Exhibit 10.7

CONFIDENTIAL
Lifeline/ASC Final Settlement Agreement
This Final Settlement Agreement is entered into effective as of June 30, 2006
between, on the one hand, each of the “ASC Parties” (which include American Stem
Cell Corporation Kenneth Swaisland, Ken Sorensen, Milton Datsopoulos, Michael
McClain, Array Capital, Catalytix LDC, Catalytix Life Sciences Hedge, Avion
Holdings, Inc., jointly and severally), and, on the other hand, the “Lifeline
Parties” (which include Lifeline Cell Technology, LLC, Jeffrey Janus, William B.
Adams, Kenneth C. Aldrich, jointly and severally). Both sides collectively are
“the Parties”, and references to the Parties are intended as references to them
jointly and severally, as well as their respective parent companies,
subsidiaries, affiliates, and sister entities, and their respective
shareholders, partners, members, directors, officers, managers and employees,
and their respective attorneys, insurers, agents, representatives, predecessors,
successors and assigns.
Background, Purpose, and Interpretation
1. Background Facts. The Parties acknowledge these facts: Prior to May 15, 2006,
various of the ASC Parties and the Lifeline Parties engaged in various
negotiations and entered into various agreements. The last of those agreements
was an Extension Agreement providing for certain transactions to be closed on or
before May 15, 2006, and for certain releases by ASC Parties of rights and
claims against Lifeline Parties to take effect if the closing did not occur. The
closing did not occur. The ASC Parties and the Lifeline Parties dispute the
legal effect of that failure to close and of those releases; certain of the ASC
Parties allege that they were induced by fraud to give the releases contained in
the Extension Agreement; the Lifeline Parties deny any fraud.
2. Purpose; No Admission. To avoid the uncertainties and costs of litigation,
the Parties now wish to resolve all known, unknown, suspected and unsuspected
claims between them, finally and forever, and they enter into this Final
Settlement Agreement for that purpose. The Parties intend this Final Settlement
Agreement to be the complete and final statement of the rights and obligations
of the ASC Parties and the Lifeline Parties as against one another, superseding,
replacing and extinguishing all rights and obligations of every kind and
character as between them, excepting only those which are expressly set forth in
this Final Settlement Agreement. This Final Settlement Agreement does not
constitute an admission by any of the Parties that they engaged in any
wrongdoing of any kind.
3. Prevention of Avoidance of Enforcement. To prevent (to the greatest extent
permitted by law) any later claim that this very Final Settlement Agreement was
procured by fraud or mistake, or is otherwise unenforceable according to its
terms, the Parties represent, warrant and agree that they have not been induced
to enter into this Final Settlement Agreement by any belief, understanding,
representation, warranty, agreement, act or omission that is not expressly set
forth in this Final Settlement Agreement, and further that no belief,
understanding, representation, warranty, agreement, act or omission is material
to this Final Settlement Agreement or the Parties’ respective decisions to enter
into it, excepting only those which are expressly set forth in this Final
Settlement Agreement.
Lifeline/ASC Final Settlement Agreement — Page 1 of 9

 

 

--------------------------------------------------------------------------------

 

CONFIDENTIAL
4. Limitation on Future Claims and Remedies. The Parties further agree that (to
the greatest extent permitted by law) any later claim that this Final Settlement
Agreement has been entered into by mistake or fraud or was breached or that
consideration failed, and any other claim relating to the formation,
interpretation, or performance of this Final Settlement Agreement, shall not be
construed to permit the rescission of this Final Settlement Agreement or the
restoration of any rights or obligations that may have existed between the ASC
Parties and the Lifeline Parties prior to the effective date of this Final
Settlement Agreement, but instead shall be construed to stipulate that this
Final Settlement Agreement is valid and enforceable according to its terms and
shall be limited to the claims and remedies expressly stated herein or otherwise
available for breach or enforcement of this Final Settlement Agreement.
New Rights and Obligations
5. Transfer Shares to ASC. All shares of ASC now owned or held by any Lifeline
Parties (being fifteen million five hundred thousand (15,500,000) shares) shall
be transferred to ASC.
6. Amended and Restated Debt. All promissory notes issued by Lifeline in favor
of ASC, and all other debt owed by Lifeline to ASC, shall be modified and
amended and restated, such that Lifeline shall issue a new amended and restated
promissory note to ASC in the amount of US $500,000.00, with the terms and in
the form attached hereto as Exhibit A.
7. Good-Faith Cooperation. The Parties agree to cooperate with one another and
to take such actions as are reasonably necessary to effectuate this Final
Settlement Agreement, at no cost to the other. This includes, without
limitation, prompt execution and delivery of all documents necessary to
effectuate the transfer of stock, extinguishing of debt, and issuance of a new
promissory note referenced above in Sections 5 and 6, consent to judicially
enforced specific performance if for any reason the necessary documents are not
executed and delivered, and waiver of any stay on appeal from a judicial order
compelling any of those acts.
8. Effective Date of New Rights. Regardless of the actual dates on which the
stock is transferred, the debt is extinguished, and the new promissory note is
issued as referenced above in Sections 5 and 6, and regardless of whether those
acts occur voluntarily or by judicial compulsion, each of those acts shall be
deemed to have occurred as of the effective date of this Final Settlement
Agreement.
9. Tax Consequences. No Party has made any representations, warranties or
agreements regarding the tax consequences, if any, of the terms of or acts
contemplated by this Final Settlement Agreement. Each of the Parties agrees that
it/he/she is solely and fully responsible for any such tax consequences to
it/him/her, and further agrees to indemnify the other side and hold it harmless
from any claim resulting from its/his/her failure to discharge any tax-related
obligations arising out of or related to this Final Settlement Agreement.
Lifeline/ASC Final Settlement Agreement — Page 2 of 9

 

 

--------------------------------------------------------------------------------

 

CONFIDENTIAL
10. No Disparagement. Each of the Parties agree not to disparage (directly or
indirectly, orally or in writing) the other Parties or any of their affiliates,
and agree to refrain from making any public statements about the other Parties
or any of their affiliates, which would serve to reflect unfavorably upon the
image or reputation of such Party.
Releases
11. Mutual General Releases. Excepting only as to rights and obligations
expressly set forth in this Final Settlement Agreement, the ASC Parties on the
one hand (and any person who may claim through them), and the Lifeline Parties
on the other (and any person who may claim through them), each hereby waives and
releases the other side (and their respective parent companies, subsidiaries,
affiliates, and sister entities, and their respective shareholders, partners,
members, managers, directors, officers, and employees, and their respective
attorneys, insurers, agents, representatives, predecessors, successors and
assigns), from every right, obligation, action, suit, liability, charge or claim
(of the broadest possible description), whether known or unknown, suspected or
unsuspected, that any of the ASC Parties may at any time otherwise have against
any of the Lifeline Parties, and vice versa, arising from acts, events or
circumstances occurring on or before the effective date of this Final Settlement
Agreement, including without limitation any right, obligation or claim which
arises from or is related to any actual or alleged promissory notes, debt,
agreements relating to stock, other contracts, communications, promises,
discussions, negotiations, fraud, misrepresentation, breach of fiduciary duty,
or other acts or omissions as between ASC and Lifeline. The release given herein
excludes for purposes hereof the Final Settlement Agreement. The persons
released by the ASC Parties are referred to as the “Lifeline Releasees”. The
persons released by the Lifeline Parties are referred to as the “ASC Releasees”.
12. Waiver of Cal. Civ. Code § 1542. Each of the Parties represents, warrants
and agrees that the releases provided in this Final Settlement Agreement extend
to all rights, obligations and claims of every nature and kind as further
described above, even if unknown or unsuspected, and expressly waives and
relinquishes all rights under California Civil Code §1542 (or similar law of any
jurisdiction), which reads as follows:
“A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.”
13. No Other Claims. Each of the ASC Parties and the Lifeline Parties represents
and warrants to the other side that it/he/she (a) has not assigned or
transferred any claims against the Lifeline Releasees or ASC Releasees, as
applicable; and (b) has not filed or otherwise asserted any claims against any
of the Lifeline Releasees or ASC Releasees, respectively, with any state,
federal, or local agency, court or other tribunal, and warrants and agrees that,
except to the extent such an agreement would be prohibited by law, it/he/she
will not do so at any time hereafter based on any acts, events or circumstances
occurring on or before the effective date of this Final Settlement Agreement,
and that, if any agency, court or other tribunal assumes jurisdiction of any
such claim on behalf of any of the ASC Parties or the Lifeline Parties, that
Party shall direct that agency, court or tribunal to withdraw or dismiss the
matter with prejudice.
Lifeline/ASC Final Settlement Agreement — Page 3 of 9

 

 

--------------------------------------------------------------------------------

 

CONFIDENTIAL
General Terms
14. Titles Not Substantive. The titles and headings herein are for ease of
reference only and shall not be considered in interpreting this Final Settlement
Agreement.
15. Heirs and Assigns. The rights and obligations of the Parties hereunder shall
bind and benefit their respective successors, administrators, spouses, heirs and
assigns.
16. Severability. If any provision of this Final Settlement Agreement is held
invalid or contrary to law by a court or other tribunal of competent
jurisdiction, the invalidity shall not affect other provisions which can be
given their intended effect without the invalid provision, and to this end the
provisions of this Final Settlement Agreement are severable.
17. Integration and Modification. This instrument supersedes all prior
discussions and agreements and contains all representations, warranties and
agreements between the Parties relating to the rights herein granted and the
obligations herein assumed or released. The Parties represent, warrant and agree
that in executing this Final Settlement Agreement, they do not rely and have not
relied upon any representation, warranty, or agreement made by any of the
Parties, other than those representations, warranties and agreements which are
expressly stated in this Agreement. The Parties agree that any alleged
representations, warranties or agreements not expressly set forth herein were
not material to any Party’s decision to enter into this Final Settlement
Agreement. This Final Settlement Agreement can be modified only by a writing
signed by the Party to be charged.
18. Waivers. A Party’s waiver or failure to exercise any right under this Final
Settlement Agreement shall not be construed to waive, support a finding of
estoppel with respect to, or otherwise affect that Party’s assertion of any
right in the future.
19. Jurisdiction and Venue. This Final Settlement Agreement is entered into and
shall be performed in the County of Los Angeles, State of California, where both
ASC and Lifeline have their headquarters. Each Party consents to the exclusive
jurisdiction of California in connection with any claim arising out of or
related to this Final Settlement Agreement, and any such claim shall be
submitted to the exclusive jurisdiction of the Los Angeles Superior Court. The
construction and interpretation of this Final Settlement Agreement shall be
governed by the laws of California applicable to contracts made and wholly to be
performed in California.
20. Attorneys’ Fees. In the event of a dispute arising out of or related to this
Final Settlement Agreement which reasonably leads to litigation or other
dispute-resolution procedure in any tribunal or forum whatsoever, the prevailing
Party shall be entitled to an award of attorneys’ fees and expenses (not limited
to taxable costs) incurred in connection therewith, including without limitation
those incurred in connection with obtaining, enforcing and/or collecting on any
award or judgment related to such a dispute or this Final Settlement Agreement.
Lifeline/ASC Final Settlement Agreement — Page 4 of 9

 

 

--------------------------------------------------------------------------------

 

CONFIDENTIAL
21. Negotiation and Advice of Counsel. Each Party acknowledges that it/he/she
has had a full opportunity both to negotiate the terms of this Final Settlement
Agreement and to obtain legal advice from an attorney of its/his/her choosing
regarding the terms of this Final Settlement Agreement, the Parties’ rights and
obligations hereunder, and the advisability of entering into this Final
Settlement Agreement. Each Party represents that it/he/she has either knowingly
decided to execute this Final Settlement Agreement based on advice of counsel or
has knowingly decided to waive the right to counsel and execute this Final
Settlement Agreement without such advice. This Final Settlement Agreement shall
be deemed to have been prepared jointly by the Parties, and the usual rule that
the provisions of a document are to be construed against the drafter shall not
apply.
22. Authority to Sign. The person signing below on behalf of each of the
Parties, and each of the Parties, represents and warrants that the signing
person has the authority to execute this Final Settlement Agreement on behalf of
said Party, and that it is not necessary for any other Party to inquire further
into the validity of execution or authority to execute. Each Party further
represents and warrants that it/he/she is the sole owner of every right,
obligation and claim released by it/him/her in this Agreement, and that
it/he/she has not assigned, transferred or encumbered all or any part of any
such right, obligation or claim.
23. Multiple Counterparts. This Final Settlement Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Faxed or scanned
signatures shall be deemed valid as if they were inked originals.
(Signature Pages to Follow)
Lifeline/ASC Final Settlement Agreement — Page 5 of 9

 

 

--------------------------------------------------------------------------------

 

Wherefore, the Parties affix their authorized signatures hereto:

                  AMERICAN STEM CELL CORPORATION        
 
                By:   /S/ KENNETH SWAISLAND       /S/ ANDREW SCHWAB            
      Kenneth Swaisland, CEO       Andrew Schwab, Secretary
 
                LIFELINE CELL TECHNOLOGIES, LLC        
 
                By:   /S/ KENNETH C. ALDRICH       /S/ WILLIAM B. ADAMS        
          Kenneth C. Aldrich,       William B. Adams,     Managing Member      
Managing Member
 
                /S/ KEN SORENSEN       /S/ KENNETH SWAISLAND           Ken
Sorensen, Individually       Kenneth Swaisland, Individually
 
                /S/ MILTON DATSOPOULOS       /S/ MICHAEL MCLAIN           Milton
Datsopoulos, Individually       Michael McClain, Individually
 
                /S/ JEFFREY JANUS       /S/ WILLIAM B. ADAMS           Jeffrey
Janus, Individually       William B. Adams, Individually
 
                /S/ KENNETH C. ALDRICH                           Kenneth C.
Aldrich, Individually            

                  ARRAY CAPITAL       CATALYTIX LDC
 
               
By:
  /S/ KEN SORENSEN       By:   /S/ KEN SORENSEN
 
               
Title:
          Title:    
 
 
 
         
 
 
 
                CATALYTIX LIFE SCIENCES HEDGE       AVION HOLDINGS, INC.
 
               
By:
  /S/ KEN SORENSEN       By:   /S/KENNETH SWAISLAND
 
               
Title:
          Title:    
 
               

 
(Signature Page to Lifeline/ASC Final Settlement Agreement)
Lifeline/ASC Final Settlement Agreement — Page 6 of 9