FILING	11
1.72.	PRODUCT IMPROVEMENT	11
1.73.	PRODUCT TRADEMARK	11
1.74.	PROSECUTING PARTY	11
1.75.	RECALL	11
1.76.	RECEIVING PARTY	11
1.77.	REGULATORY APPROVAL	12
1.78.	REGULATORY AUTHORITY	12
1.79.	REGULATORY MARKETING APPROVAL	12
1.80.	REGULATORY MARKETING APPROVAL APPLICATION	12
1.81.	REGULATORY PRICING APPROVAL	12
1.82.	RIGHT OF FIRST OFFER	12
1.83.	RIGHT OF REFERENCE	12
1.84.	[***]	12
1.85.	ROYALTY RATE	12
1.86.	ROYALTY TERM	12
1.87.	SECOND PARTY	13
1.88.	SELLING PERSON	13
1.89.	STEERING COMMITTEE	13
1.90.	STOCK PURCHASE AGREEMENT	13
1.91.	SUED PARTY	13
1.92.	SUPPLY AGREEMENT	13
1.93.	TERM	13
1.94.	TERRITORY	13
1.95.	TERRITORY PATENT RIGHT	13
1.96.	THIRD PARTY	13
1.97.	THIRD PARTY IP RIGHTS	13
1.98.	TRADEMARK	13
1.99.	TRANSITION DATE	14
1.100.	VALID CLAIM	14
1.101.	WHOLESALE ACQUISITION COST	14
1.102.	WYETH INDEMNIFIED PARTY	14
1.103.	WYETH MANUFACTURING COST	14
1.104.	WYETH PRODUCT IMPROVEMENT	14
1.105.	WYETH SUBLICENSEE	14

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2.	LICENSES AND RELATED GRANTS OF RIGHTS		14
	2.1.	LICENSES GRANTED TO WYETH	14
	2.2.	RIGHTS OF REFERENCE	16
	2.3.	TECHNOLOGY TRANSFER	16
	2.4.	LICENSES GRANTED TO ADLS	16
	2.5.	JOINT TECHNOLOGY	17
	2.6.	365(N) OF U.S. BANKRUPTCY CODE	17
	2.7.	NO IMPLIED RIGHTS	18
3.	DECISION MAKING AND DISPUTE RESOLUTION		18
	3.1.	STEERING COMMITTEE	18
	3.2.	OTHER COMMITTEES	19
	3.3.	DECISION MAKING	19
	3.4.	ALLOCATION OF FINAL DECISION MAKING AUTHORITY	20
	3.5.	ALLIANCE MANAGERS	22
4.	PRODUCT DEVELOPMENT, REGULATORY MATTERS, DATA SHARING AND CROSS REFERENCE RIGHTS, MANUFACTURING, SUPPLY AND COMMERCIALIZATION		22
	4.1.	GENERAL	22
	4.2.	GLOBAL DEVELOPMENT PLAN	22
	4.3.	INITIAL GLOBAL DEVELOPMENT PLAN	23
	4.4.	DATA SHARING	23
	4.5.	DEVELOPMENT DILIGENCE	25
	4.6.	REGULATORY APPROVALS	25
	4.7.	REGULATORY REPORTING	26
	4.8.	PHARMACOVIGILANCE AND PRODUCT LABELING	27
	4.9.	MANUFACTURE AND SUPPLY OF PRODUCTS	29
	4.10.	COMMERCIALIZATION	29
	4.11.	PRODUCT RECALLS	30
5.	CONSIDERATION		30
	5.1.	EQUITY INVESTMENT	30
	5.2.	MILESTONE PAYMENTS	30
	5.3.	ROYALTIES	31
	5.4.	REPORTS AND PAYMENTS	33
	5.5.	MAINTENANCE OF RECORDS; AUDITS	35
6.	INTELLECTUAL PROPERTY		36
	6.1.	INVENTIONS	36
	6.2.	PATENT RIGHTS	37

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	6.3.	RECORDING	43
	6.4.	TRADEMARKS	43
7.	CONFIDENTIALITY		43
	7.1.	CONFIDENTIALITY	43
	7.2.	AUTHORIZED DISCLOSURE AND USE	44
	7.3.	SEC OR SIMILAR FILINGS	45
	7.4.	PUBLIC ANNOUNCEMENTS; PUBLICATIONS	45
	7.5.	TERMINATION OF PRIOR NON-DISCLOSURE AGREEMENT	46
8.	REPRESENTATIONS, WARRANTIES AND COVENANTS		47
	8.1.	REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH PARTY	47
	8.2.	ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF ADLS	47
	8.3.	REPRESENTATION BY LEGAL COUNSEL	50
	8.4.	NO INCONSISTENT AGREEMENTS	50
	8.5.	DISCLAIMER	50
9.	TERM AND TERMINATION		51
	9.1.	TERM	51
	9.2.	TERMINATION BY EITHER PARTY FOR CAUSE	51
	9.3.	TERMINATION BY WYETH AT WILL OR FOR SAFETY	51
	9.4.	TERMINATION ON INSOLVENCY OF ADLS	52
	9.5.	EFFECTS OF TERMINATION	53
	9.6.	SURVIVAL OF CERTAIN OBLIGATIONS	56
10.	LIABILITY, INDEMNIFICATION AND INSURANCE		56
	10.1.	LIABILITY	56
	10.2.	INDEMNIFICATION BY WYETH	57
	10.3.	INDEMNIFICATION BY ADLS	57
	10.4.	PROCEDURE	57
	10.5.	INSURANCE	58
11.	DISPUTE RESOLUTION		58
	11.1.	GENERAL	58
	11.2.	FAILURE OF OFFICERS TO RESOLVE DISPUTE	59
12.	MISCELLANEOUS		59
	12.1.	ASSIGNMENT	59
	12.2.	FURTHER ACTIONS	59
	12.3.	FORCE MAJEURE	59
	12.4.	CORRESPONDENCE AND NOTICES	60

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12.5.	AMENDMENT	61
12.6.	WAIVER	61
12.7.	SEVERABILITY	61
12.8.	DESCRIPTIVE HEADINGS	61
12.9.	GOVERNING LAW; VENUE	61
12.10.	ENTIRE AGREEMENT OF THE PARTIES	62
12.11.	INDEPENDENT CONTRACTORS	62
12.12.	COUNTERPARTS	62
12.13.	INTERPRETATION	62
12.14.	CHANGE OF CONTROL OF ADLS	63
12.15.	RIGHT OF FIRST OFFER	64

EXHIBITS
	EXHIBIT 1.6	ADLS PATENT RIGHTS
	EXHIBIT 1.8	ADLS STUDY
	EXHIBIT 1.10	ADLS THIRD PARTY AGREEMENTS
	EXHIBIT 1.17	[***] STUDY
	EXHIBIT 1.25	COMPOUND
	EXHIBIT 1.90	STOCK PURCHASE AGREEMENT
	EXHIBIT 4.3	INITIAL GLOBAL DEVELOPMENT PLAN
	EXHIBIT 4.9.1	KEY TERMS OF THE SUPPLY AGREEMENT
	EXHIBIT 7.4.3	ADLS PRESS RELEASE
	EXHIBIT 8.2(a)	INFORMATION RELATED TO ADLS IP
	EXHIBIT 8.2(c)	THIRD PARTY RIGHTS RELATED TO ADLS IP
	EXHIBIT 8.2(e)	GOVERNMENT FUNDING
	EXHIBIT 8.2(o)	CONTROL LIMITATION AGREEMENTS

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DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

This Development and Commercialization Agreement (the “Agreement”) is entered into as of September 29, 2008 (the “Effective Date”), by and between Wyeth, a corporation organized and existing under the laws of the State of Delaware and having a place of business at 500 Arcola Road, Collegeville, Pennsylvania 19426 (“Wyeth”), acting through its Wyeth Pharmaceuticals Division, and Advanced Life Sciences Holdings, Inc., a corporation organized and existing under the laws of the State of Delaware and having a principal place of business at 1440 Davey Road, Woodridge, Illinois 60517 (“ADLS”).  Wyeth and ADLS may each be referred to herein individually as a “Party” and collectively as the “Parties”.

WHEREAS, Wyeth is engaged in the research, development and commercialization of pharmaceutical and health care products;

WHEREAS, ADLS controls proprietary rights related to cethromycin, an antibiotic from the ketolide class;

WHEREAS, Wyeth and ADLS desire to collaborate to develop, manufacture and commercialize products for the Territory (as defined below) based on cethromycin, as described herein;

NOW THEREFORE, in consideration of the mutual promises and covenants set forth below and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

1.DEFINITIONS.

1.1.         Abbott Agreement.  “Abbott Agreement” shall have the meaning set forth in Section 5.3.2 hereof.

1.2.         Additional Third Party License.  “Additional Third Party License” shall have the meaning set forth in Section 5.3.4 hereof.

1.3.         ADLS Indemnified Party.  “ADLS Indemnified Party” shall have the meaning set forth in Section 10.2 hereof.

1.4.         ADLS Know-How.  “ADLS Know-How” shall mean any Know-How, other than the Joint Know-How, that (i) ADLS or any of its Affiliates Controls as of the Effective Date or that comes into the Control of ADLS or any of its Affiliates during the Term (other than through the grant of a license by Wyeth) and (ii) is necessary or useful in the discovery, synthesis, research, use, Development, Manufacture or Commercialization of any Compound or any Product.

1.5.         ADLS Licensee.  “ADLS Licensee” or “Licensee” shall mean any Person who receives or has received, directly or indirectly, from ADLS, a license or

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sublicense of any right to Develop, Manufacture or Commercialize any Compound or Product.

1.6.         ADLS Patent Rights.  “ADLS Patent Rights” shall mean any Patent Right, other than any Joint Patent Right, that (i) ADLS or any of its Affiliates Controls as of the Effective Date or that comes into the Control of ADLS or any of its Affiliates during the Term (other than through the grant of a license by Wyeth) and (ii) is necessary or useful in the discovery, synthesis, research, use, Development, Manufacture or Commercialization of any Compound or any Product.  Those ADLS Patent Rights existing as of the Effective Date include without limitation those set forth on Exhibit 1.6 attached hereto.

1.7.         ADLS Product Data or Filings.  “ADLS Product Data or Filings” shall have the meaning set forth in Section 4.4.1.

1.8.         ADLS Study.  “ADLS Study” shall mean [***].

1.9.         ADLS Technology.  “ADLS Technology” shall mean, collectively, the ADLS Patent Rights and ADLS Know-How.

1.10.       ADLS Third Party Agreement(s).  “ADLS Third Party Agreement(s)” shall mean any agreement between ADLS and any Third Party under which ADLS obtains rights in or to any Licensed Right.  Those ADLS Third Party Agreement(s) in existence as of the Effective Date are listed on Exhibit 1.10.

1.11.       Affiliate(s).  “Affiliate(s)” shall mean, with respect to any Person or entity, any other Person or entity that controls, is controlled by or is under common control with such Person or entity.  A Person or entity shall be regarded as in control of another entity if it owns or controls more than fifty percent (50%) of the equity securities of the subject entity entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, for the election of the corresponding managing authority), provided, however, that the term “Affiliate” shall not include subsidiaries or other entities in which a Party or its Affiliates owns a majority of the ordinary voting power necessary to elect a majority of the board of directors or other managing authority, but is restricted from electing such majority by contract or otherwise, until such time as such restrictions are no longer in effect.

1.12.       Bankruptcy Code.  “Bankruptcy Code” shall have the meaning set forth in Section 2.6 hereof.

1.13.       Calendar Quarter.  “Calendar Quarter” shall mean the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 or December 31, for so long as this Agreement is in effect.

1.14.       Calendar Year.  “Calendar Year” shall mean each successive period of twelve (12) months commencing on January 1 and ending on December 31.

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1.15.       CAP.  “CAP” shall mean community acquired pneumonia.

1.16.       Change of Control.  “Change of Control” shall mean, with respect to a Party, (i) a merger, reorganization or consolidation of such Party with a Third Party which results in the voting securities of such Party outstanding immediately prior thereto ceasing to represent at least fifty percent (50%) of the combined voting power of the surviving entity immediately after such merger, reorganization or consolidation, (ii) a Third Party becoming the beneficial owner of fifty percent (50%) or more of the combined voting power of the outstanding securities of such Party or (iii) the sale or other transfer of all or substantially all of such Party’s business or assets to which this Agreement relates to a Third Party.

1.17.       [***] Study.  “[***] Study” shall mean [***].

1.18.       Combination Product.  “Combination Product” shall mean any Product containing as active ingredients both (a) any Compound and (b) one or more other pharmaceutically active compounds or substances, in the same formulation.

1.19.       Combination Sale.  “Combination Sale” shall have the meaning set forth in Section 1.64 hereof.

1.20.       Commercial Events.  “Commercial Events” shall have the meaning set forth in Section 5.2 hereof.

1.21.       Commercialization.  “Commercialization” or “Commercialize” shall mean to use, have used, offer for sale, have offered for sale, sell, have sold, import, have imported and otherwise commercialize a product, including activities directed to obtaining pricing and reimbursement approvals for, marketing, promoting or distributing a product.  Commercialization shall not include any activities related to Manufacturing or Development.

1.22.       Commercially Reasonable Efforts.  “Commercially Reasonable Efforts” shall mean, with respect to the efforts to be expended by a Party with respect to any objective, those reasonable, diligent, good faith efforts to accomplish such objective as such Party would normally use to accomplish a similar objective under similar circumstances.  With respect to any objective relating to the Development, Manufacture or Commercialization of a Product by Wyeth, generally or with respect to any particular country in the Territory, “Commercially Reasonable Efforts” shall mean those efforts and resources normally used by Wyeth, in the Territory or in such country, as the case may be, with respect to a product owned or controlled by Wyeth, or to which Wyeth has similar rights, which product is of similar market potential in the Territory or in such country, as the case may be, and is at a similar stage in its development or life as is such Product, taking into account issues of safety, efficacy, product

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profile, the likelihood of obtaining regulatory approvals, including satisfactory reimbursement or pricing approvals for such product in the Territory or such country, as the case may be, and the timing of such approvals, the current and projected competitiveness of the marketplace for such product in the Territory or in such country, as the case may be, the proprietary position and anticipated exclusivity of such product in the Territory or in such country, as the case may be, the existing or projected sales and profitability of such product in the Territory or such country, as the case may be, and other relevant commercial factors.  To the extent that the performance of a Party’s obligations hereunder is adversely affected by the other Party’s failure to perform its obligations hereunder, the impact of the failing Party’s failure shall be taken into account in determining whether the other Party has used its Commercially Reasonable Efforts to perform any such affected obligations.

1.23.       Commercial Payment.  “Commercial Payment” shall have the meaning set forth in Section 5.2.3.

1.24.       Competing Product.  “Competing Product” shall mean, with respect to any Product, any product that contains an active ingredient that is substantially the same as a Compound (or any analog or other pharmaceutically acceptable form of a Compound, including, without limitation, any isomer, metabolite, hydrate, solvate, salt form or polymorph of a Compound).  For the avoidance of doubt, an active ingredient shall not be considered to be separate, distinct and different from a Compound solely on the basis of its method of production, method of delivery or dosage level.

1.25.       Compound.  “Compound” means the compound set forth on Exhibit 1.25 attached hereto, also known as cethromycin, or any prodrug or other pharmaceutically acceptable form of such compound, including, without limitation, any isomer, metabolite, hydrate, solvate, salt form or polymorph of any of the foregoing.

1.26.       Confidential Information.  “Confidential Information” of a Party shall mean all Know-How or other information, including, without limitation, proprietary information and materials (whether or not patentable) regarding such Party’s technology, products, business or objectives that is communicated in any way or form by the Disclosing Party to the Receiving Party, either prior to or after the Effective Date of this Agreement, and whether or not such Know-How or other information is identified as confidential at the time of disclosure.  Subject to Section 7.3 below, the terms and conditions of this Agreement shall be considered Confidential Information of each Party.

1.27.       Continuing Party.  “Continuing Party” shall have the meaning set forth in Section 6.2.1(b) hereof.

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1.28.       Control.  “Control” or “Controlled” shall mean with respect to any intellectual property right (including, without limitation, any Know-How, Patent Right or right regarding access or reference to Product Data or Filings or other data or information), possession of the ability (whether by sole or joint ownership, license or otherwise, other than pursuant to this Agreement) to grant, without violating the terms of any Control Limitation Agreement, a license, access or other right in, to or under such intellectual property right.

1.29.       Control Limitation Agreement.  “Control Limitation Agreement” shall mean any agreement or arrangement which limits the ownership rights of a Person with respect to, or limits the ability of a Person to grant a license, sublicense or other right in, to or under, any intellectual property right.

1.30.       Current Product.  “Current Product” shall mean the Product the formulation of which is described in IND number 57836.

1.31.       Debtor.  “Debtor” shall have the meaning set forth in Section 9.4.

1.32.       Declining Party.  “Declining Party” shall have the meaning set forth in Section 6.2.1(b) hereof.

1.33.       Develop.  “Develop” shall mean shall mean to discover, research or develop a product, including the use of any licensed right for the purpose of conducting any such discovery, research or development.  When used as a noun, “Development” shall mean any and all activities involved in Developing.  Develop and Development shall include, without limitation, conducting non-clinical and clinical research and development activities such as toxicology, pharmacology and other discovery efforts, test method development and stability testing, process development, formulation development, delivery system development, quality assurance and quality control development, statistical analysis, clinical studies (including pre- and post-approval studies), regulatory affairs, pharmacovigilance and all activities directed to obtaining any Regulatory Approval.

1.34.       Development Program.  “Development Program” shall mean the Development of Products pursuant to the Global Development Plan.

1.35.       Disclosing Party.  “Disclosing Party” shall have the meaning set forth in Section 7.1 hereof.

1.36.       Divested Asset.  “Divested Asset” shall have the meaning set forth in Section 12.14.2 hereof.

1.37.       Effective Date.  “Effective Date” shall have the meaning set forth in the first paragraph of this Agreement.

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1.38.       Executive Officers.  “Executive Officers” shall mean an appropriate senior level executive designated by Wyeth (or an executive of Wyeth or an Affiliate of Wyeth designated by such senior level executive) and the President of ADLS (or an officer of ADLS or an Affiliate of ADLS designated by such President).

1.39.       FDA.  “FDA” shall mean the United States Food and Drug Administration or any successor agency thereto.

1.40.       FD&C Act.  “FD&C Act” shall mean the United States Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 301 et seq.), as amended, and the rules and regulations promulgated thereunder.

1.41.       First Commercial Sale.  “First Commercial Sale” shall mean, with respect to any Product and any country of the Territory and any indication, the first sale of such Product under this Agreement by Wyeth, its Affiliates or its Sublicensees to a Third Party in such country, after such Product has been granted Regulatory Marketing Approval and Regulatory Pricing Approval for such indication by the competent Regulatory Authorities in such country.  When used without reference to a specified indication, First Commercial Sale shall mean the First Commercial Sale for any indication.

1.42.       First Party.  “First Party” shall have the meaning set forth in Section 6.2.1(c).

1.43.       GAAP.  “GAAP” shall mean then current United States generally accepted accounting principles, consistently applied.

1.44.       Generic Product.  “Generic Product” shall mean any product containing Compound as as an active ingredient.

1.45.       Global Development Plan.  “Global Development Plan” shall have the meaning as set forth in Section 4.2.

1.46.       IND.  “IND” shall mean an Investigational New Drug Application, as defined in the FD&C Act, that is required to be filed with the FDA before beginning clinical testing of a Product in human subjects, or an equivalent foreign filing.

1.47.       Indemnified Party.  “Indemnified Party” shall have the meaning set forth in Section 10.4 hereof.

1.48.       Indemnifying Party.  “Indemnifying Party” shall have the meaning set forth in Section 10.4 hereof.

1.49.       Joint Invention(s).  “Joint Invention(s)” shall have the meaning set forth in Section 6.1 hereof.

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1.50.       Joint Know-How.  “Joint Know-How” shall have the meaning set forth in Section 6.1 hereof.

1.51.       Joint Patent Right(s).  “Joint Patent Right(s)” shall have the meaning set forth in Section 6.1 hereof.

1.52.       Joint Technology.  “Joint Technology” shall mean, collectively, the Joint Patent Rights, the Joint Inventions and the Joint Know-How.

1.53.       Know-How.  “Know-How” shall mean non-public, proprietary inventions, discoveries, data, information, processes, methods, techniques, materials, technology, results or other know-how, whether or not patentable.

1.54.       Label.  “Label” shall mean product labeling in accordance with all applicable Regulatory Approvals.

1.55.       Launch Events.  “Launch Events” shall have the meaning set forth in Section 5.2 hereof.

1.56.       Launch Payment.  “Launch Payment” shall have the meaning set forth in Section 5.2.1(a).

1.57.       Leading Party.  “Leading Party” shall have the meaning set forth in Section 6.2.2(c).

1.58.       Liability.  “Liability” shall have the meaning set forth in Section 10.2 hereof.

1.59.       Licensed Rights.  “Licensed Rights” shall mean the interest of ADLS or any of its Affiliates in the ADLS Patent Rights, the ADLS Know-How and the Joint Technology.

1.60.       Licensee Trademark.  “Licensee Trademark” shall have the meaning set forth in Section 2.1.3 hereof.

1.61.       Major Market.  “Major Market” shall mean [***].

1.62.       Manufacturing.  “Manufacturing” or “Manufacture” shall mean activities directed to producing, manufacturing, processing, filling, finishing, packaging, labeling, quality assurance testing and release, shipping and storage of a product.

1.63.       Net Combination Sale Amount.  “Net Combination Sale Amount” shall have the meaning set forth in Section 1.64 hereof.

1.64.       Net Sales.  “Net Sales” shall mean the gross amount actually received for any sale of any Product by Wyeth, any Wyeth Affiliate or any Wyeth

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Sublicensee, as appropriate (a “Selling Person”), to a non-Affiliate of the Selling Person, less the following deductions, in each case to the extent specifically related to the Product and taken by the Selling Person or otherwise paid for or accrued by the Selling Person (“Permitted Deductions”):

(i)trade, cash, promotional and quantity discounts and wholesaler fees;

(ii)taxes on sales (such as excise, sales or use taxes or value added taxes) to the extent imposed upon and paid directly with respect to the sales price (and excluding national, sales or local taxes based on income);

(iii)freight, insurance, packing costs and other transportation charges to the extent included in the invoice price to the buyer;

(iv)amounts repaid or credits taken by reason of damaged goods, rejections, defects, expired dating, recalls or returns or because of retroactive price reductions;

(v)charge back payments and rebates granted to (a) managed healthcare organizations, (b) federal, state or provincial or local governments or other agencies, (c) purchasers and reimbursers, or (d) trade customers, including wholesalers and chain and pharmacy buying groups; and

(vi)documented custom duties actually paid by the Selling Person.

Such Permitted Deductions shall be determined in accordance with GAAP.

Sales of Products between Wyeth, its Affiliates or Sublicensees for resale, or for use in the production or manufacture of Products, shall not be included within Net Sales; provided, however, that any subsequent sale of such Product (or Products produced or manufactured using such Product) by Wyeth or its Affiliate or Sublicensee to a non-Affiliate Third Party shall be included within Net Sales.

If a Product is sold as part of a Combination Product (in each case, a “Combination Sale”), the Net Sales amount for the Product sold in such a Combination Sale shall be that portion of the gross amount actually received for such Combination Sale (less all Permitted Deductions) determined as follows:

Except as provided below, the Net Sales amount for a Combination Product shall equal the gross amount actually received for the Combination Sale, reduced by the Permitted Deductions (the “Net Combination Sale Amount”), multiplied by the fraction A/(A+B), where:

A is the Wholesale Acquisition Cost, in the country where such Combination Sale occurs, of the Product contained in the Combination Product, if sold as a separate Product in such country by the Selling Person, and B is the aggregate

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Wholesale Acquisition Cost(s), in such country, of such other products or active ingredients/components, as the case may be, included in the Combination Product if sold separately in such country by the Selling Person.

In the event that the Selling Person sells the Product included in a Combination Product as a separate Product in a country, but does not separately sell all of the other products or active ingredients/components, as the case may be, included in such Combination Product in such country, the calculation of Net Sales resulting from such Combination Sale shall be determined by multiplying the Net Combination Sale Amount by the fraction A/C where:

A is the Wholesale Acquisition Cost, in the country where such Combination Sale occurs, of the Product contained in such Combination Product when sold as a separate Product by the Selling Person, and C is the Wholesale Acquisition Cost, in such country, charged by the Selling Person for the entire Combination Product.

In the event that the Selling Person does not sell the Product included in a Combination Product as a separate Product in the country where such Combination Sale occurs, but does separately sell all of the other products or active ingredients/components, as the case may be, included in the Combination Product in such country, the calculation of Net Sales resulting from such Combination Sale shall be determined by multiplying the Net Combination Sale Amount by the fraction (C-D)/C, where:

C is the Wholesale Acquisition Cost, in such country, charged by the Selling Person for the entire Combination Product, and D is the Wholesale Acquisition Cost, in such country, charged by the Selling Person for the other products or active ingredients/components, as the case may be, included in the Combination Product.

Where active ingredient portions of a Combination Product are sold separately as other products but in different dosage strengths than are in the Combination Product, the calculation of the Net Sales amount for such Combination Product shall be based on appropriate proration of the amounts of each active ingredient component included therein when applying the formulas set forth above.

Where the calculation of Net Sales resulting from a Combination Sale in a country cannot be determined by any of the foregoing methods, the calculation of Net Sales for such Combination Sale shall be that portion of the Net Combination Sale Amount reasonably determined in good faith by Wyeth in consultation with ADLS as properly reflecting the value of the Product included in the Combination Product.

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If a Product is sold as part of a bundle of distinct products (i.e., one price is charged for a number of distinct products that are not (i) packaged together with another Product or (ii) in a Combination Product form alone), the Net Sales for such Product shall be based on the ratio of the Wholesale Acquisition Cost for such Product to the sum of the Wholesale Acquisition Costs for each product in such bundle.  By way of example, if the Wholesale Acquisition Cost for such Product when sold separately is $10, and the sum of the Wholesale Acquisition Costs for each product in such bundle when sold separately if $40, then the Net Sales attributable to the Product when sold as part of the bundle would be twenty-five percent (25%) of the Net Sales of the bundle of products sold by the Selling Person.

Notwithstanding the foregoing, Net Sales shall not include any consideration received by Wyeth, its Affiliates or its Sublicensees in respect of the sale, use or other disposition of a Product in a country as part of a clinical trial prior to the receipt of all Regulatory Marketing Approvals required to commence commercial sales of such Product in such country.

Products provided by Wyeth, its Affiliates or Sublicensees free of charge, as samples, for administration to patients enrolled in clinical trials or distributed through a not-for-profit foundation or other compassionate use program at no charge to eligible patients, shall not be included in Net Sales, provided that Wyeth, its Affiliates or Sublicensees receive no cash consideration from such samples, clinical trials, not-for-profit foundation or program.

1.65.       Non-Disclosure Agreement.  “Non-Disclosure Agreement” shall have the meaning specified in Section 7.5.

1.66.       Offer.  “Offer” shall have the meaning specified in Section 12.15.

1.67.       Patent Rights.  “Patent Rights” shall mean any and all (a) patents, (b) pending patent applications, including, without limitation, all provisional applications, substitutions, continuations, continuations-in-part, divisions and renewals, and all patents granted thereon, (c) all patents-of-addition, reissues, reexaminations and extensions or restorations by existing or future extension or restoration mechanisms, including, without limitation, supplementary protection certificates or the equivalent thereof, (d) inventor’s certificates, (e) any other form of government-issued right substantially similar to any of the foregoing; and (f) all United States and foreign counterparts of any of the foregoing.

1.68.       Permitted Deductions.  “Permitted Deductions” shall have the meaning set forth in Section 1.64 hereof.

1.69.       Person.  “Person” shall mean an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, incorporated

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association, joint venture or similar entity or organization, including a government or political subdivision or department or agency of a government.

1.70.       Product.  “Product” shall mean any pharmaceutical product containing a Compound, including, but not limited to, any formulation of any Compound (including, but not limited to, oral formulations, oral suspension formulations and intravenous formulations) and any Product Improvement.  “Product” includes, without limitation, any Combination Product but does not include any separately formulated pharmaceutical product not containing a Compound, even if such product is sold together with a Product.

1.71.       Product Data or Filing.  “Product Data or Filing” shall mean (i) any pre-clinical or clinical data (including data from post-approval studies), clinical protocol, study, other data, information or result regarding any Compound or Product or the composition of or any method of making or using any Compound or Product or (ii) any IND, Regulatory Marketing Approval Application, Regulatory Marketing Approval or other regulatory filing regarding any Compound or Product.

1.72.       Product Improvement.  “Product Improvement” shall mean any alternative or improved dosage form of a Compound (e.g., a different dosage strength or a novel formulation technology) that ADLS may develop or license for a Compound.

1.73.       Product Trademark.  “Product Trademark” shall mean (i) any Trademark Controlled by ADLS and used by ADLS or its Affiliates anywhere in the world in connection with the Commercialization of Products, other than any corporate name or corporate logo of ADLS or its Affiliates or any Trademark used by ADLS or its Affiliates to identify products other than Products, or (ii) any Licensee Trademark.

1.74.       Prosecuting Party.  “Prosecuting Party” shall have the meaning set forth in Section 6.2.1(b).

1.75.       Recall.  “Recall” shall mean, with respect to any pharmaceutical product, a “recall,” “product withdrawal,” “stock recovery,” “seizure” or any similar term as utilized by any Regulatory Authority under such Regulatory Authority’s procedures regarding the recall of pharmaceutical products, as the same may be amended from time to time, and shall include any related post-sale warning or mailing of information regarding such product, including any warnings or mailings described in the Regulatory Authority’s product recall procedures.

1.76.       Receiving Party.  “Receiving Party” shall have the meaning set forth in Section 7.1 hereof.

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1.77.       Regulatory Approval.   “Regulatory Approval” means any technical, medical, scientific or other license, registration, authorization or approval of any Regulatory Authority regarding the research, development, clinical testing, commercial manufacture, distribution, marketing, pricing, reimbursement, promotion, offer for sale, use, import, export or sale of any pharmaceutical product or proposed pharmaceutical product.

1.78.       Regulatory Authority.  “Regulatory Authority” shall mean, with respect to any national, supra-national, regional, state or local regulatory jurisdiction, any agency, department, bureau, commission, council or other governmental entity involved in the granting of a Regulatory Approval for such jurisdiction.

1.79.       Regulatory Marketing Approval.  “Regulatory Marketing Approval” shall mean, with respect to any Product in any regulatory jurisdiction and for any indication, Regulatory Approval authorizing the marketing of such Product in such jurisdiction for such indication.

1.80.       Regulatory Marketing Approval Application.  “Regulatory Marketing Approval Application” shall mean, with respect to any Product in any regulatory jurisdiction for any indication, an application submitted to the appropriate Regulatory Authority for such regulatory jurisdiction seeking Regulatory Marketing Approval of such Product for use in such indication in such regulatory jurisdiction.

1.81.       Regulatory Pricing Approval.  “Regulatory Pricing Approval” shall mean, with respect to any Product in any regulatory jurisdiction, and for any indication, the achievement of all applicable pricing and reimbursement approvals with respect to such Product in such jurisdiction and for such indication.

1.82.       Right of First Offer.  “Right of First Offer” shall have the meaning specified in Section 12.15.

1.83.       Right of Reference.  “Right of Reference” shall mean a “Right of Reference,” as that term is defined in 21 C.F.R. § 314.3(b) and any comparable right existing under the laws or regulations of any foreign country.

1.84.       [***].

1.85.       Royalty Rate.  “Royalty Rate” shall have the meaning set forth in Section 5.3.2.

1.86.       Royalty Term.  “Royalty Term” shall mean, on a country-by-country and Product-by-Product (but not indication-by-indication) basis, the period from the date of the First Commercial Sale of the Product in a country for any indication until the latest of (i) the end of any regulatory data exclusivity period

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for such Product in such country or (ii) the date on which there is no Valid Claim of any ADLS Patent Right which covers the use or sale of the Product in such country or (iii) ten (10) years after such First Commercial Sale of such Product in such Country.

1.87.       Second Party.  “Second Party” shall have the meaning set forth in Section 6.2.1(c).

1.88.       Selling Person.  “Selling Person” shall have the meaning set forth in Section 1.64 hereof.

1.89.       Steering Committee.  “Steering Committee” shall have the meaning set forth in Section 3.1.1 hereof.

1.90.       Stock Purchase Agreement.  “Stock Purchase Agreement” shall mean the Stock Purchase Agreement dated as of the Effective Date by and between Wyeth and ADLS in the form attached hereto as Exhibit 1.90.

1.91.       Sued Party.  “Sued Party” shall have the meaning set forth in Section 6.2.3(c) hereof.

1.92.       Supply Agreement.  “Supply Agreement” shall have the meaning set forth in Section 4.9.1 hereof.

1.93.       Term.  “Term” shall have the meaning set forth in Section 9.1.

1.94.       Territory.  “Territory” shall mean China, South Korea, Taiwan, Hong Kong, Afghanistan, Bangladesh, Bhutan, Brunei, Darussalam, Cambodia, Indonesia, Laos, Macau, Malaysia, Maldives, Mongolia, Myanmar, Nepal, North Korea, Pakistan, the Philippines, Singapore, Sri Lanka, Thailand, Vietnam and, if Wyeth accepts an Offer pursuant to Section 12.15, [***].

1.95.       Territory Patent Right.  “Territory Patent Right” shall have the meaning set forth in Section 6.2.1(a).

1.96.       Third Party.  “Third Party” shall mean any Person other than Wyeth, ADLS and their respective Affiliates.

1.97.       Third Party IP Rights.  “Third Party IP Rights” shall have the meaning set forth in Section 6.2.3(b) hereof.

1.98.       Trademark.  “Trademark” shall mean any trademark, trade dress, design, logo, slogan, house mark or name used in connection with the marketing of a product, including, without limitation, any registration or application for registration of any of the foregoing.

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1.99.       Transition Date.  “Transition Date” shall have the meaning set forth in Section 5.3.2 hereof.

1.100.     Valid Claim.  “Valid Claim” shall mean a claim of any unexpired issued patent that shall not have been dedicated to the public, disclaimed nor held invalid or unenforceable by a court or government agency of competent jurisdiction in an unappealed or unappealable decision.

1.101.     Wholesale Acquisition Cost.  “Wholesale Acquisition Cost” for any product shall mean the list price for wholesalers, distributors and other direct accounts before any rebates, discounts, allowances or other price concessions that might be offered by the supplier of the product.

1.102.     Wyeth Indemnified Party.  “Wyeth Indemnified Party” shall have the meaning set forth in Section 10.3 hereof.

1.103.     Wyeth Manufacturing Cost.  “Wyeth Manufacturing Cost” shall have the meaning set forth in Section 5.4.2.

1.104.     Wyeth Product Improvement.  “Wyeth Product Improvement” shall mean any Know-How (other than the Joint Know-How) Controlled by Wyeth or any of its Affiliates during the Term (other than through the grant of a license by ADLS) pertaining to the composition of, or any method of making or using, or any Patent Right (other than a Joint Patent Right) Controlled by Wyeth or any of its Affiliates during the Term (other than through the grant of a license by ADLS) that covers or claims, any alternative or improved dosage form of a Compound (e.g., a different dosage strength or a novel formulation technology) that Wyeth may Develop under this Agreement.

1.105.     Wyeth Sublicensee.  “Wyeth Sublicensee” or “Sublicensee” shall mean any Person who has received, directly or indirectly, from Wyeth, a sublicense of any right licensed to Wyeth by ADLS hereunder.

2.LICENSES AND RELATED GRANTS OF RIGHTS.

2.1.        Licenses Granted to Wyeth.

2.1.1.      Licenses for Compounds and Products.  Subject to the terms and conditions of this Agreement, ADLS, effective as of the Effective Date, hereby grants to Wyeth under the Licensed Rights, with the right to grant sublicenses as set forth in Section 2.1.2, the following licenses:

(a)           A non-exclusive license to Develop and have Developed, in all countries throughout the world, Compounds and Products for Commercialization in the Territory, and to Manufacture and have Manufactured, in all countries throughout the world, any such Compound or Product for use in such Development.

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(b)           An exclusive license (exclusive even as to ADLS and its Affiliates except as necessary to fulfill their obligations under this Agreement) to Commercialize Compounds and Products in the Territory and, subject to the obligation to purchase Product from ADLS pursuant to the Supply Agreement contemplated by Exhibit 4.9.1, to Manufacture and have Manufactured, in all countries throughout the world, Compounds and Products solely for use or sale in the Territory as part of such Commercialization.

2.1.2.      Sublicenses.  Wyeth may grant and authorize sublicenses within the scope of the rights conveyed to Wyeth pursuant to Section 2.1.1.  Wyeth shall give ADLS prompt written notice of each such sublicense, identifying the applicable Sublicensee, Products sublicensed, territory and scope of rights granted.  Wyeth shall be responsible to ensure that each Sublicensee complies with all applicable terms and conditions of this Agreement.

2.1.3.      Trademark License.  Subject to the terms and conditions of this Agreement, ADLS, effective as of the Effective Date, hereby grants to Wyeth an exclusive, royalty-free license to use any Product Trademark(s) solely in connection with Commercialization of Products in the Territory.  With respect to any Trademark Controlled by a Licensee and used by such Licensee in connection with the Commercialization of Products in the United States or Europe, other than any corporate name or corporate logo of such Licensee or any Trademark used by such Licensee to identify products other than Products (each, a “Licensee Trademark”), ADLS shall use Commercially Reasonable Efforts to obtain from such Licensee a written agreement confirming ADLS’ right to include such Trademark in the Product Trademarks licensed to Wyeth as provided in this Section 2.1.3.

2.1.4.      Direct Licenses to Affiliates.  Wyeth may at any time request and authorize ADLS to grant licenses directly to Affiliates of Wyeth by giving written notice designating to whom a direct license is to be granted.  Upon receipt of any such notice, ADLS shall enter into and sign a separate agreement with such designated Affiliate of Wyeth conveying such direct license for so long as such Affiliate remains an Affiliate of Wyeth.  All such direct license agreements shall be consistent with the terms and conditions of this Agreement, except for such modifications as may be required by the laws and regulations in the country in which the direct license will be exercised.  In countries where validity of the direct license agreement requires prior government approval or registration, such direct license agreement shall not become binding between the parties thereto until such approval or registration is granted, which approval or registration shall be obtained by Wyeth.  All out-of-pocket costs incurred in granting a direct license, including ADLS’ reasonable attorneys’ fees,

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under this Section 2.1.4 shall be borne by Wyeth.  Wyeth shall cause any such Affiliate to make all payments required to be made to ADLS and to satisfy all other obligations of such Affiliate to ADLS under any such agreement and shall remain directly liable to ADLS for any breaches of any such agreement by its Affiliate.  In the event that any such direct license results in the imposition on ADLS of any taxes in excess of those that would be imposed if Wyeth had granted a sublicense to such Affiliate, Wyeth shall be obligated to pay to ADLS such amounts as may be necessary to “gross up” payments to ADLS to account for such additional taxes.  Any progress reports and royalty statements to be provided under this Agreement shall be consolidated by Wyeth to one single report and statement for all Affiliates of Wyeth.

2.2.         Rights of Reference.  ADLS and Wyeth shall have Rights of Reference as set forth in Section 4.4.

2.3.         Technology Transfer.  ADLS shall provide reasonable assistance to Wyeth, as requested by Wyeth and at no additional cost to Wyeth, to effect the timely and orderly transfer of the ADLS Know-How to Wyeth in order for Wyeth to be able to Develop and Commercialize Compounds and Products as contemplated by this Agreement.  All Know-How and other materials provided by or on behalf of ADLS may be subject to the obligations set forth in Section 7, and shall be used by Wyeth and its Affiliates and Sublicensees solely for the Development, Manufacture and Commercialization of Products for the Territory pursuant to the licenses set forth in Section 2.1.1 above.

2.4.         Licenses Granted to ADLS.

2.4.1.      License for Compounds and Products.  Subject to the terms and conditions of this Agreement, Wyeth, effective as of the Effective Date, hereby grants to ADLS under any Wyeth Product Improvement, with the right to grant sublicenses as and to the extent provided in Section 2.4.2, the following royalty-free licenses:

(a)         A non-exclusive license to Develop and have Developed, in all countries throughout the world, Products for future Commercialization outside the Territory, and to Manufacture and have Manufactured, in all countries throughout the world, any such Product for use in such Development.

(b)         A non-exclusive license to Commercialize Products outside the Territory and to Manufacture and have Manufactured, in all countries throughout the world, Products solely for use or sale outside the Territory as part of such Commercialization.

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2.4.2.      ADLS’ Ability to Sublicense.  Subject to the terms of this Agreement, ADLS may sublicense any right licensed to ADLS by Wyeth in Section 2.4.1 to any ADLS Licensee.  ADLS shall give Wyeth prompt written notice of each such sublicense, identifying the applicable ADLS Licensee, Products sublicensed, territory and scope of rights granted.  ADLS shall ensure that each such ADLS Licensee complies with all applicable terms and conditions of this Agreement.

2.5.         Joint Technology.  The Parties may exploit Joint Technology as provided in Section 6.1.

2.6.         365(n) of U.S. Bankruptcy Code.   All rights and licenses now or hereafter granted by ADLS to Wyeth under or pursuant to any Section of this Agreement, including, without limitation, Sections 2.1, 2.2, 2.3 and 2.4 hereof, are rights to “intellectual property” (as defined in Section 101(35A) of Title 11 of the United States Code, as amended (such Title 11, the “Bankruptcy Code”).  ADLS hereby grants to Wyeth and its Affiliates a right to access and to obtain possession of and to benefit from and, in the case of any biological material or other tangible item of which there is a fixed or limited quantity, to obtain a pro rata portion of, each of the following to the extent related to any Compound or Product, or otherwise related to any right or license granted under or pursuant to this Agreement: (i) copies of pre-clinical and clinical research data and results, (ii) all of the following (to the extent that any of the following are so related): cell lines, antibodies, assays, reagents and other biological materials, (iii) product samples and inventory, (iv) ADLS Technology, (v) laboratory notes and notebooks, (vi) data and results related to clinical trials, (vii) Product Data or Filings, and (viii) Rights of Reference in respect of regulatory filings and approvals, all of which constitute “embodiments” of intellectual property pursuant to Section 365(n) of the Bankruptcy Code, and (xi) all other embodiments of such intellectual property, whether any of the foregoing are in ADLS’ possession or control or in the possession and control of any Third Party but which ADLS has the right to access or benefit from and to make available to Wyeth.  ADLS shall not interfere with the exercise by Wyeth or its Affiliates of rights and licenses to intellectual property licensed hereunder and embodiments thereof in accordance with this Agreement and agrees to use Commercially Reasonable Efforts to assist Wyeth and its Affiliates to obtain such intellectual property and embodiments thereof in the possession or control of Third Parties as reasonably necessary or desirable for Wyeth or its Affiliates to exercise such rights and licenses in accordance with this Agreement.  The Parties hereto acknowledge and agree that the payments provided for under Section 5.2, and all other payments by Wyeth to ADLS hereunder, other than royalty payments pursuant to Section 5.3, do not constitute royalties within the meaning of Section 365(n) of the Bankruptcy Code or relate to licenses of intellectual property hereunder.

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2.7.         No Implied Rights.  Except as expressly provided in this Agreement, neither Party shall be deemed by estoppel or implication to have granted the other Party any license or other right with respect to any intellectual property of such Party.

3.DECISION MAKING AND DISPUTE RESOLUTION.

3.1.        Steering Committee.

3.1.1.      Formation of the Steering Committee.  ADLS and Wyeth shall establish a “Steering Committee” to facilitate communications regarding the Development of Products by the Parties and to oversee, direct and coordinate the activities of the Parties under this Agreement in regard to the Development Program.  The Steering Committee shall also serve as a forum to facilitate communications between the Parties regarding Development activities and Development of Products worldwide.  The Steering Committee shall be comprised of up to four (4) representatives from each Party as appointed by such Party.  The Steering Committee may change its size from time to time by mutual consent of its members.  A Party may replace one or more of its representatives from time to time upon written notice to the other Party.  Each Party, respectively, shall designate its initial members of the Steering Committee within thirty (30) days after the Effective Date.  The Steering Committee shall exist until the completion of the ADLS Study, the [***] Study and any other studies included under the Global Development Plan, unless the Parties otherwise agree in writing.  Following termination of the Steering Committee, each Party shall continue to have an approval right with respect to matters specified to be decided by the Steering Committee under this Agreement.  In such event, if the Parties are unable to reach agreement on a matter specified in this Agreement to have been decided by the Steering Committee, the matter shall be resolved in accordance with Section 3.3.3 below.

3.1.2.      Chairperson; Secretary of the Steering Committee.  The chairperson and secretary of the Steering Committee shall rotate on an annual basis between the Parties.  The chairperson and secretary shall not be from the same Party at the same time.  The first chairperson shall be designated by Wyeth.  The chairperson shall be responsible for scheduling meetings of the Steering Committee, preparing agendas for meetings and sending to all Steering Committee members notices of all regular meetings and agendas for such meetings at least five (5) business days before such meetings.  The chairperson shall solicit input from both Parties regarding matters to be included on the agenda, and any matter either Party desires to have included on the agenda shall be included for discussion.  Nothing herein shall be construed to prohibit the Steering Committee from discussing or acting on matters not included on the applicable agenda. 

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The secretary shall record the minutes of the meeting, circulate copies of meeting minutes to the Parties and each Steering Committee member promptly following the meeting for review, comment and approval by the Steering Committee members and finalize approved meeting minutes.  The chairperson shall be a member of the Steering Committee but the secretary need not be a member of the Steering Committee.

3.1.3.      Meetings.  It is currently contemplated that the Steering Committee shall meet at least once each Calendar Quarter until it has been terminated in accordance with Section 3.1.1 at dates and times mutually agreed by the Steering Committee, unless otherwise mutually agreed by the Parties.  The initial meeting of the Steering Committee shall be held within ninety (90) days after the Effective Date.  Either Party may call a special meeting of the Steering Committee on fifteen (15) days written notice to the other Party’s members of the Steering Committee (or upon such shorter notice as exigent circumstances may require).  Such written notice shall include an agenda for the special meeting.  In-person meetings, including, without limitation, special meetings, of the Steering Committee shall alternate between the offices of the Parties, unless otherwise agreed upon by the members of the Steering Committee.  Meetings of the Steering Committee may be held telephonically or by video conference; provided however, that at least one (1) meeting per year shall be held in-person.  Meetings of the Steering Committee shall be effective only if at least one (1) representative of each Party is in attendance or participating in the meeting.  Members of the Steering Committee shall have the right to participate in and vote at meetings held by telephone or video conference.  In addition, the Steering Committee may act on any matter or issue without a meeting if it is documented in a written consent signed by each member of the Steering Committee.

3.2.         Other Committees.  The Steering Committee may establish additional committees to oversee specific projects or activities or to perform certain other functions under this Agreement, and such committees shall always include equal representation from each Party.

3.3.        Decision Making.

3.3.1.      Decisions by Consensus.  All decisions of the Steering Committee and all other committees established under this Agreement shall be made by unanimous agreement of both Parties’ representatives.  If the Steering Committee cannot or does not reach unanimous agreement on a matter within the purview of the Steering Committee, then such matter may be referred for resolution as set forth in Section 3.3.3 below.

3.3.2.      Lower Committee Escalation to Steering Committee.  If any other committee established by the Steering Committee cannot reach a

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decision on a matter, the lower committee shall refer the matter to the Steering Committee for resolution. A matter shall be considered referred to the Steering Committee as of the date that the lower committee or either Party provides each Steering Committee member a written description of the disputed matter.  The Party referring such disputed matter to the Steering Committee shall use reasonable efforts to include in the written description the positions taken by each Party’s members of the lower committee as to such matter, all other material information relevant to such matter and a copy of the minutes (if any) of the applicable lower committee meeting(s) at which such matter was discussed.  Within fifteen (15) days after such matter is so presented to the Steering Committee, the Steering Committee shall meet to discuss and try to resolve the matter.

3.3.3.      Steering Committee Dispute Resolution.  If the Steering Committee cannot resolve any matter within its purview by unanimous agreement, the matter may be referred by either Party to the Executive Officers, who shall meet promptly (and in any event within ten (10) days after such matter is referred to the Executive Officers) in an effort to resolve the matter.  If, after discussion, the Executive Officers are unable to reach consensus on the matter, any matter as to which one Party has final decision making authority (as described below in Section 3.4) may thereafter be resolved as determined by such Party and any other matter may thereafter be resolved in accordance with Section 11.2 below.

3.4.         Allocation of Final Decision Making Authority.  Final decision making authority shall be allocated to ADLS and Wyeth in regard to certain matters, to the extent such matters are within the purview of the Steering Committee, as described below.  Such final decision making authority may be exercised only after discussion by the Executive Officers as described in Section 3.3.3, in order to encourage the Parties to reach consensus on decisions at the Steering Committee level or lower committee levels.  Each Party shall exercise its final decision making authority described herein in a manner consistent with the terms and conditions of this Agreement.

3.4.1.      ADLS.  To the extent decisions regarding any of the following fall within the purview of the Steering Committee, ADLS shall have final decision making authority as described in this Section 3.4 with respect to the following matters:

(a)           Any decision involving Development of any Compound or Product for use or sale outside the Territory;

(b)           Any decision regarding any filing related to any Compound or Product with any Regulatory Authority outside the Territory (other than filings related to Manufacture outside the Territory of Compounds or Products for use or sale in the Territory);

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(c)           Any decision relating to Commercialization of any Product outside the Territory;

(d)           Any decision regarding the Manufacture of any Product for use or sale solely outside the Territory or in any clinical study undertaken for the sole purpose of obtaining any Regulatory Approval outside the Territory, except as otherwise provided in the Supply Agreement; and

(e)           Any decision involving the Label for a Product outside the Territory.  ADLS will reasonably consider, but shall have no obligation to accept or act on, requests from Wyeth to modify the Label for a Product outside the Territory.

3.4.2.      Wyeth.  Wyeth shall have final decision making authority as described in this Section 3.4 with respect to the following matters:

(a)           Any decision regarding the Development of any Compound or Product for use or sale in the Territory;

(b)           Any decision regarding any filing related to any Compound or Product with any Regulatory Authority in the Territory (other than filings related to Manufacture in the Territory of Compounds or Products for use or sale outside the Territory);

(c)           Any decision relating to Commercialization of any Product in the Territory;

(d)           Any decision regarding the Manufacture by or on behalf of Wyeth or its Affiliate or Sublicensee of any Product for use or sale in the Territory or in any clinical study undertaken for the purpose of obtaining any Regulatory Approval in the Territory (other than Manufacture by ADLS or its Affiliate or suppliers of ADLS or its Affiliate of Compounds or Products, if any, to be supplied to Wyeth or its Affiliate, which supply, if any, shall be governed by the Supply Agreement); and

(e)           Any decision involving the Label for a Product inside the Territory.  Wyeth will reasonably consider, but shall have no obligation to accept or act on, requests from ADLS to modify the Label for a Product inside the Territory.

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authority in a manner inconsistent with this Agreement, including the Global Development Plan, or to amend the provisions of this Agreement or the Global Development Plan, or to convey licenses or rights to such Party beyond those rights and licenses expressly set forth in this Agreement.

3.5.         Alliance Managers.  In addition to the foregoing governance provisions, each of the Parties shall appoint a single individual to serve as that Party’s Alliance Manager.  The role of each Alliance Manager shall be to facilitate the relationship between the Parties as established by this Agreement.  The Alliance Managers shall attend meetings of the Steering Committee and support the chairperson of such committee in the discharge of his or her responsibilities.  Unless otherwise determined by the Steering Committee, a Party’s Alliance Manager shall serve as secretary at each meeting of such committee for which the chairperson is a representative of the other Party.  Alliance Managers shall be non-voting participants in such committee meetings.  A Party may replace its Alliance Manager from time to time upon written notice to the other Party.

4.PRODUCT DEVELOPMENT, REGULATORY MATTERS, DATA SHARING AND CROSS REFERENCE RIGHTS, MANUFACTURING, SUPPLY AND COMMERCIALIZATION.

4.1.         General.  Subject to the terms and conditions of this Agreement (including the Parties’ responsibilities under the Global Development Plan and Wyeth’s responsibilities under Section 4.5.1 below), Wyeth shall have the sole authority and the exclusive right to undertake the Development of Compounds and Products for use or sale in the Territory.  Subject to the terms and conditions of this Agreement (including the Parties’ responsibilities under the Global Development Plan and ADLS’ responsibilities under Section 4.5.2 below), ADLS shall have the sole authority and the exclusive right to undertake the Development of Compounds and Products for use or sale outside the Territory, provided, however, that, in connection with such activities, ADLS shall take into account their potential impact on Wyeth’s Development and Commercialization of Compounds and Products for use or sale in the Territory.  Except as expressly provided in this Agreement, each Party shall be solely responsible for the expenses of conducting such Development.

4.2.         Global Development Plan.  From time to time, in order to facilitate the Development of Products on a worldwide basis, a Party, acting through its representatives on the Steering Committee, may propose that certain Development activities be performed in coordination between the Parties in accordance with a written plan (the “Global Development Plan”).  If approved by the Steering Committee for inclusion in the Global Development Plan, such Development activities shall be incorporated in appropriate detail into a written amendment of the Global Development Plan.  If not approved by the Steering Committee for inclusion in the Global Development Plan, such Development

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activities may be performed by a Party to the extent in accordance with Section 4.1 above.  Except as expressly provided in this Agreement or agreed in writing by the Parties, each Party shall be solely responsible for the expenses of performing its responsibilities under the Global Development Plan.

4.2.1.      In addition, if ADLS or a Licensee decides to conduct any clinical studies with respect to any proposed future Product, ADLS shall give written notice of such decision to Wyeth with a brief description of the proposed Product and clinical studies.  If, after receipt of such notice, Wyeth notifies ADLS that Wyeth has a good faith interest in Developing and Commercializing such Product in the Territory, then such clinical studies shall be added to the Global Development Plan pursuant to an amendment of the Global Development Plan to be approved by the Steering Committee in accordance with this Agreement.

4.2.2.      During the Term, the Global Development Plan may be updated from time to time as deemed necessary by the Steering Committee.

4.2.3.      Each Party shall provide to the other Party or the Steering Committee, as appropriate, such information in its Control and relevant to the Development of Products as may be necessary or appropriate in connection with updating the Global Development Plan.  Each modification or update of the Global Development Plan shall be subject to review and approval of the Steering Committee.

4.3.         Initial Global Development Plan.  The initial Global Development Plan, which shall initially consist of the ADLS Study and the [***] Study, is attached hereto as Exhibit 4.3.

4.3.1.      [***].

4.3.2.      [***].

4.4.        Data Sharing.

4.4.1.      ADLS shall promptly disclose to and share with, or cause to be disclosed to and shared with, Wyeth, at no cost to Wyeth, each Product Data or Filing generated by or otherwise coming into the ownership or Control of ADLS, any of its Affiliates or any ADLS Licensee in connection with the Development, Manufacture or Commercialization of Compounds or Products worldwide (the “ADLS Product Data or Filings”).  ADLS shall require each ADLS Licensee to allow ADLS to include in the ADLS Product Data or Filings to be provided to Wyeth under this Section 4.4.1 any Product Data or Filing generated by or otherwise coming into the ownership or Control of such ADLS Licensee in connection with the Development, Manufacture or Commercialization

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of Compounds or Products.  Upon request, ADLS shall promptly assign and transfer, or cause to be assigned and transferred, to Wyeth any ADLS regulatory filing filed with any Regulatory Authority in the Territory.

4.4.2.      Wyeth shall promptly disclose to and share with, or cause to be disclosed to and shared with, ADLS, at no cost to ADLS, all Product Data or Filings generated by or otherwise coming into the ownership or Control of Wyeth, any its Affiliates or any Wyeth Sublicensee in connection with the Development, Manufacture or Commercialization of Compounds or Products pursuant to this Agreement.

4.4.3.      Subject to Sections 4.3.1 and 8.1(e), each Party disclaims any representation or warranty that Product Data or Filings provided as set forth in this Section 4.4 will meet the requirements of any particular country, or that such Product Data or Filings will be adequate or usable by the other Party in connection with seeking any Regulatory Marketing Approval in any particular country.

4.4.4.      Subject to Section 4.4.5, each Party and its Affiliates and Sublicensees or Licensees, as the case may be, shall have the right as set forth in this Section 4.4.4 to use, without additional payment, any and all Product Data or Filings provided pursuant to Section 4.4.1 or Section 4.4.2 to support any regulatory filings for Compounds or Products (i) in the Territory, in the case of Wyeth and its Affiliates and Wyeth Sublicensees, or (ii) outside the Territory, in the case of ADLS and its Affiliates and ADLS Licensees.

(a)           ADLS hereby grants to Wyeth and its Affiliates a Right of Reference, for regulatory filings in the Territory (or for Manufacture, in countries outside the Territory, of Compounds or Products for sale in the Territory, or for clinical trials related to supporting or obtaining any Regulatory Approval in the Territory), to any ADLS Product Data or Filing to be provided or disclosed by ADLS or its Affiliates or Licensees pursuant to Section 4.4.1, and ADLS shall, and shall require its Affiliates and Licensees to, provide a signed statement to this effect, if requested by Wyeth.  Wyeth may sublicense the Right of Reference set forth in this Section 4.4.4(a) to its Sublicensees in the Territory.

(b)           Wyeth hereby grants to ADLS and its Affiliates a Right of Reference, for regulatory filings outside the Territory (or for Manufacture in the Territory of Compounds or Products for sale outside the Territory, or for clinical trials related to supporting or obtaining any Regulatory Approval outside the Territory) to any Product Data or Filing to be provided or disclosed by Wyeth or

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any of its Affiliates or Sublicensees pursuant to Section 4.4.2, and Wyeth shall, and shall require its Affiliates and Sublicensees to, provide a signed statement to this effect, if requested by ADLS.  ADLS may sublicense the Right of Reference set forth in this Section 4.4.4(b) to its Licensees solely for use in connection with the Development, Manufacture and Commercialization of Products outside the Territory.

4.4.5.      Wyeth shall obtain from each Wyeth Sublicensee (i) an obligation by the Sublicensee to disclose to and share with Wyeth (for disclosure to and sharing with ADLS as set forth in Section 4.4.2) any and all Product Data or Filings generated by or otherwise coming into the ownership or Control of such Sublicensee, and (ii) the right of ADLS, its Affiliates and Licensees to disclose and to use such Product Data or Filings as set forth in Section 4.4.4(b).

4.4.6.      ADLS shall obtain from each ADLS Licensee (i) an obligation by such Licensee to disclose to and share with ADLS (for disclosure to and sharing with Wyeth as set forth in Section 4.4.1) any and all Product Data or Filings generated by or otherwise coming into the ownership or Control of such Licensee, and (ii) the right of Wyeth, its Affiliates and Sublicensees to disclose and to use such Product Data or Filings as set forth in Section 4.4.4(a).  Commencing upon the Effective Date, it shall be a condition to any Person becoming an ADLS Licensee that such Person agree in writing to the obligation and grant of rights by such ADLS Licensee as set forth in this Section 4.4.6.

4.5.        Development Diligence.

4.5.1.      Wyeth shall use Commercially Reasonable Efforts to Develop and obtain Regulatory Marketing Approval for the Current Product in each Major Market, provided that ADLS has successfully completed all Development activities to be performed by ADLS with respect to such Product pursuant to Section 4.5.2.  In addition, Wyeth shall use Commercially Reasonable Efforts to perform its obligations under the Global Development Plan [***].  Wyeth shall have no diligence obligation, express or implied, with respect to the Development of Products except as provided in this Section 4.5.1.

4.5.2.      ADLS shall use Commercially Reasonable Efforts to perform its obligations under the Global Development Plan [***].

4.6.        Regulatory Approvals.

4.6.1.      Subject to ADLS’ obligations under Section 4.5.2, Wyeth shall file, in its own name and at its own expense, all applications for Regulatory

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Approval in the Territory for Products where Wyeth, in its sole discretion (subject to Section 4.5.1), elects to do so, and all other applications for any approvals required for any clinical study or other study or action necessary or desirable to obtain such Regulatory Approval.  Wyeth shall have the sole responsibility for communicating with any Regulatory Authority in the Territory regarding any application for Regulatory Approval or any Regulatory Approval once granted or any such other applications.

4.6.2.      Subject to its diligence obligations under Section 4.5.2, ADLS shall have the sole right, in its sole discretion, to file and maintain, in its own name, all applications for Regulatory Approval outside the Territory for Products.  Notwithstanding the foregoing, ADLS shall, or ADLS shall cause its Licensee to, as applicable, use Commercially Reasonable Efforts to obtain Regulatory Marketing Approval for the Current Product, and ADLS shall, or ADLS shall cause its Licensee to, as applicable, use Commercially Reasonable Efforts to maintain such Regulatory Marketing Approval for the Current Product, as well as any Regulatory Marketing Approval obtained from the FDA for any other Product.  If ADLS or its Licensee, as applicable, elects not to continue to maintain any such Regulatory Marketing Approval, ADLS shall provide Wyeth with prompt written notice of the decision not to continue the maintenance of such Regulatory Marketing Approval in sufficient time to allow Wyeth to continue the maintenance of such Regulatory Marketing Approval in a timely manner.  In such event, at Wyeth’s request in its sole discretion, ADLS shall, or ADLS shall cause its Licensee to, as applicable, execute such documents and perform such acts, at no cost to Wyeth, as may be reasonably necessary (i) to assign and transfer to Wyeth all of the right, title and interest of ADLS or its Licensee, as applicable, in and to such Regulatory Marketing Approval and related files and (ii) to permit Wyeth to continue the maintenance of such Regulatory Marketing Approval.  If Wyeth elects to obtain such assignment and/or continue the maintenance of such Regulatory Marketing Approval, Wyeth may deduct from any payment to be made to ADLS hereunder any expenses incurred by Wyeth in connection therewith, provided that such deductions in aggregate shall not exceed the aggregate payments to be made to ADLS hereunder.  In addition, ADLS shall, or shall cause its Licensee to, consult with Wyeth in regard to, and provide Wyeth with copies of all regulatory correspondence and meeting minutes pertaining to, all regulatory filings relating to this Section 4.6.2.

4.7.         Regulatory Reporting.  Wyeth shall be responsible for filing, at its own expense, all reports required to be filed in order to maintain any Regulatory Approvals granted for Products in the Territory.

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4.8.        Pharmacovigilance and Product Labeling.

4.8.1.      Definitions.  Unless otherwise defined herein, the terms used surrounding adverse experiences will have the meaning set forth in U.S. Code of Federal Regulations (CFR), title 21 parts 312 and 314 and the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use E2A as stated now and as may be revised in the future.

4.8.2.      Pharmacovigilance.   Wyeth shall be solely responsible for all of the following in the Territory:  adverse experience reports; literature review and associated reports; adverse experience follow-up reports; preparation and submission of all safety reports to the Regulatory Authorities as required; maintaining information regarding Compounds and Products for inclusion in the global safety database; all interactions with relevant Regulatory Authorities and investigators; periodic submissions; risk management; safety monitoring, signal detection and safety measures (e.g., clinical holds and restriction on distribution).

ADLS shall be solely responsible for all of the following outside the Territory or in connection with its clinical studies:  adverse experience reports; literature review and associated reports; adverse experience follow-up reports; preparation and submission of all safety reports to the Regulatory Authorities as required; maintaining information regarding Compounds and Products for inclusion in the global safety database; all interactions with relevant Regulatory Authorities and investigators; periodic submissions; risk management; safety monitoring, signal detection and safety measures (e.g., clinical holds and restriction on distribution).

Notwithstanding the foregoing and until such time as a pharmacovigilance agreement is executed as provided in Section 4.8.4, to the extent either Party has or receives any information regarding any adverse experience which may be related to the use of the Compounds and Products, the Parties shall promptly forward such information as follows:

·Fatal or life-threatening serious adverse events/adverse drug reactions judged by either the investigator or sponsor to be reasonably related to the Compounds, Products or protocol shall be transmitted to the other Party within two (2) calendar days from the date received by the receiving Party.

·All other serious adverse events/adverse drug reactions not fatal or life-threatening but judged by either the investigator or sponsor to be reasonably related to the Compounds, Products or

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protocol shall be transmitted to the other Party within five (5) calendar days from the date received by the receiving Party.

If to Wyeth:

Facsimile:  610-989-5544

or

Overnight courier to:

Global Safety Surveillance Epidemiology & Labeling

Wyeth Research

GSSEL Triage Unit

Dock E

500 Arcola Road

Collegeville, PA  19426

If to ADLS:

Facsimile:  630-739-6754

or

Overnight courier to:

Advanced Life Sciences Holdings, Inc.

1440 Davey Road

Woodridge, IL  60517

Attn:  Director of Regulatory Affairs

4.8.3.      Product Labeling.    Wyeth shall be solely responsible for the administrative aspects of preparing, updating and maintaining product labeling in connection with Commercialization of Product(s) in the Territory (and related Manufacturing of such Products, subject to ADLS’ obligations under the Supply Agreement).  Such labeling may include but is not limited to text and graphical contents of printed labels and labeling components, including but not limited to healthcare professional leaflets or inserts, patient leaflets or inserts and cartons.

ADLS shall be solely responsible for the administrative aspects of preparing, updating and maintaining product labeling in connection with Commercialization of Product(s) outside of the Territory (and related Manufacturing of such Products).  Such labeling may include but is not limited to text and graphical contents of printed labels and labeling components, including but not limited to healthcare professional leaflets or inserts, patient leaflets or inserts and cartons.

The Parties agree to jointly develop the Developmental Core Data Sheet and Core Data Sheet for the Products in order to achieve global labeling consistency.

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4.8.4.      Pharmacovigilance Agreement.  The Parties agree to meet promptly after the Effective Date to establish (if such agreement is mutually agreed to be necessary) a detailed pharmacovigilance agreement containing reasonable and customary terms that are mutually acceptable, outlining the responsibilities of each Party in connection with the collection and reporting of adverse experiences and Product labeling which will supersede this Section 4.8.

4.9.        Manufacture and Supply of Products.

4.9.1.      Supply Agreement.  Within [***] after the Effective Date, the Parties shall negotiate, draft, execute and deliver, and the Parties shall thereafter perform their respective obligations under, a supply agreement pursuant to which ADLS shall supply or have supplied Wyeth’s clinical and commercial requirements for Products in bulk (tablet or other) form and containing the key terms set forth in Exhibit 4.9.1 attached hereto, as well as other reasonable and customary terms for an agreement of such type (the “Supply Agreement”).

4.9.2.      Final Labeling and Packaging of Products.  Wyeth shall be responsible for the final labeling and packaging of Products supplied to Wyeth under the Supply Agreement for sale in the Territory.

4.10.       Commercialization.  Subject to the terms and conditions of this Agreement, Wyeth shall have the sole authority and the exclusive right in the Territory, at its expense, to Commercialize Products itself or through one or more Affiliates or Third Parties selected by Wyeth and shall have sole authority and responsibility in all matters relating to the Commercialization of Products in the Territory, including but not limited to:  booking sales of all Products in the Territory, making decisions with respect to the pricing of each Product in each country in the Territory and making all decisions regarding marketing of and post-approval clinical studies for any Product in the Territory, provided, however, that prior to commencing any such post-approval clinical study, Wyeth shall consult with ADLS in regard to the development of such study.  Wyeth shall use Commercially Reasonable Efforts to Commercialize the Current Product in each Major Market where Wyeth has obtained Regulatory Marketing Approval for such Product, provided that ADLS has successfully completed all Development activities to be performed by ADLS with respect to such Product pursuant to Section 4.5.2.  Except for the foregoing, Wyeth shall have no other diligence obligations, express or implied, with respect to the Commercialization of Products.  ADLS shall have the sole authority and the exclusive right outside the Territory, at its expense, to Commercialize Products itself or through one or more Affiliates or Third Parties selected by ADLS and shall have sole authority and responsibility in all matters relating to the Commercialization of Products outside the Territory, including but not limited to booking sales of all Products outside the Territory, making decisions with respect to the pricing of each

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Product in each country outside the Territory and making all decisions regarding marketing of and post-approval clinical studies for any Product outside the Territory.

4.11.       Product Recalls.  Wyeth shall be solely responsible for all contact with Regulatory Authorities relating to any Recall of any Product in the Territory and ADLS shall be solely responsible for all contact with Regulatory Authorities related to any Recall of any Product outside of the Territory.  The responsible Party shall be solely responsible for implementing, directing and administering any Recall of any such Product required or recommended by any Regulatory Authority or court of competent jurisdiction, or determined by the responsible Party, in its sole discretion, to be necessary or advisable.  Wyeth shall be responsible for the cost of any Recall of any Product in the Territory and ADLS shall be responsible for the cost of any Recall of any Product outside of the Territory, except as otherwise provided in the Supply Agreement.

5.CONSIDERATION.

5.1.         Equity Investment.  Upon the Effective Date, Wyeth and ADLS shall each execute, deliver and consummate the purchase by Wyeth and sale by ADLS of shares of ADLS’ common stock pursuant to the terms and conditions of the Stock Purchase Agreement, and thereafter Wyeth and ADLS shall perform their respective obligations thereunder.

5.2.         Milestone Payments.  In partial consideration of ADLS’ contributions to the development of data useful for the Development of Products in the Territory, Wyeth shall be obligated to make a one-time, non-refundable payment upon the achievement of each of the applicable events described in Section 5.2.2 (the “Launch Events”) and Section 5.2.3 (the “Commercial Events”) by Wyeth or any Wyeth Affiliate or Sublicensee.

5.2.1.     Timing of Payment.

(a)           Wyeth shall promptly notify ADLS in writing of the achievement of each Launch Event, and Wyeth shall have thirty (30) business days following achievement of any Launch Event in which to pay the corresponding amount to ADLS (each, a “Launch Payment”).

(b)           Each Commercial Payment payable as provided below shall be payable with the royalty due for the fourth Calendar Quarter of the Calendar Year for which the Commercial Payment is earned.

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(c)           Each Launch Payment and Commercial Payment shall be payable one time only even if multiple Products achieve such event.

5.2.2.     Launch Payments.

Launch Event	Launch Payment
[***]	$	[***]
[***]	$	[***]
[***]	$	[***]

5.2.3.      Commercial Payments.  If the Net Sales of all Products within the Territory in any Calendar Year reach any of the following levels within the time period specified for such level, Wyeth shall make the one-time payment indicated below for achievement of such Commercial Event (each, a “Commercial Payment”).  Each Commercial Payment set forth herein for Commercial Event shall be payable only once.  If Net Sales of all Products within the Territory in an eligible Calendar Year exceed more than one level of Net Sales, a Commercial Payment shall be payable for each Commercial Event achieved during such Calendar Year.  For avoidance of doubt, should Net Sales of Products first achieve any applicable Commercial Event in any Calendar Year ending after the applicable time period specified for achievement of such Commercial Event, under no circumstances shall any Commercial Payment be payable with respect to such achievement.

Commercial Event	Commercial Payment
[***]	$	[***]
[***]	$	[***]
[***]	$	[***]

5.3.        Royalties.

5.3.1.      Product Royalties.  In consideration for the licenses granted to Wyeth under Section 2.1 hereof, Wyeth shall pay to ADLS royalties during the Royalty Term for the applicable Product in the applicable country as set forth in Section 5.3.2 below, subject to the adjustments provided in Sections 5.3.4 and 5.4.2 below.

5.3.2.      Royalty Rates.  Except as provided in Sections 5.3.4 and 5.4.2 below, Wyeth shall pay to ADLS royalties on a Product-by-Product and country-by-country basis in the amount of the applicable royalty rate set forth in the table below (the “Royalty Rate”) of the aggregate Net Sales

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obtained by Wyeth, its Affiliates or its Sublicensees from the sale of each Product in the Territory during the Royalty Term for such Product:

	Royalty Rate (% of Net Sales)
[***]	[***]
[***]	[***]

“Transition Date” shall mean [***] or, if later, the last date upon which there exists a Valid Claim, covering the use or sale of the applicable Product in the applicable country, under the ADLS Patent Rights licensed to ADLS pursuant to that certain License Agreement dated December 13, 2004 between ADLS and Abbott Laboratories, as amended (the “Abbott Agreement”), with respect to which ADLS is obligated to pay royalties under the Abbott Agreement, provided that ADLS shall have delivered written evidence of such later date to Wyeth at least thirty (30) days prior to [***].

Further, if, during the Royalty Term for a Product in any country within the Territory, (i) a Third Party commences commercial sales of a Generic Product in such country or (ii) there is no Valid Claim of any ADLS Patent Right which covers the use or sale of such Product in such country, then the Royalty Rate for such Product in such country shall be [***], effective for all Net Sales of such Product in such country during the Royalty Term for such Product in such country occurring on or after (a) the date of the first commercial sale of such Generic Product in such country (for so long as any Generic Product continues to be sold in such country) or (b) the first date upon which there is no such Valid Claim in such country (for so long as there is no such Valid Claim in such country).

5.3.3.      Expiration of Royalty Term.  After expiration of the Royalty Term for any Product in any country in the Territory, no further royalties shall be payable in respect of Net Sales of such Product in such country, and the licenses granted to Wyeth under Section 2.1 with respect to such Product in such country shall thereafter become fully paid-up, perpetual, irrevocable, royalty-free licenses.

5.3.4.      Royalty Adjustments for Additional Third Party Licenses.  In the event Wyeth determines, after good faith consultation with ADLS, that it is necessary to obtain a license under any intellectual property right from any Third Party in order to research, Develop, Manufacture or Commercialize any Compound or Products pursuant to rights granted to Wyeth under this Agreement (an “Additional Third Party License”), Wyeth shall be solely responsible for negotiating and obtaining any such Additional Third Party License, but shall not be obligated to do so.  Wyeth shall use Commercially Reasonable Efforts to consult with ADLS

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regarding whether Wyeth should obtain such rights as part of an agreement through which ADLS or its licensee obtains similar rights, provided, however, that Wyeth shall have no obligation to do so.  Wyeth may deduct from the royalties payable under Section 5.3.2 on the Net Sales of any Product [***], provided that such deduction shall not reduce the royalties payable under Section 5.3.2 to less than [***] of the amount that would otherwise be payable to ADLS.  [***].  Except for any permitted deduction described in this Section 5.3.4, Wyeth shall be solely responsible for all costs of any such Additional Third Party Licenses.

5.3.5.      Other Third Party Agreements.  ADLS shall be solely responsible for all payment obligations related to the ADLS Technology under its licenses and other agreements with Third Parties that are in effect as of the Effective Date, including, without limitation, those obligations arising under the ADLS Third Party Agreements.  If after the Effective Date ADLS enters into any license or other agreement with a Third Party relating to any Compound or Product, ADLS shall use Commercially Reasonable Efforts to obtain in such license or other agreement the right to sublicense the rights granted under such license or other agreement to Wyeth under this Agreement.  ADLS shall use Commercially Reasonable efforts to consult with Wyeth prior to entering into any such license or agreement and to allow Wyeth to obtain such rights either through ADLS or directly from such Third Party.  Any payment made to such a Third Party or any additional payment made to ADLS in order to obtain such rights shall be treated as a payment made for an Additional Third Party License pursuant to Section 5.3.4.

5.3.6.      [***]

5.4.        Reports and Payments.

5.4.1.      Cumulative Royalties.  The obligation to pay royalties under Section 5.3 above shall be imposed only once with respect to Net Sales of any single unit of a Product regardless of how many applicable Valid Claims included within the ADLS Patent Rights cover the Product in the applicable country.

5.4.2.      Royalty Statements and Payments.  Within [***] after the end of each Calendar Quarter [***], Wyeth shall deliver to ADLS a report setting forth for such Calendar Quarter the following information, on a country-by-country basis: (a) the Net Sales of each Product in each country, (b) the basis for any adjustments to the royalty payable for the sale of each Product, (c) the royalty due hereunder for the sale of each Product and the resulting total royalty due for the sale of all Products during such Calendar Quarter, in each case prior to the application of the provisions of this Section 5.4.2, (d) the transfer price (determined as provided in

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Exhibit 4.9.1 attached hereto) paid by Wyeth to ADLS for the supply of Products under the Supply Agreement during such Calendar Quarter and any Wyeth Manufacturing Cost incurred during such Calendar Quarter, (e) [***] and (f) the withholding taxes, if any, required by law to be deducted in respect of the royalties payable to ADLS after giving effect to the provisions of this Section 5.4.2.  The total royalty due for the sale of Products during any Calendar Quarter shall be reduced by [***].  No report shall be required with respect to any Calendar Quarter in which both (x) there are no Net Sales of Products in the Territory and (y) there is no transfer price paid or payable by Wyeth to ADLS for the supply of Products under the Supply Agreement or Wyeth Manufacturing Cost incurred by Wyeth.  The royalty due for the sale of Products during any Calendar Quarter, determined in accordance with this Section 5.4.2, shall be remitted at the time the royalty report for such Calendar Quarter is delivered.

5.4.3.      Taxes and Withholding.  All payments under this Agreement shall be made in full without any deduction or withholding for or on account of any tax unless such deduction or withholding is required by applicable laws or regulations.  If Wyeth is so required to deduct or withhold, Wyeth will (a) promptly notify ADLS of such requirement, (b) pay to the relevant authorities the full amount required to be deducted or withheld promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against ADLS, (c) promptly forward to ADLS an official receipt (or certified copy) or other documentation reasonably acceptable to ADLS evidencing such payment to such authorities and (d) cooperate reasonably, as ADLS may request (at ADLS’ expense), in efforts of ADLS to obtain a refund or otherwise recover such withheld taxes.

5.4.4.      Currency.  All amounts payable and all calculations made hereunder shall be paid and made in United States dollars.  As applicable, Net Sales and any royalty deductions shall be converted into United States dollars in accordance with Wyeth’s customary and usual currency conversion procedures, consistently applied.

5.4.5.      Method of Payment.  All payments by one Party to the other Party under this Agreement shall be made by wire transfer in immediately available funds to such account as the receiving Party shall designate before such payment is due (which account the receiving Party may from time to time change upon written notice to the paying Party).

5.4.6.      Additional Provisions Relating to Royalties.  Each Party acknowledges and agrees that nothing in this Agreement (including, without limitation, any exhibits or attachments hereto) shall be construed

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as representing an estimate or projection of either (a) the number of Products that will or may be successfully Developed or Commercialized by either Party or (b) the anticipated sales or the actual value of any Product, and that the figures set forth in Section 5.2.3 or elsewhere in this Agreement or the exhibits hereto or that have otherwise been discussed by the Parties are merely intended to define Wyeth’s payment obligations to ADLS in the event such sales performance is achieved.  NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, THAT WYETH WILL BE ABLE TO SUCCESSFULLY DEVELOP OR COMMERCIALIZE ANY PRODUCT OR, IF COMMERCIALIZED, THAT WYETH WILL ACHIEVE ANY PARTICULAR SALES LEVEL OF SUCH PRODUCT(S).

5.5.        Maintenance of Records; Audits.

5.5.1.      Record Keeping.  Wyeth shall keep complete and accurate books and accounts of record in connection with the sale of Products, in sufficient detail to permit accurate determination of all figures and other information necessary for verification of royalties and other amounts to be paid hereunder.  Wyeth shall maintain such books and records for a period of at least three (3) years after the end of the Calendar Year in which they were generated.

5.5.2.      Audits.  Upon thirty (30) days prior written notice from ADLS, Wyeth shall permit an independent certified public accounting firm of nationally recognized standing selected by ADLS and reasonably acceptable to Wyeth to examine, at ADLS’ sole expense, the relevant books and records of Wyeth and Wyeth’s Affiliates as may be reasonably necessary to verify the accuracy of the reports submitted by Wyeth in accordance with Section 5.4 and the payment of royalties and Commercial Payments hereunder based on Net Sales.  An examination by ADLS under this Section 5.5.2 shall occur not more than once in any Calendar Year and shall be limited to the pertinent books and records for any Calendar Year ending not more than three (3) years before the date of the request.  The accounting firm shall be provided access to such books and records at Wyeth’s and Wyeth’s Affiliate’s facility(ies) where such books and records are normally kept and such examination shall be conducted during Wyeth’s and Wyeth’s Affiliate’s normal business hours.  Wyeth may require the accounting firm to sign a standard non-disclosure agreement before providing the accounting firm access to Wyeth’s and Wyeth’s Affiliate’s facilities or books and records.  Upon completion of the audit, the accounting firm shall provide both Wyeth and ADLS a written report disclosing whether the reports submitted by Wyeth are correct or incorrect, whether the royalties and other amounts paid hereunder are correct or incorrect and, in each case, the amount of any discrepancies and specific details concerning each such discrepancy (if any).

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5.5.3.      Underpayments/Overpayments.  If such accounting firm correctly concludes that additional royalties or Commercial Payment(s) were due to ADLS, Wyeth shall pay to ADLS such additional royalties or Commercial Payment(s) (together with applicable interest at [***]) within thirty (30) days of the date Wyeth receives such accountant’s written report so concluding.  In the case of such an underpayment, if such audit determines that the amount due is at least [***] more than the amount actually paid for the applicable period audited, Wyeth also shall reimburse ADLS for the out-of-pocket expenses incurred in conducting the audit.  If such accounting firm concludes that Wyeth overpaid royalties or Commercial Payment(s) to ADLS, ADLS, within thirty (30) days of the date it receives such accountant’s report so concluding, will refund such overpayments to Wyeth.

5.5.4.      Confidentiality.  All financial information of Wyeth which is subject to review under this Section 5.5 shall be deemed to be Wyeth’s Confidential Information subject to the provisions of Section 7 hereof, and ADLS shall not disclose such Confidential Information to any Third Party or use such Confidential Information for any purpose other than verifying payments to be made by Wyeth to ADLS hereunder, provided, however, that such Confidential Information may be disclosed by ADLS to Third Parties to the extent (but only to the extent) necessary to enforce ADLS’ rights under this Agreement.

6.INTELLECTUAL PROPERTY.

6.1.         Inventions.  Subject to the provisions of Section 2.1 hereof, any invention or Know-How made jointly by employees of both Parties (a “Joint Invention” or “Joint Know-How”) and any Patent Right claiming any such Joint Invention or Joint Know-How (a “Joint Patent Right”) shall be jointly owned by the Parties.  All inventions and Know-How made solely by one or more employees of a Party shall be solely owned by such Party.  All determinations of inventorship under this Agreement shall be made in accordance with the patent law of the United States.  ADLS shall promptly disclose to Wyeth any invention or any newly acquired or licensed Patent Right or Know-How that is or may become a Licensed Right.  Any Joint Invention or any Joint Know-How, including any resulting Joint Patent Right, shall be treated as Joint Technology under this Agreement.

During the Term and after termination of this Agreement, either Party may exploit and grant licenses under such Party’s interest in any Joint Technology without accounting to or obtaining consent from the other Party, subject to the rights and obligations of the Parties with respect to Joint Technology under this Agreement, including the licenses of ADLS’ interest under the Joint Technology granted by ADLS to Wyeth under Section 2.1.1.

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6.2.        Patent Rights.

6.2.1.     Filing, Prosecution and Maintenance of Patent Rights.

(a)           ADLS Patent Rights.  ADLS, at its expense, shall have the sole right but not the obligation to prepare, file, prosecute and maintain, throughout the world, all ADLS Patent Rights other than Territory Patent Rights using counsel of its choice.  ADLS shall have the first right but not the obligation to file or continue prosecution or maintenance of any application for an ADLS Patent Right in the Territory (a “Territory Patent Right”) using patent counsel selected by ADLS and reasonably acceptable to Wyeth.  Before filing any Territory Patent Right, ADLS shall give Wyeth a reasonable opportunity to review and comment upon the text of the application.  ADLS shall consult with Wyeth with respect to any such application, shall not unreasonably refuse to address any of Wyeth’s comments with respect to such application and shall supply Wyeth with a copy of each such application as filed, together with notice of its filing date and serial number.  ADLS shall also keep Wyeth advised of the status of prosecution of all such patent applications included within the ADLS Patent Rights and shall reasonably consider timely comments of Wyeth with respect thereto, and provide Wyeth with a reasonable opportunity to comment on all material correspondence received from and all material submissions to be made to any government patent office or authority with respect to any such patent application or patent.  In addition, if ADLS elects not to file in any country in the Territory a patent application on ADLS Know-How that, if filed, would be a Territory Patent Right, or to cease the prosecution or maintenance of any Territory Patent Right in the Territory, ADLS shall provide Wyeth with prompt written notice upon the decision to not file or continue the prosecution of such patent application or maintenance of such patent in sufficient time to allow Wyeth to file, continue prosecution of such application or maintain such patent in a timely manner.  In such event, ADLS shall permit Wyeth, at Wyeth’s sole discretion, to file or continue prosecution or maintenance of such Territory Patent Right in the applicable country on ADLS’ behalf and at Wyeth’s own expense.  If Wyeth elects to make such filing and/or continue such prosecution or maintenance, Wyeth may deduct from any payment to be made to ADLS hereunder any expenses incurred by Wyeth in connection therewith.

(b)           Joint Patent Rights.  In the event the Parties make any Joint Invention, the Parties shall promptly meet to discuss and

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determine, based on the advice of patent counsel selected jointly by the Parties, whether to seek patent protection thereon.  If the Parties jointly decide to seek patent protection on a Joint Invention, the Parties shall jointly appoint one of the Parties (the “Prosecuting Party”) to have the obligation (subject to the opt out provisions of this Section 6.2.1(b)), to prepare, file, prosecute and maintain any Joint Patent Right throughout the world to the extent determined jointly by the Parties, using patent counsel selected by jointly the Parties.  The Prosecuting Party shall give the other Party a reasonable opportunity to review the text of any application with respect to such Joint Patent Right before filing, shall consult with such other Party with respect thereto, shall not unreasonably refuse to address any timely comments of such other Party with respect to such application and shall supply such other Party with a copy of the application as filed, together with notice of its filing date and serial number.  The Prosecuting Party shall keep the other Party advised of the status of the actual and prospective patent filings (including, without limitation, the grant of any Joint Patent Rights), and shall provide such other Party with advance copies of any material official correspondence related to the filing, prosecution and maintenance of such patent filings.  Subject to the opt-out provisions below, the Party other than the Prosecuting Party shall reimburse the Prosecuting Party for [***] of the out-of-pocket costs incurred by the Prosecuting Party in preparing, filing, prosecuting and maintaining such Joint Patent Rights, which reimbursement will be made pursuant to invoices submitted by the Prosecuting Party to the other Party no more often than once per Calendar Quarter.  If either Party (the “Declining Party”) at any time declines to share in the costs of filing, prosecuting and maintaining any such Joint Patent Right, on a country-by-country basis, the Declining Party shall provide the other Party (the “Continuing Party”) with thirty (30) days prior written notice to such effect, in which event the Declining Party shall (i) have no responsibility for any expenses incurred in connection with such Joint Patent Right in the applicable country after the end of such thirty (30) day period and (ii) if the Continuing Party elects to continue prosecution or maintenance, the Declining Party, upon the Continuing Party’s request, shall execute such documents and perform such acts, at the Continuing Party’s expense, as may be reasonably necessary (x) to assign to the Continuing Party all of the Declining Party’s right, title and interest in and to such Joint Patent Right and (y) to permit the Continuing Party to file, prosecute and/or maintain such Joint Patent Right.  Any such Joint Patent Right shall cease to be a

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Joint Patent Right and shall become a Patent Right of the Continuing Party.

(c)           No liability.  Neither Party (the “First Party”) shall have any liability to the other Party (the “Second Party”) for any actions taken or not taken after exercising any right granted to the First Party under the provisions of this Section 6.2.1 to file a patent application or to assume or continue the prosecution or maintenance of a Patent Right which (in the case of any such patent application or Patent Right) the Second Party has elected not to file or not to prosecute or maintain or, in the case of any Joint Patent Right, not to pay for.

6.2.2.     Enforcement of Patent Rights.

(a)           Notice.  If either Wyeth or ADLS becomes aware of any infringement, anywhere in the world, of any issued patent within the ADLS Patent Rights or Joint Patent Rights, it will promptly notify the other Party in writing to that effect.

(b)           Patent Rights in the Territory.  In all cases where such infringement occurs in the Territory or represents infringement of any Territory Patent Right or Joint Patent Right in the Territory, except in cases where any existing ADLS Third Party Agreement grants the first or sole right to prosecute such infringement to a Third Party, Wyeth shall have the first right, but not the obligation, to take action to obtain a discontinuance of infringement or bring suit against a Third Party infringer of such Patent Rights within [***] from the date of notice given pursuant to Section 6.2.2(a) and, with ADLS’ consent or if ADLS is a necessary and indispensable party, to join ADLS as a party plaintiff.  Wyeth shall bear all the expenses of any suit brought by it claiming infringement of any such Patent Rights.  ADLS will cooperate with Wyeth in any such suit and shall have the right to consult with Wyeth and to participate in and be represented by independent counsel in such litigation at its own expense.  Wyeth shall incur no liability to ADLS as a consequence of such litigation or any unfavorable decision resulting therefrom, including any decision holding any of such Patent Rights invalid or unenforceable.  If, after the expiration of the foregoing [***] period (or, if earlier, the date upon which Wyeth provides written notice that it does not plan to seek a discontinuance or bring suit), Wyeth has not obtained a discontinuance of infringement of such Patent Rights or filed suit against any such Third Party infringer of such Patent Rights, then ADLS shall have the right, but not the obligation, to bring suit against such Third Party infringer of such

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Patent Rights and to join Wyeth as a party plaintiff, provided that ADLS shall bear all the expenses of such suit.  Wyeth will cooperate with ADLS in any such suit for infringement of such Patent Rights brought by ADLS against a Third Party, and shall have the right to consult with ADLS and to participate in and be represented by independent counsel in such litigation at its own expense.  ADLS shall incur no liability to Wyeth as a consequence of such litigation or any unfavorable decision resulting therefrom, including any decision holding any of such Patent Rights invalid or unenforceable.  Neither Party shall have the right to settle any patent infringement litigation under this Section 6.2.2(b)  in a manner that diminishes the rights or interests of the other Party without the prior written consent of such other Party, such consent not to be unreasonably withheld, conditioned or delayed.  Any recoveries obtained by either Party as a result of any proceeding against a Third Party infringer (where the infringement relates to the Manufacture, importation, use, offer for sale or sale of any Product) shall be allocated as follows:

(i)Such recovery shall first be used to reimburse each Party for all out-of-pocket costs in connection with such litigation paid by that Party;

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(iii)         [***].

(c)           Joint Patent Rights Outside the Territory.  With respect to any notice of a Third Party infringer of the Joint Patent Rights outside the Territory, the Parties shall meet as soon as reasonably practicable to discuss such infringement and determine an appropriate course of action, including an initial allocation of the fees and expenses of such course of action.  The Parties jointly shall appoint one of the Parties (the “Leading Party”) to bring an action against such Third Party infringer or otherwise address such alleged infringement within [***] from the date of notice and to control such litigation or other means of addressing such infringement.  The other Party shall cooperate with the Leading Party in any such suit brought by the Leading Party and shall have the right to consult with the Leading Party and participate in and be represented by independent counsel in such litigation at its own expense. The Leading Party shall not have the right to settle any patent infringement litigation under this Section 6.2.2(c) in a manner that diminishes the rights or interests of the other Party without the prior written consent of such other Party, such

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consent not to be unreasonably withheld or delayed.  Any recoveries obtained by either Party shall be allocated as in Section 6.2.2(b).

6.2.3.     Infringement and Third Party Licenses.

(a)           Notice of Potential Infringement of Third Party Rights.  If the making, having made, importing, exporting, using, distributing, marketing, promoting, offering for sale or selling of any Product is alleged by a Third Party to infringe a Third Party’s patent or other intellectual property rights, the Party becoming aware of such allegation shall promptly notify the other Party.  Additionally, if either Party determines that, based upon the review of a Third Party’s patent or patent application or other intellectual property rights, it may be desirable to obtain a license from such Third Party with respect thereto, such Party shall promptly notify the other Party of such determination.

(b)           Option to Negotiate.  In the event that a Party determines that it may be desirable to obtain a license under one or more patents or patent applications or other intellectual property rights Controlled by a Third Party (collectively, “Third Party IP Rights”), which Third Party IP Rights (i) relate to any Compound or any Product and (ii) if valid and issued, may, in the absence of a license from such Third Party, be infringed by the Development, Manufacture, use or Commercialization of any Compound or Product by or on behalf of Wyeth or any of its Affiliates or Sublicensees in the Territory or outside of the Territory pursuant to the exercise of rights granted by ADLS to Wyeth hereunder, such Party shall have the right, but not the obligation, to negotiate and enter into an agreement with such Third Party, whereby such Party is granted a license under such Third Party IP Rights permitting such Party to practice such Third Party IP Rights in connection with the Development, Manufacture, use or Commercialization of any Compounds or Products and the performance of any of its obligations or the exercise of any of its rights under this Agreement; provided, however, that if such Party proceeds in negotiating and entering into such license agreement with such Third Party, then (a) if such Party is Wyeth, and the license agreement with such Third Party includes the grant of rights outside of the Territory, Wyeth shall use Commercially Reasonable Efforts to obtain the right under such license agreement to sublicense such Third Party IP Rights outside of the Territory to ADLS, and (b) if such Party is ADLS, and the license agreement with such Third Party includes the grant of rights in the Territory, ADLS shall use Commercially

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Reasonable Efforts to obtain the right under such license agreement to sublicense such Third Party IP Rights in the Territory to Wyeth.  The provisions of this Section 6.2.3(b) are subject to the provisions of Sections 5.3.4 and 5.3.5.

(c)           Third Party Infringement Suit.  If a Third Party sues Wyeth or any of Wyeth’s Affiliates or Sublicensees (the “Sued Party”) alleging that the Sued Party’s practice of any right granted by ADLS to Wyeth hereunder through the Development, Manufacture, use or Commercialization of any Compound or Product pursuant to this Agreement infringes or will infringe such Third Party’s intellectual property, then, upon the Sued Party’s request and in connection with the Sued Party’s defense of any such Third Party infringement suit, ADLS shall provide reasonable assistance to the Sued Party for such defense at the Sued Party’s expense.  The Sued Party shall be solely responsible for expenses incurred in defending against any such suit and for payment of any damages or other rewards that may result therefrom, subject to Section 10.

6.2.4.      Patent Certifications.  Each Party shall immediately give written notice to the other of any certification of which it becomes aware filed pursuant to any statutory or regulatory requirement in any country in the Territory similar to 21 U.S.C. § 355(b)(2)(A) or § 355(j)(2)(A)(vii) (or any amendment or successor statute thereto) claiming that any ADLS Patent Right or Joint Patent Right covering any Compound or Product is invalid or that infringement will not arise from the Development, Manufacture, use or Commercialization in the Territory of such Compound or Product by a Third Party.  Upon the giving or receipt of such notice, Wyeth shall have the first right, but not the obligation, to bring an infringement action against such Third Party.  In such a case, Wyeth shall notify ADLS at least ten (10) days prior to the date set forth by statute or regulation of its intent to exercise, or not exercise, this right.  Any infringement action against a Third Party arising under this Section 6.2.4 shall be governed by the provisions of Section 6.2.2(b) hereof.

6.2.5.      Patent Term Restoration.  During the Term, the Parties shall reasonably cooperate with each other in obtaining patent term restoration in any country in the Territory under any statute or regulation equivalent or similar to 35 U.S.C. § 156, where applicable to the ADLS Patent Rights and Joint Patent Rights.  If any election with respect to seeking such patent term restoration is to be made in any country in the Territory during the Term with respect to such country, Wyeth shall make such election (including, without limitation, by filing supplementary protection certificates and any other extensions that are now or in the future become available) and ADLS shall abide by such election and cooperate, as

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reasonably requested by the Wyeth, in connection with the foregoing (including, without limitation, by providing appropriate information and executing appropriate documents).

6.3.         Recording.  If Wyeth deems it necessary or desirable to register or record this Agreement or evidence of this Agreement with any patent office or other appropriate government authorities in one or more jurisdictions in the Territory, ADLS shall reasonably cooperate to execute and deliver to Wyeth any documents accurately reflecting or evidencing this Agreement that are necessary or desirable, in Wyeth’s reasonable judgment, to complete such registration or recordation.  Wyeth shall reimburse ADLS for all reasonable out-of-pocket expenses, including attorneys’ fees, incurred by ADLS in complying with the provisions of this Section 6.3.

6.4.         Trademarks.  Wyeth shall, in its sole discretion, select and own all product-related Trademarks and related copyrights to be used in connection with the Commercialization of any Product hereunder in the Territory, except to the extent that Wyeth in its discretion may determine to exercise the right granted to Wyeth by ADLS under the Trademark license provided for in Section 2.1.3.  ADLS shall neither use nor seek to register, anywhere in the world, any Trademark which is confusingly similar to any Trademark used by or on behalf of Wyeth or its Affiliates or Sublicensees in connection with any Product commercialized hereunder (other than any Trademark rights to which were obtained by Wyeth from ADLS under Section 2.1.3; provided, however, that nothing in this Section 6.4 shall be construed to prevent ADLS from enforcing its own Trademark rights.

7.CONFIDENTIALITY.

7.1.         Confidentiality.  Except to the extent expressly authorized by this Agreement or otherwise agreed in writing by the Parties, for the Term and for [***] thereafter, each Party (the “Receiving Party”) receiving any Confidential Information of the other Party (the “Disclosing Party”) hereunder shall keep such Confidential Information confidential and shall not publish or otherwise disclose or use such Confidential Information for any purpose other than as provided for in this Agreement except for Confidential Information that the Receiving Party can establish:

(a)           was already known by the Receiving Party (other than under an obligation of confidentiality) at the time of disclosure by the Disclosing Party and such Receiving Party has documentary evidence to that effect;

(b)           was generally available to the public or otherwise part of the public domain at the time of its disclosure to the Receiving Party;

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(c)           became generally available to the public or otherwise part of the public domain after its disclosure to the Receiving Party, and other than through any act or omission of the Receiving Party in breach of this confidentiality obligation;

(d)           was disclosed to the Receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the Disclosing Party not to disclose such information to others; or

(e)           was independently discovered or developed by or on behalf of the Receiving Party without the use of or reference to the Confidential Information belonging to the Disclosing Party and the Receiving Party has documentary evidence to that effect.

7.2.         Authorized Disclosure and Use.

7.2.1.      Disclosure.  Notwithstanding the foregoing Section 7.1, the Receiving Party may disclose Confidential Information belonging to the Disclosing Party to the extent such disclosure is reasonably necessary to:

(a)           file or prosecute patent applications which the Receiving Party is authorized to file or prosecute hereunder, if the Disclosing Party consents to such disclosure (such consent not to be unreasonably withheld or delayed); provided that a disclosure of the Disclosing Party’s Confidential Information under this Section 7.2.1(a) shall be treated as a publication under Section 7.4.4, and shall be subject to the requirements of advance notice, a review period and an opportunity to file patent application(s), as set forth in Section 7.4.4;

(b)           prosecute or defend litigation;

(c)           exercise rights hereunder provided such disclosure is covered by terms of confidentiality similar to those set forth herein;

(d)           facilitate discussions with prospective licensees and sublicensees of the Receiving Party, subject to appropriate confidentiality agreements;

(e)           facilitate discussions with potential financial investors in connection with an investment in or acquisition of the Receiving Party, subject to appropriate confidentiality agreements; or

(f)            comply with applicable governmental laws, regulations and orders.

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In the event that the Receiving Party shall reasonably deem it necessary to disclose, pursuant to Section 7.2.1(b) or 7.2.1(f), Confidential Information belonging to the Disclosing Party, the Receiving Party shall to the extent possible give reasonable advance notice of such disclosure to the Disclosing Party and take reasonable measures to ensure confidential treatment of such information.

7.2.2.      Use.  Notwithstanding the foregoing Section 7.1, each Party shall have the right to use Confidential Information of the other Party in Developing, Manufacturing and Commercializing Compounds and Products as provided in this Agreement.

7.3.         SEC or Similar Filings.  Either Party may disclose the terms of this Agreement and events related to the Development or Commercialization of Products (including the achievement of Launch Events and Commercial Events and the payment and amount of corresponding payments, as well as the equity purchase described in Section 5.1) to the extent reasonably required to comply with applicable laws, rules and regulations, including, without limitation, the rules and regulations promulgated by the United States Securities and Exchange Commission, comparable foreign regulatory organizations and self-regulatory organizations (such as securities exchanges).  Subject to the foregoing, before disclosing this Agreement or any of the terms hereof pursuant to this Section 7.3, the Parties will reasonably consult with one another on the terms of this Agreement to be redacted in making any such disclosure.  If a Party discloses this Agreement or any of the terms hereof in accordance with this Section 7.3, such disclosing Party agrees, at its own expense, to seek confidential treatment of portions of this Agreement, or such terms, as may be reasonably and timely requested by the other Party.

7.4.         Public Announcements; Publications.

7.4.1.      Coordination.  The Parties agree on the importance of coordinating their public announcements respecting this Agreement and the subject matter thereof (other than academic, scientific or medical publications that are subject to the publication provision set forth below).  Subject to Section 7.3, ADLS and Wyeth shall, from time to time, and at the request of the other Party, discuss and agree on the general information content relating to this Agreement which may be publicly disclosed (including, without limitation, by means of any printed publication or oral presentation).

7.4.2.      Announcements.  Except as may be expressly permitted under Sections 7.3, 7.4.3 and 7.4.4, or as may be appropriate for either Party to make in connection with its Development or Commercialization activities as contemplated hereunder, subject to Sections 7.1 and 7.2 hereof, neither

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Party will make any public announcement regarding this Agreement or the Development, Manufacturing or Commercialization of any Product without the prior written approval of the other Party.

7.4.3.      Press Releases.  Each Party may issue, if it determines to do so, a press release reasonably approved by the other Party, announcing the execution of this Agreement.  Such press release to be issued by ADLS shall be in the form of Exhibit 7.4.3 attached hereto.

7.4.4.      Publications.  During the Term, each Party will submit to the other Party for reasonable prior review and approval all proposed academic, scientific and medical publications and public presentations relating to the Development, Manufacture or Commercialization of any Product, or any proposed disclosure under Section 7.2.1(a) (but excluding marketing, sales and promotional materials and presentations used for Commercialization), for review in connection with preservation of Patent Rights or to determine whether any of such other Party’s Confidential Information should be modified or deleted.  Without limiting the foregoing, if such proposed publication or presentation contains information or data that should reasonably be reviewed for the preservation of Patent Rights, written copies of such proposed publication or presentation shall be submitted to the non-publishing Party no later than sixty (60) days before submission for publication or presentation and the non-publishing Party shall provide its comments with respect to such publication or presentation within thirty (30) business days of its receipt of such written copy.  The review period may be extended for an additional ninety (90) days in the event the non-publishing Party can demonstrate reasonable need for such extension, including, but not limited to, the preparation and filing of patent applications.  By mutual agreement, this period may be further extended.  Wyeth and ADLS will each comply with standard academic practice regarding authorship of scientific publications and recognition of the contribution of other parties in any publications relating to the Development, Manufacture or Commercialization of any Product.

7.5.         Termination of Prior Non-Disclosure Agreement.  This Agreement supersedes the Non-Disclosure Agreement between the Parties dated July 18, 2007 (the “Non-Disclosure Agreement”), including any amendments thereto, provided, however, that the foregoing shall not limit any remedies available to either Party with respect to any breach of the Non-Disclosure Agreement which occurred prior to the Effective Date.  All Information (as defined in the Non-Disclosure Agreement) exchanged between the Parties under the Non-Disclosure Agreement shall be deemed to be Confidential Information under this Agreement and shall be subject to the terms of this Section 7.

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8.REPRESENTATIONS, WARRANTIES AND COVENANTS.

8.1.         Representations, Warranties and Covenants of Each Party.  Each of ADLS and Wyeth hereby represents, warrants and covenants to the other Party as follows:

(a)           it is a corporation duly organized and validly existing under the laws of the state of its incorporation;

(b)           the execution, delivery and performance of this Agreement by such Party has been duly authorized by all requisite corporate action and does not require any stockholder action or approval;

(c)           it has the power and authority to execute and deliver this Agreement and to perform its obligations hereunder;

(d)           the execution, delivery and performance by such Party of this Agreement and its compliance with the terms and provisions hereof does not and will not conflict with or result in a breach of any of the terms and provisions of or constitute a default under (i) a loan agreement, guaranty, financing agreement, agreement affecting a product or other agreement or instrument binding or affecting it or its property; (ii) the provisions of its certificate of incorporation or bylaws; or (iii) any order, writ, injunction or decree of any court or governmental authority entered against it or by which any of its property is bound;

(e)           it shall use Commercially Reasonable Efforts to conduct all human clinical trials of Products in accordance with current Good Clinical Practices, as defined by regulations promulgated by the FDA and corresponding ICH Guidelines, and shall use Commercially Reasonable Efforts to cause its Affiliates and Licensees (in the case of ADLS) and Sublicensees (in the case of Wyeth) to conduct such clinical trials in such manner; and

(f)            it shall at all times comply in all material respects with all laws and regulations applicable to its activities under this Agreement.

8.2.         Additional Representations, Warranties and Covenants of ADLS.  In addition to the representations, warranties and covenants made by ADLS elsewhere in this Agreement, ADLS hereby represents, warrants and covenants to Wyeth that:

(a)           except as disclosed in Exhibit 8.2(a), as of the Effective Date, the ADLS Patent Rights and the ADLS Know-How are

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existing and, to its knowledge, are not invalid or unenforceable, in whole or in part;

(b)           it has the full right, power and authority to grant the licenses granted or to be granted to Wyeth under this Agreement;

(c)           except as disclosed in Exhibit 8.2(c) attached hereto, as of the Effective Date, no Third Party has any right, title or interest in or to any of the ADLS Patent Rights or ADLS Know-How or any of ADLS’ interest in the Joint Know-How or Joint Patent Rights that would preclude the grant to Wyeth of the licenses set forth herein;

(d)           except as disclosed in Exhibit 8.2(c) attached hereto, ADLS is the sole and exclusive owner of the ADLS Patent Rights listed on Exhibit 1.6 attached hereto and the ADLS Know-How existing as of the Effective Date, all of which are free and clear of any liens, charges or encumbrances;

(e)           except as set forth in Exhibit 8.2(e) attached hereto, no ADLS Patent Right and no portion of the ADLS Know-How existing as of the Effective Date and relating to any Compound or Product is subject to any funding agreement with the United States government or any of its agencies;

(f)            to its knowledge, as of the Effective Date, neither the Development, Manufacture, use or Commercialization of any Compound or Product infringes or would infringe any existing issued patent owned or possessed by any Third Party;

(g)           to its knowledge, as of the Effective Date, there are no Third Party pending patent applications which are not included in the ADLS Patent Rights and, if issued, would cover the Development, Manufacture, use or Commercialization of any Compound or Product;

(h)           to its knowledge, as of the Effective Date, there are no claims, judgments or settlements against or owed by ADLS or any of its Affiliates, or pending or threatened claims or litigation, in each case relating to the ADLS Patent Rights listed in Exhibit 1.6 attached hereto or the ADLS Know-How;

(i)            during the Term, ADLS will use diligent efforts not to diminish the rights under the ADLS Patent Rights or the ADLS Know-How granted to Wyeth hereunder, including, without limitation, by not committing or permitting any actions or

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omissions which would cause ADLS to breach any ADLS Third Party Agreement; ADLS will provide Wyeth promptly with written notice of any such breach or any allegation of any such breach; and as of the Effective Date, ADLS is in compliance in all respects with each ADLS Third Party Agreement;

(j)the ADLS Third Party Agreements are in full force and effect; to ADLS’ knowledge, as of the Effective Date, no other party to such agreements is in breach or default thereunder; and ADLS has not waived or allowed to lapse or terminate any of its rights relating to any Compound or Product under the ADLS Third Party Agreements;

(k)ADLS has provided a true and complete copy of each ADLS Third Party Agreement to Wyeth, including any amendment(s) thereto;

(l)ADLS will not during the Term amend such ADLS Third Party Agreements in a manner that would adversely affect the rights, obligations or economic interests of Wyeth under this Agreement without Wyeth’s prior written consent;

(m)ADLS shall furnish Wyeth with copies of all notices received by ADLS relating to any alleged breach or default by ADLS under ADLS Third Party Agreements within five (5) business days after ADLS’ receipt thereof.  In the event ADLS does not resolve any such alleged breach, it shall notify Wyeth within a sufficient period of time before the expiration of the cure period for such breach under such ADLS Third Party Agreement such that Wyeth, in its sole discretion, is able to cure or otherwise resolve such alleged breach.  If Wyeth makes any payments to a Third Party in connection with the cure or other resolution of such alleged breach of ADLS, then Wyeth may credit the amount of such payments against any royalties or other payments payable to ADLS pursuant to this Agreement;

(n)ADLS shall promptly furnish Wyeth with copies of all (i) amendments of the ADLS Third Party Agreements and (ii) correspondence (or in the case of oral discussions, a summary of such discussions) with or from and reports received from or provided to licensors under the ADLS Third Party Agreements to the extent material to Wyeth or its rights granted under this Agreement;

(o)except as disclosed in Exhibit 8.2(o) attached hereto, as of the Effective Date, ADLS is not a party to or otherwise subject to

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any Control Limitation Agreement limiting Wyeth’s access to or rights with respect to any Licensed Right or any other intellectual property right that would, but for such Control Limitation Agreement, be included in the Licensed Rights;

(p)except as may otherwise be expressly permitted by the terms of this Agreement, during the Term, ADLS will not enter into or otherwise allow itself to be subject to any Control Limitation Agreement limiting Wyeth’s access to or rights with respect to any Licensed Right or any other intellectual property right that would, but for such Control Limitation Agreement, be included in the Licensed Rights;

(q)as of the Effective Date, there are no ADLS Licensees, and ADLS will provide Wyeth promptly with written notice in the event that any Person becomes an ADLS Licensee and a copy of any document pursuant to which such Person is granted a license or sublicense of any right to Develop, Manufacture or Commercialize any Compound or Product, which copy may be redacted with respect to financial terms;

(r)it has complied with the “Right of First Negotiation” as defined in Section 5.6 of the Abbott Agreement, including the notice and negotiation provisions thereof, with respect to the transactions contemplated by this Agreement;

(s)[***]; and

(t)[***].

8.3.         Representation by Legal Counsel.  Each Party hereto represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has participated in the drafting hereof.  In interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption shall exist or be implied against the Party which drafted such terms and provisions.

8.4.         No Inconsistent Agreements.  Neither Party has in effect and after the Effective Date neither Party shall enter into any oral or written agreement or arrangement that would be inconsistent with its obligations under this Agreement.

8.5.         Disclaimer.  EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, THE PARTIES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND PARTICULARLY THAT PRODUCTS WILL BE SUCCESSFULLY

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DEVELOPED HEREUNDER, AND IF PRODUCTS ARE DEVELOPED, WITH RESPECT TO SUCH PRODUCTS, THE PARTIES DISCLAIM ALL IMPLIED WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

9.TERM AND TERMINATION.

9.1.         Term.  The term of this Agreement (the “Term”) will commence on the Effective Date and shall extend, unless this Agreement is terminated earlier in accordance with this Section 9, on a Product-by-Product and country-by-country basis until such time as the Royalty Term with respect to the sale of such Product in such country expires.

9.2.         Termination by Either Party for Cause.  Either Party may terminate this Agreement, in its entirety or, at the terminating Party’s option, on a Product-by-Product and country-by-country basis, at any time during the Term by giving written notice to the other Party in the event that the other Party commits a material breach of its obligations under this Agreement and such breach remains uncured for [***] (or [***] in the case of the breach of a payment obligation, other than any payment obligation that the payor is disputing in good faith), measured from the date written notice of such breach is given to the breaching Party; provided, however, that if such breach is not susceptible of cure within the stated period and the breaching Party uses active and continuous, diligent, good faith efforts to cure such breach, the stated period will be extended by an additional [***].  Notwithstanding the foregoing, a Party shall not have the right to terminate this Agreement in part pursuant to this Section 9.2 with respect to an individual Product or country unless the other Party’s material breach giving rise to such termination right specifically relates to such Product or country, as applicable.

9.3.         Termination by Wyeth At Will or For Safety.

9.3.1.      Termination At Will.  Wyeth shall have the right, exercisable upon [***] prior written notice to ADLS, to terminate this Agreement either (a) in its entirety or (b) on a Product-by-Product basis.  Notwithstanding the foregoing, in no event shall such termination at will by Wyeth relieve it of its obligation to fully satisfy its payment obligations under this Agreement, to the extent accrued prior to such termination, and stock purchase obligations under Section 5.1.

9.3.2.      Termination for a Material Safety Issue.  Wyeth shall have the right to terminate this Agreement, at any time, either in its entirety or on a Product-by-Product and country-by-country basis, by giving [***] prior written notice to ADLS in the event of any safety issue that would reasonably be expected to have a material adverse effect on Wyeth’s ability to Develop, Manufacture or Commercialize any Compound or

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Product, as determined in Wyeth’s reasonable judgment and according to Wyeth’s standard internal procedures for evaluating such safety issues.

9.4.Termination on Insolvency of ADLS.  ADLS shall be deemed a “Debtor” under this Agreement if, at any time during the Term (i) a case is commenced by or against ADLS under the Bankruptcy Code, (ii) ADLS files for or is subject to the institution of bankruptcy, reorganization, liquidation or receivership proceedings (other than a case under the Bankruptcy Code), (iii) ADLS assigns all or a substantial portion of its assets for the benefit of creditors, (iv) a receiver or custodian is appointed for ADLS’ business or (v) a substantial portion of ADLS’ business is subject to attachment or similar process; provided, however, that in the case of any involuntary case under the Bankruptcy Code, ADLS shall not be deemed a Debtor if the case is dismissed within [***] after the commencement thereof.  In the event that ADLS is deemed a Debtor, Wyeth may terminate this Agreement by providing written notice to ADLS.  In accordance with Section 2.6 above, all licenses granted under this Agreement are deemed to be, for purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to “intellectual property” as defined in Section 101 of the Bankruptcy Code, and Wyeth shall have such rights as are provided under the Bankruptcy Code in the event of the bankruptcy of ADLS.

9.4.1.      Licenses.  If a case is commenced under the Bankruptcy Code by or against ADLS, ADLS (in any capacity, including debtor-in-possession) and its successors and assigns (including a trustee) shall:

(a)as Wyeth may elect in a written request, immediately upon such request:

(i)            perform all of the obligations provided in this Agreement to be performed by ADLS, including, where applicable, providing to Wyeth portions of intellectual property licensed hereunder (including embodiments thereof) held by ADLS and/or such successors and assigns or otherwise available to them; or

(ii)           provide to Wyeth all such intellectual property (including all embodiments thereof) held by ADLS and/or such successors and assigns or otherwise available to them; and

(b)not interfere with Wyeth’s rights under this Agreement, or any agreement supplemental hereto, to such intellectual property (including such embodiments), including any right to obtain such intellectual property (or such embodiments) from another entity, to the extent provided in Section 365(n) of the Bankruptcy Code.

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9.4.2.      Rights to Intellectual Property.  If (i) a case under the Bankruptcy Code is commenced by or against ADLS, (ii) this Agreement is rejected as provided in the Bankruptcy Code and (iii) Wyeth elects to retain its rights hereunder as provided in Section 365(n) of the Bankruptcy Code, then ADLS (in any capacity, including debtor-in-possession) and its successors and assigns (including any trustee) shall provide to Wyeth all intellectual property licensed hereunder (including all embodiments thereof) held by ADLS and/or such successors and assigns, or otherwise available to them, immediately upon Wyeth’s written request.  Whenever ADLS or any of its successors or assigns provides to Wyeth any of the intellectual property licensed hereunder (or any embodiment thereof) pursuant to this Section 9.4.2, Wyeth shall have the right to perform the obligations of ADLS hereunder with respect to such intellectual property, but neither such provision nor such performance by Wyeth shall release ADLS from liability resulting from rejection of the license or the failure to perform such obligations.

9.4.3.      Additional Rights.  All rights, powers and remedies of Wyeth provided herein are in addition to and not in substitution for any and all other rights, powers and remedies now or hereafter existing at law or in equity (including the Bankruptcy Code) in the event of the commencement of a case under the Bankruptcy Code.  The Parties agree that they intend the following rights to extend to the maximum extent permitted by law, and to be enforceable under Bankruptcy Code Section 365(n):

(a)           the right of access to any intellectual property (including all embodiments thereof) of ADLS, or any Third Party with whom ADLS contracts to perform an obligation of ADLS under this Agreement, and, in the case of the Third Party, which is necessary for the Development, Manufacture, Commercialization or use of Products; and

(b)           the right to contract directly with any Third Party to complete the contracted work.

9.5.         Effects of Termination.

9.5.1.      Effect of Termination by Wyeth for Cause.  If Wyeth terminates this Agreement with respect to any one or more Products in any one or more countries pursuant to Section 9.2 (Termination by either Party for Cause):

(a)           All licenses conveyed by ADLS to Wyeth with respect to the applicable terminated Product in the applicable terminated country shall become irrevocable and perpetual, Wyeth’s rights under Sections 4.4, 4.6.2, 6.2.1(a), 6.2.2(a) and (b), 6.2.4, 6.2.5

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and 8.2(i), (l), (m), (n), (p) and (q) with respect to such Product shall remain in effect and Wyeth shall have no further obligations to ADLS under this Agreement with respect to such Product in such country other than (i) an obligation to pay royalties with respect to Net Sales of such Product in such country in an amount equal to [***] of the amount that would otherwise have been payable under this Agreement, such amount to be paid in accordance with and subject to the other terms of this Agreement governing the payment of royalties, and (ii) those obligations that expressly survive termination in accordance with Section 9.6 hereof;

(b)           Such termination shall not be construed to limit ADLS’ right to receive payments that accrued before the effective date of such termination;

(c)           Wyeth shall have the right to offset, against any payment owing to ADLS as provided for under Section 9.5.1(a), any damages found or agreed by the Parties to be owed by ADLS to Wyeth;

(d)           For the avoidance of doubt, all licenses and other rights granted by Wyeth to ADLS under Sections 2.4 and 4.4, and any rights granted by ADLS under such rights to any Affiliate or ADLS Licensee, with respect to such Product(s) shall terminate as of the effective date of such termination; and

(e)           Nothing in this Section 9.5.1 shall limit any other remedy Wyeth may have for ADLS’ breach of this Agreement.

9.5.2.      Effect of Termination by Wyeth on Insolvency of ADLS.  If Wyeth terminates this Agreement pursuant to Section 9.4 (Termination on Insolvency of ADLS):

(a)           All licenses granted to Wyeth shall become irrevocable and perpetual, Wyeth’s rights under Sections 4.4, 4.6.2, 6.2.1(a), 6.2.2(a) and (b), 6.2.4, 6.2.5 and 8.2(i), (l), (m), (n), (p) and (q) shall remain in effect and Wyeth shall have no further obligations to ADLS under this Agreement other than (i) those obligations that expressly survive termination in accordance with Section 9.6 hereof and (ii) an obligation to pay royalties with respect to Net Sales of Products in an amount equal to [***] of the amount that would otherwise have been payable under this Agreement, such amount to be paid in accordance with and subject to the other terms of this Agreement governing the payment of royalties;

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(b)           Such termination shall not be construed to limit ADLS’ right to receive payments that accrued before the effective date of such termination;

(c)           Wyeth shall have the right to offset, against any payment owing to ADLS as provided for under Section 9.5.2(a), any damages found or agreed by the Parties to be owed by ADLS to Wyeth;

(d)           For the avoidance of doubt, all licenses and other rights granted by Wyeth to ADLS under Sections 2.4 and 4.4, and any rights granted by ADLS under such rights to any Affiliate or ADLS Licensee, shall terminate as of the effective date of such termination; and

(e)           Nothing in this Section 9.5.2 shall limit any other remedy Wyeth may have for any breach by ADLS of this Agreement.

9.5.3.      Effect of Termination by ADLS for Cause or by Wyeth At Will or For Safety.

(a)           If ADLS terminates this Agreement in its entirety pursuant to Section 9.2 (Termination by Either Party for Cause), or if Wyeth terminates this Agreement in its entirety pursuant to Section 9.3 (Termination by Wyeth At Will or For Safety), then the following shall apply:

(i)            All licenses granted by ADLS to Wyeth shall automatically terminate; and

(ii)           Such termination shall not be construed to limit ADLS’ right to receive payments that accrued before the effective date of such termination.

(b)           If this Agreement is not terminated in its entirety, but (i) ADLS terminates this Agreement with respect to any one or more Products in any one or more countries pursuant to Section 9.2, (ii) Wyeth terminates this Agreement pursuant to Section 9.3.1 with respect to any one or more Products or (iii) Wyeth terminates this Agreement pursuant to Section 9.3.2 with respect to any one or more Products in any one or more countries, then the following shall apply:

(i)            All licenses granted by ADLS to Wyeth under Section 2.1 with respect to such Product(s) in such countr(y/ies) shall terminate, provided that the licenses to

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Wyeth with respect to all remaining Products and in all other countries in the Territory shall remain in effect; and

(ii)           Such termination shall not be construed to limit ADLS’ right to receive payments that accrued before the effective date of such termination.

(c)           Nothing in this Section 9.5.3 shall limit any other remedy ADLS may have for Wyeth’s breach of this Agreement.

9.5.4.      Disposition of Inventories of Products.  Following termination of this Agreement with respect to one or more Products by ADLS pursuant to Section 9.2, or by Wyeth pursuant to Section 9.3.1, ADLS shall have the right but not the obligation to purchase from Wyeth, at Wyeth’s cost, Wyeth’s then existing inventory of such Product or Products.  Wyeth, its Affiliates and its Sublicensees shall have the right to continue to sell in the Territory any amounts of their existing inventories of such Products that ADLS does not elect to purchase as described in this Section 9.5.4 for a period not to exceed [***] after the effective date of any such termination of this Agreement with respect to one or more Products, and Wyeth shall pay any royalties payable in connection with such sales in accordance with Sections 5.3 and 5.4. and, if applicable, any Commercial Payment payable with respect to such sales in accordance with Section 5.2.3.

9.6.         Survival of Certain Obligations.  Expiration or termination of this Agreement shall not relieve the Parties of any obligation accrued prior to such expiration or termination.  The following provisions shall survive expiration or termination of this Agreement:  Section 1 (Definitions) (to the extent definitions are embodied in the following Sections); Section 4.7 (Regulatory Reporting); Section 4.8.2 (Pharmacovigilance); Section 4.11 (Product Recalls) (solely with respect to Products sold prior to such expiration or termination); Section 5.5 (Maintenance of Records; Audits); Section 6.1 (Inventions); Section 7 (Confidentiality); Section 10 (Liability, Indemnification and Insurance); Section 11 (Dispute Resolution); and Section 12 (Miscellaneous) (other than Sections 12.14 (Change of Control of ADLS) and 12.15 (Right of First Offer)).

10.LIABILITY, INDEMNIFICATION AND INSURANCE.

10.1.       Liability.  Except with respect to liability arising from a breach of Section 6 or 7, from any willful misconduct or intentionally wrongful act, or to the extent such Party may be required to indemnify the other Party under this Section 10, neither Party nor its respective Affiliates shall be liable to the other for special, punitive or consequential damages, whether based on contract or tort, or arising under applicable law or otherwise, in connection with this Agreement.

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10.2.       Indemnification by Wyeth.  Wyeth will indemnify, defend and hold harmless ADLS and its Affiliates, Licensees and each of their respective employees, officers, directors and agents (each, an “ADLS Indemnified Party”) from and against any and all liability, loss, damage, expense (including reasonable attorneys’ fees and expenses) and cost (collectively, a “Liability”) that the ADLS Indemnified Party may be required to pay to one or more Third Parties to the extent resulting from or arising out of (i) any claims of any nature, including product liability claims, arising out of the Development, Manufacture or Commercialization of Compounds or Products by, on behalf of or under the authority of Wyeth (other than by ADLS, its Affiliates or Licensees or any of their respective employees, officers, directors and agents), or (ii) any breach by Wyeth of any representation, warranty or covenant set forth in this Agreement, except, in each case, to the extent caused by the negligence or willful misconduct of ADLS or any ADLS Indemnified Party or any breach by ADLS of any representation, warranty or covenant set forth herein.

10.3.       Indemnification by ADLS.  ADLS will indemnify, defend and hold harmless Wyeth and its Affiliates, Sublicensees and distributors and each of its and their respective employees, officers, directors and agents (each, a “Wyeth Indemnified Party”) from and against any and all Liabilities that the Wyeth Indemnified Party may be required to pay to one or more Third Parties to the extent resulting from or arising out of (i) any claims of any nature, including product liability claims, arising out of the Development, Manufacture or Commercialization of any Compound or Product by, on behalf of or under the authority of ADLS (other than by Wyeth, its Affiliates or Sublicensees or any of their respective employees, officers, directors and agents), or (ii) any breach by ADLS of any representation, warranty or covenant set forth in this Agreement, except, in each case, to the extent caused by the negligence or willful misconduct of Wyeth or any Wyeth Indemnified Party or any breach by Wyeth of any representation, warranty or covenant set forth herein.

10.4.       Procedure.  Each Party will notify the other promptly in the event it becomes aware of a claim for which indemnification may be sought hereunder.  In furtherance and not in limitation of the preceding sentence, in case any proceeding (including any governmental investigation) shall be instituted involving any Wyeth Indemnified Party or ADLS Indemnified Party in respect of which indemnity may be sought pursuant to this Section 10, ADLS (if such proceeding is initiated against an ADLS Indemnified Party) or Wyeth (if such proceeding is initiated against a Wyeth Indemnified Party) (such Party referred to as the “Indemnified Party”) shall promptly notify the other Party (the “Indemnifying Party”) in writing within fifteen (15) days after the Indemnified Party first becomes aware of such proceeding and the Indemnifying Party and Indemnified Party shall then promptly meet to discuss how to respond to any claims that are the subject matter of such proceeding.  The Indemnifying Party shall have the right to assume the defense of any Third Party claim subject to indemnification obligations hereunder.  The Indemnifying Party, upon assuming

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the defense of the claim, shall retain counsel reasonably satisfactory to the Indemnified Party to conduct the defense of the claim and shall pay the fees and expenses of such counsel related to such proceeding.  The Indemnified Party agrees to cooperate fully with the Indemnifying Party in the defense of any such claim, action or proceeding, or any litigation resulting from any such claim.  In any such proceeding, the Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of the Indemnified Party unless (a) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (b) the named parties to any such proceeding (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and representation of both Parties by the same counsel would be inappropriate due to actual or potential differing interests between them.  All such fees and expenses shall be reimbursed as they are incurred.  The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent, the Indemnifying Party agrees to indemnify the Indemnified Party from and against any loss or liability by reason of such settlement.  The Indemnifying Party shall not, without the written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which the Indemnified Party is, or arising out of the same set of facts could have been, a party and indemnity could have been sought hereunder by the Indemnified Party, unless such settlement includes an unconditional release of the Indemnified Party from all liability on claims that are the subject matter of such proceeding.

10.5.       Insurance.  ADLS shall obtain and maintain, during the Term, commercial general liability insurance, including products liability insurance, with reputable and financially secure insurance carriers to cover its indemnification obligations under Section 10.3, with limits of not less than [***] per occurrence and in the aggregate.  Insurance shall be procured with carriers having an A.M. Best Rating of A-VII or better.

11.DISPUTE RESOLUTION

11.1.       General.  Any controversy, claim or dispute arising out of or relating to this Agreement shall be settled, if possible, through good faith negotiations between the Parties.  However, subject to Section 3.3 with respect to decisions of the Steering Committee and other committees established under this Agreement, if the Parties are unable to settle such dispute after good faith negotiations, the matter shall be referred to the Executive Officers (having authority to bind the Parties with respect to such dispute, subject to obtaining any necessary corporate or management approvals) to be resolved by negotiation in good faith as soon as is practicable but in no event later than thirty (30) days after referral.  The resolution, if any, of a referred matter shall be reduced to writing signed by such Executive Officers and thereafter shall be final and binding on the Parties.

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11.2.       Failure of Officers to Resolve Dispute.  If the Executive Officers are unable to settle the dispute after good faith negotiation in the manner set forth above, either Party may seek resolution of the dispute through any remedies available at law or in equity from any court of competent jurisdiction as provided in Section 12.9 below.

12.MISCELLANEOUS.

12.1.       Assignment.  Neither this Agreement nor any interest hereunder shall be assignable by either Party, without the prior written consent of the other Party, which consent shall not be unreasonably withheld, conditioned or delayed, except a Party may make an assignment of its entire interest in this Agreement without the other Party’s consent to an Affiliate or to a successor to all or substantially all of the business of such Party to which this Agreement relates, whether by merger, sale of stock, sale of assets, exclusive transfer of technology or other transaction, provided that, in the case of assignment to an Affiliate, the assigning Party shall guarantee the performance of this Agreement by such Affiliate.  Each successor or permitted assign shall promptly provide the other Party written notice of its agreement to be bound by the terms and conditions of this Agreement.  This Agreement shall be binding upon the successors and permitted assigns of the Parties, and the name of a Party appearing herein shall be deemed to include the names of such Party’s successors and permitted assigns to the extent necessary to carry out the intent of this Agreement.  Any assignment not in accordance with this Section 12.1 shall be void.  In addition, ADLS shall not assign any interest in the Licensed Rights to any Third Party or Affiliate unless such assignee agrees in writing that such assignment is subject to the terms and conditions of this Agreement and the rights granted to Wyeth hereunder.

12.2.       Further Actions.  Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of the Agreement.

12.3.       Force Majeure.  Neither Party shall be liable to the other for delay or failure in the performance of the obligations on its part contained in this Agreement if and to the extent that such failure or delay is due to circumstances beyond its control which it could not have avoided by the exercise of reasonable diligence.  Such Party shall notify the other Party promptly should such circumstances arise, giving an indication of the likely extent and duration thereof, and shall use all Commercially Reasonable Efforts to resume performance of its obligations as soon as practicable, provided, however, that neither Party shall be required to settle any labor dispute or disturbance.

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12.4.    Correspondence and Notices.

12.4.1.    Ordinary Notices.  Subject to Section 12.4.2, correspondence, reports, documentation and any other communication in writing between the Parties in the course of ordinary implementation of this Agreement shall be delivered by hand, sent by facsimile transmission (receipt verified), sent by registered or certified mail (return receipt requested) postage prepaid or sent using a nationally recognized express courier service, in each case to the employee or representative of the other Party who is designated by such other Party to receive such written communication.

12.4.2.    Extraordinary Notices.  Any notice or notification required or permitted to be provided pursuant to the terms and conditions of this Agreement (including, without limitation, any notice of force majeure, breach, termination, change of address, etc.) shall be in writing and shall be deemed given upon receipt if delivered personally or by facsimile transmission (receipt verified), five (5) days after deposited in the mail if mailed by registered or certified mail (return receipt requested) postage prepaid, or on the next business day if sent by overnight delivery using a nationally recognized express courier service and specifying next business day delivery (receipt verified), to the Parties at the following addresses or facsimile numbers (or at such other address or facsimile number for a Party as shall be specified by like notice, provided, however, that notices of a change of address shall be effective only upon receipt thereof):

All correspondence to Wyeth shall be addressed as follows:

Wyeth

500 Arcola Road

Collegeville, Pennsylvania 19426

Attn:  Senior Vice President, Corporate Business Development

Fax:  (484) 865-6476

with a copy to:

Wyeth

5 Giralda Farms

Madison, New Jersey 07940

Attn:  Executive Vice President and General Counsel

Fax:  (973) 660-7156

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All correspondence to ADLS shall be addressed as follows:

Advanced Life Sciences Holdings, Inc.
1440 Davey Road
Woodridge, IL  60517

Attn:  Chief Legal Counsel

Fax:  (630) 739-6754

with a copy to:

Winston & Strawn LLP
35 West Wacker Drive
Chicago, IL  60601

Attn:  R. Cabell Morris, Jr.

Fax:  (312) 558-5700

12.5.       Amendment.  No amendment, modification or supplement of any provision of this Agreement shall be valid or effective unless made in writing and signed by a duly authorized officer of each Party.

12.6.       Waiver.  No provision of this Agreement shall be waived by any act, omission or knowledge of a Party or its agents or employees except by an instrument in writing expressly waiving such provision and signed by a duly authorized officer of the waiving Party.  The waiver by either of the Parties of any breach of any provision hereof by the other Party shall not be construed to be a waiver of any succeeding breach of such provision or a waiver of the provision itself.

12.7.       Severability.  If any clause or portion thereof in this Agreement is for any reason held to be invalid, illegal or unenforceable, the same shall not affect any other portion of this Agreement, as it is the intent of the Parties that this Agreement shall be construed in such fashion as to maintain its existence, validity and enforceability to the greatest extent possible.  In any such event, this Agreement shall be construed as if such clause of portion thereof had never been contained in this Agreement, and there shall be deemed substituted therefor such provision as will most nearly carry out the intent of the Parties as expressed in this Agreement to the fullest extent permitted by applicable law.

12.8.       Descriptive Headings.  The descriptive headings of this Agreement are for convenience only and shall be of no force or effect in construing or interpreting any of the provisions of this Agreement.

12.9.       Governing Law; Venue.  This Agreement shall be governed by and interpreted in accordance with the substantive law of the state of New York, without regard to conflict of law principles thereof.  Subject to Section 11 hereof, any action based upon a controversy, claim or dispute arising out of or relating to this Agreement shall be brought only in a federal court of competent

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jurisdiction (or a state court if no federal court has jurisdiction) located in New York, New York and the Parties hereby submit to the exclusive jurisdiction and venue of such courts.

12.10.          Entire Agreement of the Parties.  This Agreement constitutes and contains the complete, final and exclusive understanding and agreement of the Parties respecting the subject matter hereof and cancels and supersedes any and all prior negotiations, correspondence, understandings and agreements, whether oral or written, among the Parties respecting the subject matter hereof.

12.11.          Independent Contractors.  Both Parties are independent contractors under this Agreement.  Nothing herein contained shall be deemed to create an employment, agency, joint venture or partnership relationship between the Parties or any of their agents or employees, or any other legal arrangement that would impose liability upon one Party for the act or failure to act of the other Party.  Neither Party shall have any express or implied power to enter into any contracts or commitments or to incur any liabilities in the name of, or on behalf of, the other Party, or to bind the other Party in any respect whatsoever.

12.12.          Counterparts.  This Agreement may be executed in two counterparts, each of which need not contain the signature of more than one Party but all such counterparts taken together shall constitute one and the same agreement.

12.13.          Interpretation.  Except where the context requires otherwise, (a) the use of any gender herein shall be deemed to encompass references to either or both genders, and the use of the singular shall be deemed to include the plural (and vice versa), (b) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation,” (c) the word “will” shall be construed to have the same meaning and effect as the word “shall,” (d) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (e) any reference herein to any Person shall be construed to include the Person’s successors and assigns, (f) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (g) all references herein to Sections or Exhibits shall be construed to refer to Sections or Exhibits of this Agreement, and references to this Agreement include all Exhibits hereto, (h) the word “notice” shall mean notice in writing (whether or not specifically stated) and shall include notices, consents, approvals and other written communications contemplated under this Agreement, (i) provisions that require that a Party, the Parties or any committee hereunder “agree,” “consent” or “approve” or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter, approved minutes or otherwise (but excluding e-mail and instant messaging),

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and (j) references to any specific law, rule or regulation, or article, section or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement or successor law, rule or regulation thereof.

12.14.          Change of Control of ADLS.

12.14.1.           Change of Control Notice.  ADLS shall notify Wyeth in writing promptly (and in any event within two (2) business days) following the entering into of a definitive agreement with respect to a Change of Control of ADLS.

12.14.2.           Disposition Upon Divestiture.  If, in connection with any Change of Control of ADLS, any governmental agency requires ADLS (including, but not limited to, pursuant to a consent decree) to divest its interest in any Product or this Agreement (the “Divested Asset(s)”), Wyeth shall have the right to purchase ADLS’ interest in the Divested Asset(s) for fair consideration.  ADLS shall propose in writing a purchase price for the Divested Asset(s) within [***] after receiving notice of such divestiture requirement.  Wyeth shall have [***] after receipt of such written proposal to accept or reject the proposed price for the Divested Asset(s).  If Wyeth rejects the proposed price, ADLS shall be free to offer the Divested Asset(s) for sale to a Third Party for [***].  If no sale to a Third Party is consummated within such [***] period, the provisions of this Section 12.14.2 requiring ADLS to first offer the Divested Assets to Wyeth shall again apply.

12.14.3.           Right to Terminate if Confirmation of Continued Priority Not Received.  Wyeth may terminate this Agreement in its entirety or with respect to any one or more Product(s) upon any Change of Control of ADLS unless, within [***] following the closing of such Change of Control, Wyeth has received from ADLS, and any Third Party who is acquiring or has acquired control of ADLS, written confirmation reasonably satisfactory to Wyeth to the effect that (i) after such Change of Control, the Development, Manufacture and Commercialization of Products as contemplated by this Agreement will have a priority for ADLS or its successor following such Change of Control which is equal to or greater than the priority that such Development, Manufacture and Commercialization had for ADLS prior to such Change of Control; and (ii) ADLS will continue to meet all of its obligations under this Agreement following such Change of Control.  Any termination by Wyeth under this Section 12.14.3 shall be treated as a termination for cause under Section 9.2.

12.14.4.           Rights if Acquiror Has Competing Product.  Furthermore, in the event that a Change of Control of ADLS results in ADLS or any Affiliate of ADLS having, immediately following the

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Change of Control, marketing or royalty rights to, or any other substantial financial interest in, any Competing Product, Wyeth may, in its sole discretion, regardless of any assurances provided by ADLS, terminate this Agreement in its entirety or with respect to any one or more Product(s).  Any termination by Wyeth under this Section 12.14.4 shall be treated as a termination for cause under Section 9.2.

12.14.5.           No Relief from Obligation.  Nothing in this Section 12.14 shall relieve ADLS of any of its obligations under this Agreement.

12.15.             Right of First Offer.  Wyeth is hereby granted a Right of First Offer (as hereinafter defined) to Develop and Commercialize Products in [***].  The “Right of First Offer” shall mean a written offer (the “Offer”) presented by ADLS to Wyeth to exclusively Develop and Commercialize Products in [***].  The Offer shall be presented to Wyeth before any such rights to Develop and Commercialize Products in [***] are offered or granted by or on behalf of ADLS to any Third Party.  The Offer shall disclose the proposed terms and conditions of the arrangement and any other material facts relating to the Offer.  Wyeth shall have [***] after receipt of the Offer to accept or reject it in writing.  In the event that Wyeth accepts such Offer, the Parties shall negotiate in good faith and enter into a written agreement containing the terms of such Development and Commercialization in [***].  Except for any terms and conditions expressly set forth in the Offer, such agreement between the Parties for [***] shall be substantially on the terms and conditions of this Agreement.  If Wyeth rejects the Offer, ADLS shall be free to make similar offers to Third Parties for a period of [***] on terms and conditions, on the whole, no less favorable to ADLS than those offered to Wyeth.  If, after such [***] period, ADLS has not entered into a written agreement with a Third Party granting to such Third Party rights to Develop and Commercialize Products in [***], ADLS shall not offer or grant to a Third Party any rights to Develop or Commercialize Products in [***] without again complying with the provisions of this Section 12.15.

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IN WITNESS WHEREOF, duly authorized representatives of the Parties have duly executed this Agreement to be effective as of the Effective Date.

WYETH,			ADVANCED LIFE SCIENCES
			HOLDINGS, INC.
acting through its
Wyeth Pharmaceuticals Division
By:	/s/ Theodore R. Kozial		By:	/s/ Michael T. Flavin
Name:		Theodore R. Kozial	Name:		Michael T. Flavin, Ph.D.
Title:		Vice President	Title:		Chief Executive Officer

Signature Page to Development and Commercialization Agreement

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EXHIBIT 1.6

ADLS PATENT RIGHTS

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EXHIBIT 1.8

ADLS STUDY

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EXHIBIT 1.10

ADLS THIRD PARTY AGREEMENT(S)

1.             License Agreement, dated December 13, 2004, by and between Abbott Laboratories and Advanced Life Sciences Holdings, Inc.

2.             First Amendment to License Agreement, dated April 27, 2005, by and between Abbott Laboratories and Advanced Life Sciences Holdings, Inc.

3.             Second Amendment to License Agreement, dated August 2, 2005 by and between Abbott Laboratories and Advanced Life Sciences Holdings, Inc.

4.             Third Amendment to License Agreement, dated August 10, 2005, by and between Abbott Laboratories and Advanced Life Sciences Holdings, Inc.

5.             Fourth Amendment to License Agreement dated as of November 13, 2007 by and between Abbott Laboratories and Advanced Life Sciences, Inc.

6.             Fifth Amendment to License Agreement expected to be executed on or around September 30, 2008 by and between Abbott Laboratories and Advanced Life Sciences, Inc.

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EXHIBIT 1.17

[***] STUDY

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EXHIBIT 1.25

COMPOUND

Structural Formula

Chemical Name

[3aS,4R,7R,9R,10R,11R,13R,15R,15aR]-4-ethyloctahydro-3a,7,9,11,13,15-hexamethyl-11-[[3-(3-quinolinyl)-2E-propenyl]oxy]-10-[[3,4,6-trideoxy-3-(dimethylamino)-b-D-xylo-hexopranosyl]oxy]-2H-oxacyclotetradecino [4,3-d] oxazole-2,6,8,14(1H,7H,9H)-tetrone.

Molecular Formula

C₄₂H₅₉N₃O₁₀

Molecular Weight

765.93

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EXHIBIT 1.90

STOCK PURCHASE AGREEMENT

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EXHIBIT 4.3

INITIAL GLOBAL DEVELOPMENT PLAN

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EXHIBIT 4.9.1

KEY TERMS OF THE SUPPLY AGREEMENT

1.Rolling Forecasts.  [***].

2.Inventory; Launch.  ADLS shall at all times maintain an inventory of each Product (in bulk tablet form) equal to [***] of the estimate provided to ADLS under Section 1 above for the next [***].  ADLS shall at all times maintain an inventory of the API for each Product, and/or such Product in bulk tablet form, sufficient to support supply of [***] of the estimate for such Product provided to ADLS under Section 1 above for the next [***].  Such inventory shall be maintained by ADLS at no charge to Wyeth.  The Supply Agreement shall also contain appropriate provisions with respect to launch quantities of Products.

3.Shelf Life.  Each shipment of Products shall have, as of the date of receipt by Wyeth, at least [***] of remaining shelf life.

4.Third Party Manufacturers.  At all times during the Term and as provided in Section 9 below, ADLS shall satisfy its supply obligations to Wyeth hereunder through binding written agreements with qualified Third Parties engaged to perform services or supply facilities or goods in connection with the Manufacture of Products, provided that ADLS shall not enter into any such agreement unless prior thereto ADLS shall have given Wyeth a written summary identifying the proposed manufacturer and the principal terms of such proposed agreement and Wyeth shall not have reasonably objected thereto in writing within ten (10) days after receipt of such summary.  Upon reasonable request, ADLS shall permit and arrange for Wyeth to conduct due diligence inspections of any proposed Third Party manufacturers.

5.Changes.  Except as otherwise permitted under the change control procedures to be specified in the Supply Agreement, ADLS shall not modify or change the process, specifications, materials, suppliers, facilities or analytical testing methods used in connection with the Manufacture of Products, regardless of whether such modification or change requires the approval of any Regulatory Authority, without the prior written consent of Wyeth, which consent shall not be unreasonably withheld.  ADLS shall provide Wyeth with a written summary of all proposed modifications or changes and must receive the written approval of Wyeth prior to the implementation thereof, which approval shall not be unreasonably withheld.  The detailed provisions reflecting this Section 5 shall be set forth in a quality agreement on reasonable and customary terms, and complying with applicable regulatory requirements, to be negotiated and entered into by the Parties in connection with the Supply Agreement (the “Quality Agreement”).

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6.Failure to Supply.  ADLS shall give Wyeth prompt written notice if ADLS becomes aware that it will not be able to satisfy Wyeth’s requirements for Products in any material way.  In such event, or in the event that, without such prior notice, ADLS actually fails to materially satisfy Wyeth’s requirements for Products, Wyeth and ADLS shall promptly work together, in good faith, to devise and implement measures to cure such failure to supply or to identify an appropriate alternative source of Products.  In addition, in the event of an uncured failure to supply, if Wyeth determines to utilize an alternative source of Products, at Wyeth’s request, ADLS shall promptly transfer to Wyeth or its designee, at no cost to Wyeth, all Know-How and other technical information necessary or useful to permit Wyeth to make or have made Products, provided that, pending the full transfer of supply to an alternative source, ADLS shall use best efforts to continue to supply Wyeth’s requirements for Products until such time as Wyeth determines, in its sole reasonable discretion, that such alternative supplier is fully able to supply all such requirements.  Until such time, available quantities of Products shall be allocated pro-rata among Wyeth’s requirements hereunder for the Territory and ADLS’ requirements for outside the Territory based upon their relative sales of the applicable Products for the immediately preceding [***] period, or if such shortages occur during or prior to the first [***] period of sales for a Product, then such pro-rata allocation shall be based upon the Parties’ then current relative annualized projected requirements for such Product.

7.Transfer Price.  The transfer price for commercial supplies of the Current Product purchased by Wyeth during the Royalty Term shall be [***].  The transfer price for commercial supplies of other Products purchased by Wyeth during the Royalty Term shall be as mutually agreed by the Parties, but shall in no event exceed [***].

8.Inspection and Other Rights.  Wyeth shall have reasonable and customary (a) rights to routinely inspect the facilities (including with respect to compliance with applicable regulatory requirements) and books and records of ADLS and its Third Party manufacturers relating to Products and (b) rights to information, consultation and participation with respect to regulatory inspections of ADLS and its Third Party manufacturers relating to Products.

9.Survival.  In the event that Wyeth terminates the Agreement with respect to any Product pursuant to Section 9.2 or 9.4 of the Agreement, at Wyeth’s option the Supply Agreement shall remain in effect with respect to any such Product until such time as ADLS and Wyeth are able to transfer all Third Party supply arrangements relating to such Product directly to Wyeth and, pending such transfer, ADLS shall use best efforts to ensure Wyeth’s continued supply of any such Product from any applicable Third Party manufacturer(s).

10.Qualification of Back-Up Manufacturers.  Wyeth shall have the right to qualify potential back-up manufacturers (for both API and Products) for use in the event that Wyeth elects to Manufacture or have Manufactured any Product due to a failure by ADLS to supply or have supplied such Product to Wyeth.

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11.Stability Studies.  ADLS, at its expense, shall perform stability studies with respect to each Product in accordance with ICH Guidelines and meeting the requirements of Regulatory Authorities in the Territory, as applicable, as necessary to establish a shelf life of at least [***] for each Product in a final packaged form (as will be agreed upon and set forth in further detail in the Supply Agreement or the Quality Agreement).  The detailed provisions reflecting this Section 11 shall be set forth in the Quality Agreement.

12.Term.  The Supply Agreement shall remain in effect with respect to each Product supplied thereunder during the Royalty Term for such Product.

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EXHIBIT 7.4.3

ADLS PRESS RELEASE

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EXHIBIT 8.2(a)

INFORMATION RELATED TO ADLS IP

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EXHIBIT 8.2(c)

THIRD PARTY RIGHTS RELATED TO ADLS IP

Please refer to Exhibit 1.10.

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EXHIBIT 8.2(e)

GOVERNMENT FUNDING

None.

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EXHIBIT 8.2(o)

CONTROL LIMITATION AGREEMENTS

Please refer to Exhibit 1.10.

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EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Michael T. Flavin, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Advanced Life Sciences Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))  for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2008

/s/ Michael T. Flavin

Michael T. Flavin

Chief Executive Officer

Advanced Life Sciences Holdings, Inc.

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EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, John L. Flavin, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Advanced Life Sciences Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 6, 2008

/s/ John L. Flavin

John L. Flavin

Chief Financial Officer

Advanced Life Sciences Holdings, Inc.

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EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

In connection with the quarterly report on Form 10-Q of Advanced Life Sciences Holdings, Inc. (the “Company”) for the fiscal quarter ending September 30, 2008 (the “Report”), I, Michael T. Flavin, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 to the extent applicable; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6, 2008

/s/ Michael T. Flavin

Michael T. Flavin

Chief Executive Officer

Advanced Life Sciences Holdings, Inc.

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EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

In connection with the quarterly report on Form 10-Q of Advanced Life Sciences Holdings, Inc. (the “Company”) for the fiscal quarter ending September 30, 2008 (the “Report”), I, John L. Flavin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 to the extent applicable; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6, 2008

/s/ John L. Flavin

John L. Flavin

Chief Financial Officer

Advanced Life Sciences Holdings, Inc

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