Exhibit 10.3


 


LABORATORY
SERVICE AGREEMENT


 


This Laboratory Service Agreement (“Agreement”)
is effective as of November 22, 2005 (“Effective Date”), by and between Covance Central Laboratory Services LP (“Covance”), an
Indiana limited partnership, with offices at 8211 SciCor Drive, Indianapolis,
Indiana 46214, and Advanced Life Sciences
Inc. (“ALSI”), with
offices at 1440 Davey Road, Woodridge, IL 60517.


 


Recitals


 


WHEREAS,
Covance is engaged in the business of providing laboratory testing, data
management, protocol management and information management services for
pharmaceutical clinical trials (“Services”); and


 


WHEREAS, ALSI
desires for Covance to perform such Services in accordance with and subject to
the terms and conditions of this Agreement.


 


NOW, THEREFORE,
in consideration of the foregoing recitals and the mutual promises and
covenants contained herein, and each act done pursuant thereto, ALSI and
Covance agree as follows:


 


1.              DEFINITIONS AND INTERPRETATION


 


(a) Definitions
- The following terms, as used herein (unless a clear contrary interpretation
appears), have the following meanings:


 


“Clinical
Trial” means a Study or the scientific evaluation of a Drug or Medical Device
on the terms and conditions of a Protocol.


 


 “Drug” means a new or existing drug provided
by ALSI and which is the subject of a Clinical Trial or Study under this
Agreement.


 


“FDA” means
the United States Food and Drug Administration or any other government body or
agency that succeeds it.


 


“Project”
means a Study or Clinical Trial, or any other clinical trial, project or
assignment between Covance and ALSI.


 


“Protocol”
means the document which specifies the laboratory testing procedures as written
by ALSI as applicable for the performance of a Study or Clinical Trial and is
provided to Covance.


 


“Study” means
a Clinical Trial or the scientific evaluation of a Drug or Medical Device on
the terms and conditions of the Protocol.


 


(b)                                 Interpretation - In this Agreement,
unless a clear contrary intention appears: 


 


i.                              the singular number includes the plural and vice versa;


 


1





















 


ii.                           reference to any person or entity includes such person’s or entity’s
successors and assigns;


 


iii.                        reference to this Agreement means such agreement as amended, modified
or supplemented from time to time in accordance with the terms hereof;


 


iv.                       reference to any law, rule,
regulation, order, decree, requirement, policy, guideline, directive or
interpretation means as amended, modified, codified, replaced or reenacted in
whole or in part, and in effect on the determination date, including rules and
regulations promulgated thereunder;


 


v.                          “hereunder”, “hereof”, “hereto”
and words of similar import shall be deemed references to this Agreement as a
whole and not to any particular Section or other provision hereof;


 


vi.                       “including” (and with
correlative meaning “include”) means including without limiting the generality
of any description preceding such term; and


 


vii.                    relative to the determination of any period
of time, “from” means “from and including to” and “to” means “to but excluding”.


 


2.               SERVICES


 


Covance hereby
agrees to perform Services for ALSI’s protocol                     ,
pursuant to the terms and conditions contained in this Agreement, the Protocol,
the Statement of Work (“SOW”), the Quote for Services (“Budget”), and all other
applicable documents.    


 


3.              FEES AND BILLING


 


Fees for the
Project are set forth in the attached Budget. 
The Budget contains all of the applicable discounts and Services that
will be provided for that Project.


 


ALSI agrees
make an advance payment equal to 10% of the Budget (“Advance Payment”).  Covance will invoice the Advance Payment when
this Agreement has been signed by both parties. 
ALSI will pay the Advance Payment invoice within thirty (30) days after
receipt.  


 


Each month,
Covance will invoice ALSI for all fees due and expenses incurred while
providing Services during the previous month. 
Payment is due thirty (30) days from the date of the invoice.   After invoices have reached 90% of the
Budget, Covance will begin applying funds from the Advance Payment to the
monthly invoices.  Should the Study be
terminated before the Advance Payment is exhausted, and assuming all prior
invoices have been paid, Covance will apply Advance Payment funds to the final
invoice and refund any remaining Advance Payment funds to ALSI within thirty
(30) days.  


 


Upon written
notification by ALSI that the Clinical Trial has been concluded or six months
after the non-receipt of any kits (whichever comes first), Covance will issue a
final invoice for any Services rendered to identify amounts due to Covance or
refund due to ALSI.


 


2





















 


Covance will
hold prices unchanged for twelve (12) months from Project start up.  Thereafter, fees may be adjusted annually by
Covance upon thirty (30) days written notice to ALSI.  However, should global political, logistical
or economic changes take place which increase Covance’s purchase prices,
Covance may assess additional charges to ALSI upon thirty (30) days’ prior
written notice.


 


If ALSI
requests a material change to the Project at any time which would affect the
Services, Covance will revise fees to reflect the change in the SOW and/or
Budget.  


 


COVANCE will
provide each Investigator site with project and visit specific specimen
collection supplies needed to collect and ship specimens. The kits include test
tubes, pipettes, collection needles, and other required materials, in addition
to instructions for collection and shipment. The kits shall also have a test
requisition form designated for the Project. Each kit and collection tube will
be bar coded to ensure tracking and testing audit trails upon its return to
Covance.  Should a kit be lost through no
fault of Covance, or should a kit expire at the Investigator site, or should a
kit otherwise need to be replaced through no fault of Covance, Covance will
supply replacement kits for those that need to be replaced.  The charge for any replacement kit which is
lost, expires, or otherwise needs to be replaced through no fault of Covance,
will be an amount equal to the price listed in the Budget per kit for the same
kit/visit as is being replaced.


 


4.              PROPERTY OWNERSHIP


 


All materials,
documents, information, programs and suggestions of every kind and description
supplied to Covance by or on behalf of ALSI or prepared or developed by Covance
pursuant to this Agreement (except for Covance procedural manuals, personnel
data and Covance developed technology and software) shall be the sole and
exclusive property of ALSI.  Strategic
insight and proposed Project design and scope provided in any Covance proposal
shall remain the property of Covance and may only be used by ALSI to assess
whether it wishes to pursue such work with Covance.


 


5.              PATENT RIGHTS


 


Covance will
disclose promptly to ALSI or its nominee any and all patentable inventions,
discoveries and improvements conceived or made by Covance in the course of the
Clinical Trial and/or while providing Services to ALSI pursuant to this
Agreement, and Covance agrees to assign all its interests therein to ALSI or
its nominee; provided ALSI requests such assignment within one year of
notification of such invention; provided, further, that Covance
shall retain all rights to any data, processes, software (including codes),
technology, means, know-how and delta flags developed by Covance relating to
laboratory testing or data management. 
When requested by ALSI, Covance will execute any and all applications,
assignments or other instruments and give testimony which ALSI deems necessary
to apply for and obtain any Letters of Patent of the United States of America
or of any foreign country or to otherwise protect ALSI’s interest therein.  ALSI shall compensate Covance for the time
devoted to said activities and reimburse Covance for expenses incurred.  These obligations shall continue beyond the
termination of this Agreement with respect to patentable inventions,
discoveries and improvements conceived or made by Covance while providing Services
to ALSI pursuant to this Agreement, and shall be binding upon Covance’s
assignees.


 


3





















 


6.              CONFIDENTIAL INFORMATION/LEGAL PROCEEDINGS


 


Covance agrees
that all materials, documents and information provided to it by ALSI and,
except as provided in Section 4, all test information, data and records
developed by Covance exclusively in connection with the performance of its
Services pursuant to this Agreement is and shall be the sole property of ALSI
and considered confidential (collectively, “Confidential Information”).  Covance agrees to hold Confidential
Information in confidence and in a manner consistent with the way in which
Covance maintains the confidentiality of its own proprietary information.  Covance shall disclose the Confidential
Information to Investigators and Covance employees, officers, directors and
representatives only on a need-to-know basis. 
Covance agrees that, except as necessary to fulfill its obligations
under this Agreement, it will not use or disclose to any other third party any
Confidential Information; provided, however, that Covance has no
obligations with respect to any Confidential Information that is: 


 


(a)          now or later becomes publicly available through no fault of Covance;



(b)         obtained by Covance from a third party not under obligation to ALSI
with respect to such Confidential Information;


(c)          already in Covance’s possession as indicated in its written records;
or 


(d)         required to be disclosed by any law, rule, regulation, order, decree
or subpoena, in which event Covance will give ALSI, if practicable, advance
written notice to permit ALSI to seek a protective order or other similar order
with respect to such Confidential Information. 



 


The foregoing
obligations of non-use and confidentiality will extend for five (5) years
beyond the date of disclosure or generation of such Confidential Information. 


 


Should Covance
be obligated to provide testimony or records regarding any Study, Protocol or
Clinical Trial in any legal or administrative proceeding, then ALSI shall
reimburse Covance its out-of-pocket costs therefore plus an hourly fee for its
employees or representatives equal to the internal fully burdened cost to
Covance of such employee or representative.


 


Nothing
contained in this Section 6 shall be interpreted to limit the rights and
obligations of the parties under Section 4 hereof and to the extent that
any conflict arises in applying the provisions of Sections 4 and 6, the
provisions of Section 4 shall control. 


 


7.              COMPLIANCE


 


Performance -
Covance will perform its Services in accordance with the current state of the
laboratory art. All of Covance’s tests, assays and other activities undertaken
under this Agreement shall comply in all material respects with College of American
Pathologists (“CAP”).  CLIA (Clinical
Laboratory Improvement Act) certification is obtained through compliance with
CAP requirements.  This Agreement
contains all the conditions under which Covance will provide Services. Covance
makes no other express or implied commitments or warranties concerning the
performance of the Clinical Trial.


 


Change in
Requirements - Should government regulatory requirements be changed, Covance
will make every reasonable effort to satisfy the new requirements.  In the event that compliance with such new
regulatory requirements necessitates a change in this Agreement, Covance will
submit to ALSI a revised technical and cost proposal for ALSI’s acceptance
prior to performing Services.


 


Conflicts - In
the event of a conflict in government regulation, ALSI will designate the
applicable regulations to be followed by Covance in the performance of its
Services.


 


4





















 


8.              LABORATORY VISITS


 


ALSI’s
representatives may visit Covance’s facility with reasonable frequency during
normal business hours to observe the progress of a Clinical Trial. All such
visits shall be scheduled in advance by ALSI. ALSI agrees that all confidential
and proprietary information of Covance obtained or observed during such visits
shall remain sole property of Covance and ALSI shall keep such information
confidential and shall not use or disclose it to a third party without Covance’s
prior written consent.


 


9.              INDEMNIFICATION 


 


A.                                    ALSI shall indemnify Covance and its respective affiliates and their
respective officers, directors, employees and agents (“Covance Group”) from any
loss, damage, cost or expense (including reasonable attorney’s fees) (a “Loss”)
arising from any claim, demand, assessment, action, suit or proceeding (a “Claim”)
arising from or related to (i) personal injury to a participant in the
Clinical Trial or any employee within the Covance Group directly or indirectly
caused by the Study Drug, (ii) Covance’s performance of or involvement
with the Clinical Trial or its obligations under this Agreement, (iii) this
Agreement, the Clinical Trial or any aspect thereof, or the Protocol, which
violates any applicable law, rule, regulation or ordinance, (iv) the Study
Drug’s harmful or otherwise unsafe effect, including, without limitation, a
Claim based upon ALSI’s or any other person’s use, consumption, sale,
distribution or marketing of the Study Drug, or (v) the negligence, gross
negligence or intentional misconduct or inaction of ALSI in the performance of
its obligation under this Agreement or the Protocol related to any Clinical
Trial; provided that if such Loss or Claim (other than a Loss or Claim
described in clause (iv)) hereof arises in whole or in part from Covance’s
negligence, gross negligence or intentional misconduct or inaction, then the
amount of such Loss that ALSI shall indemnify the appropriate person or entity
within the Covance Group pursuant to this Section 9 shall be reduced by an
amount in proportion to the percentage of Covance’s responsibilities for such
Loss as determined by a court of competent jurisdiction in a final and
non-appealable decision or in a binding settlement between the parties. ALSI
shall not indemnify the Covance Group from any Loss from any Claim described in
clause (iv) hereof arising solely from the willful misconduct or inaction
or gross negligence of Covance.


 


B.                                    Covance shall indemnify ALSI and its officers, directors, employees
and agents (“ALSI Group”) from any Loss arising from any Claim for personal
injury to Study participants or personal injury to any employee within the ALSI
Group or property damage arising or occurring during the conduct of the
Clinical Trial as a result of Covance’s negligence, gross negligence or
intentional misconduct or inaction; provided that if such Loss or Claim
hereof arises in whole or part from the ALSI Group’s negligence, gross
negligence or intentional misconduct or inaction, then the amount of the Loss
that Covance shall indemnify the ALSI Group for pursuant to this Section 9
shall be reduced by an amount in proportion to the percentage of ALSI Group’s
responsibilities for such Loss as determined by a court of competent
jurisdiction in a final and non-appealable decision or in a binding settlement
between the parties.


 


C.                                    Upon receipt of notice of any Claim that may give rise to a right of
indemnity from a party, a person or entity entitled to seek indemnification
pursuant to the foregoing provisions (the “Indemnified Party”) shall give
written notice thereof to the other party (the “Indemnifying Party”) with a
Claim for indemnity. Such notice shall indicate the nature of the Claim and the
basis therefor. Promptly after a Claim is made for which the Indemnified Party
seeks indemnity, the Indemnified Party shall permit the Indemnifying Party, at
its option and expense, to assume the complete defense of such Claim, provided,
however, that (a) the Indemnified Party will have the right to
participate in the defense of any such Claim at its own cost and expense, (b) the
Indemnifying Party will conduct the defense of such Claim, with due


 


5





















 


regard for the
business interest and potential related liability of the Indemnified Party and (c) the
Indemnifying Party will, prior to making any settlement, consult with the
Indemnified Party as to the terms of such settlement, with the Indemnified
Party having the right, at its election, to release and hold harmless the
Indemnifying Party from its obligations hereunder with respect to such Claim
and assume a complete defense of the same in return for payment by the
Indemnifying Party to the Indemnified Party of the amount of the Indemnifying
Party’s settlement offer. The Indemnifying Party will not, in defense of such
Claim, except with the consent of the Indemnified Party, consent to the entry
of any judgment or enter into any settlement which does not include, as an
unconditional term thereof, the giving by the claimant or plaintiff to the
Indemnified Party of a release from all liability in respect thereof.  After notice to the Indemnified Party of the
Indemnifying Party’s election to assume the defense of such Claim, the
Indemnifying Party shall be liable to the Indemnified Party for such legal or
other expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof at the request of the Indemnifying Party. As to those
Claims with respect to those which the Indemnifying Party does not elect to
assume control of the defense, the Indemnified Party will afford the
Indemnifying Party an opportunity to participate in such defense, at the
Indemnifying Party’s own cost and expense, and will not settle or otherwise
dispose of any of the same without the consent of the Indemnifying Party, which
may not be unreasonably withheld or delayed. 



 


D.                                    The obligations of the parties under this Section survive the
termination of this Agreement.  Further,
a breach by the Indemnified Party of its obligations under this Agreement shall
not relieve the Indemnifying Party of its obligations under this Section unless
such breach was solely responsible for the Loss or Claim as determined by a
court of competent jurisdiction in a final and non-appealable decision or in a
binding settlement between the parties.


 


10.       DEFAULT


 


If Covance is
in default of its material obligations under this Agreement, ALSI shall
promptly notify Covance in writing of any such default.  Covance shall have a period of thirty (30)
days from receipt of such notice within which to cure the default.  If Covance shall fail to so cause such cure,
then this Agreement shall, at ALSI’s option and upon notice to Covance,
immediately terminate.  In any event,
ALSI’s sole remedy for any default by Covance under this Agreement shall be the
refund of all money paid to Covance under this Agreement. Under no
circumstances shall ALSI be entitled to, nor shall Covance be responsible for,
any incidental, indirect, consequential or special damages (including, without
limitation, lost profit) arising in connection with any default or breach by
Covance of its obligations under this Agreement or any documents related
thereto.


 


If ALSI is in
default of its material obligations under this Agreement, then Covance shall
promptly notify ALSI in writing of any such default. ALSI shall have a period
of thirty (30) days from the date of receipt of such notice within which to
cure the default.  If ALSI fails to cure
within the specified time period, then this Agreement shall, at Covance’s
option, immediately terminate.


 


After performing Services, Covance will store the Study specimens
(hereinafter “Archival Specimens”) for the length of
time and under storage conditions as described in the applicable Statement of
Work.  Archival Specimens may
subsequently be shipped to ALSI or another party as specified in the Statement
of Work or as otherwise requested by ALSI. 
In no event shall Covance’s liability for any breach or default with
regard to storage of an Archival Specimen exceed the fee it has been paid for
storage of that specimen for the prior twelve (12) months.   


 


6





















 


11.       INSURANCE


 


Covance shall
secure and maintain in full force and effect through the performance of its
Services the necessary insurance coverage in amounts appropriate to the conduct
of Covance’s business. Certificates evidencing such insurance will be made
available for examination upon request by ALSI.


 


12.       FORCE MAJEURE


 


No party shall
be liable for a delay in performance or failure to perform its obligations
under this Agreement if such delay or failure is due to acts of God or any
other event beyond the control of the parties, including, without limitation,
fire, explosion, weather, disease, war, insurrection, civil strife, riots,
government action or power failure, provided, however, that the party who is
unable to perform resumes performance as soon as possible following the end of
the event causing delay or failure. Any deadline or time for performance which
falls due during or subsequent to the occurrence of any of the events referred
to above shall be automatically extended for a period of time equal to the
period of delay caused by any such event.


 


Covance will
promptly notify ALSI if, by reason of any of the events referred to above,
Covance is unable to meet any deadline or time for performance specified in
this Agreement.  In the event that any
part of Covance’s Services is rendered invalid as a result of any such event,
Covance will, upon written request from ALSI and at ALSI’s sole cost and
expense, repeat that part of the Services affected by the event.


 


13.       TERMINATION


 


ALSI may
terminate this Agreement prior to completion of the Clinical Trial, at any time
and for any reason, upon 30 days written notice to Covance, except when the
reason for termination is the safety of patients, then it can be terminated
immediately.  In the event of
termination, Covance shall be entitled to full payment for work performed on
the Clinical Trial up through the date work on such Clinical Trial is
concluded, including, without limitation, all fees and other expenses of
Covance for such Clinical Trial.  Covance
shall use reasonable efforts to conclude or transfer the Clinical Trial as
expeditiously as practicable and in accordance with all applicable laws, rules and
regulations, including those of the FDA. 
Further, Covance and ALSI shall cooperate with each other during such
Clinical Trial termination to safeguard patient safety, continuity of patient
treatment and to comply with applicable laws, rules and regulations.


 


The
termination of this Agreement shall not relieve either party of its obligations
to the other with respect to (a) maintaining the confidentiality of
Confidential Information, (b) assignment of inventions and assistance with
respect thereto, (c) indemnification, (d) compensation for Services performed,
and (e) retention of records.


 


14.       MISCELLANEOUS


 


A.                                    Independent Contractor. It is
understood and agreed that Covance shall perform its duties as an independent
contractor and not as an agent, employee, partner or joint venture of
ALSI.  Covance will have no authority to
bind or commit ALSI in any manner whatsoever and will not, at any time, hold
itself out to third parties as having authority to enter into or incur any
commitments, expenses, liabilities or obligations of any nature on behalf of ALSI,
except pursuant to this Agreement.


 


7





















 


B.                                    Advertising.  Neither party shall use the name of the other
party or the names of the employees of the other party in any advertising or
sales promotional material or in any publication without the prior written
permission of such party.


 


C.                                    Modifications.  No amendments or modifications may be made to
this Agreement without the mutual written agreement of ALSI and Covance.


 


D.                                    Law. 
This Agreement will be governed by Indiana law.  It is the intention of the parties that in
the event disputes should arise between the parties over the interpretation and
application of this Agreement, the parties will first attempt to settle such
disputes by negotiation and consultation between the senior executives of ALSI
and Covance and other parties familiar with this Agreement or the Study.


 


E.                                      Costs of Litigation.  In the event that any party commences legal
proceedings against the other party in connection with this Agreement, the
party prevailing through a final non-appealable decision shall be entitled to
recover its costs and expenses of litigation (including reasonable attorneys’
fees) from the other party.


 


F.                                      Binding Effect.     This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their successors and assigns;
provided, however, that neither party shall have the right to assign this
Agreement or any of the rights set forth herein or delegate any of the
obligations hereunder without the prior written consent of the other party.


 


G.                                    Entire Agreement.              This Agreement represent the entire
understanding between the parties with respect to the subject matter hereof as
of the Effective Date, and this Agreement supersedes all prior agreements,
negotiations, understandings, representations, statements and writings between
the parties relating thereto.


 


H.                                    Waiver.     No waiver of any term, provision, or condition of this Agreement
whether by conduct or otherwise in any one or more instances shall be deemed to
be or construed as a further or continuing waiver or estoppel of any such term,
provision, or condition or of any other term, provision, or condition of this
Agreement.


 


I.                                         Severability.                                                                            If any term or provision of this Agreement shall be held invalid or
unenforceable, the remaining terms hereof shall not be affected but shall be
valid and enforced.


 


J.                                      Notices. All notices required to be
given under this Agreement shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed first class, registered or
certified mail, return receipt requested, postage paid:


 


	
  If to ALSI
  to:

  	
  Advanced
  Life Sciences Inc.

  
	
   

  	
  1440 Davey
  Road

  
	
   

  	
  Woodridge,
  IL 60517

  
	
   

  	
  Attention:

  
	
   

  	
   

  
	
  If to
  Covance to:

  	
  Covance
  Central Laboratory Services LP

  
	
   

  	
  8211 SciCor
  Drive

  
	
   

  	
  Indianapolis,
  Indiana 46214-2985

  
	
   

  	
  UNITED
  STATES

  
	
   

  	
  Attention:
  Vice President, Finance

  



 


8





















 


or at such
other place as either party shall hereafter furnish to the other party in
writing. Notices shall be deemed given on the date of personal delivery or
deposit in the mail as specified above.


 


K.                                    Captions. Any caption used in this
Agreement is inserted for convenience and reference only and is to be ignored
in the construction and interpretation of the provisions hereof.


 


IN WITNESS
WHEREOF, the parties by their duly authorized officers have executed this
Agreement on the dates set forth below, to be effective on the Effective Date
set forth on the first page of this Agreement.


 


	
  Advanced
  Life Sciences Inc.

  	
  Covance
  Central Laboratory Services LP

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Michael T. Flavin

  	
   

  	
  By:

  	
  /s/
  Deborah L. Tanner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  November 22,
  2005

  	
  Date:

  	
  November 22,
  2005

  
						



 


9