**Exhibit 4.12**

 

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**ADVANCED CELL TECHNOLOGY, INC.**

 

 

**INVESTOR’S RIGHTS AGREEMENT**

 

 

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December 31, 1998

 

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TABLE OF CONTENTS

 
| 1.     | Registration Rights      |                                                 |
|--------|--------------------------|------------------------------------------------------|
|   | 1.1                      | Definitions                                          |   |
|   | 1.2                      | Request for Registration                             |   |
|   | 1.3                      | Company Registration                                 |   |
|   | 1.4                      | Obligations of the  Company                          |   |
|   | 1.5                      | Furnish Information                                  |   |
|   | 1.6                      | Expenses of Demand  Registration                     |   |
|   | 1.7                      | Expenses of  Company Registration                    |   |
|   | 1.8                      | Underwriting Requirements                            |   |
|   | 1.9                      | Delay of Registration                                |   |
|   | 1.10                     | Indemnification                                      |   |
|   | 1.11                     | Reports  Under Securities Exchange Act of 1934       |   |
|   | 1.12                     | Form S-3  Registration                          |   |
|   | 1.13                     | Assignment of  Registration Rights                   |   |
|   | 1.14                     | Limitations on  Subsequent Registration Rights       |   |
|   | 1.15                     | “Market Stand-Off” Agreement               |   |
|   | 1.16                     | Termination of  Registration Rights                  |   |
|   |                     |                                                 |   |
| 2.     | Covenants of the Company |                                                 |
|   | 2.1                      | Delivery of Financial  Statements                    |   |
|   | 2.2                      | Inspection                                           |   |
|   | 2.3                      | Termination of  Information and Inspection Covenants |   |
|   | 2.4                      | Right of First Offer                                 |   |
|   | 2.5                      | Negative Covenants                                   |   |
|   | 2.7                      | Termination of Certain  Covenants                    |   |
|   |                     |                                                 |   |
| 3.     | Miscellaneous            |                                                 |
|   | 3.1                      | Successors and Assigns                               |   |
|   | 3.2                      | Governing  Law                                       |   |
|   | 3.3                      | Counterparts                                         |   |
|   | 3.4                      | Titles and Subtitles                                 |   |
|   | 3.5                      | Notices                                              |   |
|   | 3.6                      | Expenses                                             |   |
|   | 3.7                      | Amendments and Waivers                               |   |
|   | 3.8                      | Severability                                         |   |
|   | 3.9                      | Aggregation of Stock                                 |   |
|   | 3.10                     | Entire Agreement;  Amendment; Waiver                 |   |

 

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INVESTOR’S RIGHTS AGREEMENT

 

THIS INVESTOR’S RIGHTS AGREEMENT is made as of the       dayof December, 1998, by and between Advanced Cell Technology, Inc., aDelaware corporation (the “Company”), and Avian Farms, Inc., a Delawarecorporation, referred to herein as an “Investor.”

 

RECITALS

 

WHEREAS, the Company and the Investor are parties to the Series APreferred Stock Purchase Agreement of even date herewith (the “Series AAgreement”);

 

WHEREAS, in order to induce the Company to enter into the Series AAgreement and to induce the Investor to invest funds in the Company pursuant tothe Series A Agreement, the Investor and the Company hereby agree thatthis Agreement shall govern the rights of the Investor to cause the Company toregister shares of Common Stock issuable to the Investor andcertain other matters as set forth herein;

 

NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

 

I.                               Registration Rights.The Company covenants and agrees as follows:

 

1.1                        Definitions. For purposes of this Section 1:

 

(a)                         The term “Act” means the Securities Act of1933, as amended.

 

(b)                        The term “Form S-3” means such formunder the Act as in effect on the date hereof or any registration form underthe Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by referenceto other documents filed by the Company with the SEC.

 

(c)                         The term “Holder” means any person owning orhaving the right to acquire Registrable Securities or any assignee thereof inaccordance with Section 1.13 hereof.

 

(d)                        The term “1934 Act” shall mean the SecuritiesExchange Act of 1934, asamended.

 

(e)                         The term “register”, “registered,” and “registration”refer to a registration effected by preparing and filing a registrationstatement or similar document in compliance with the Act, and the declarationor ordering of effectiveness of such registration statement or document.

 

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(f)                          The term “Registrable Securities” means (i) theCommon Stock issuable or issued upon conversion of the Series A PreferredStock, and (ii) any Common Stock of the Company issued as (or issuableupon the conversion or exercise of any warrant, right or other security whichis issued as) a dividend or other distribution with respect to, or in exchangefor or in replacement of the shares referenced in (i) above, excluding inall cases, however, any Registrable Securities sold by a person in a transactionin which his rights under this Section 1 are not assigned.

 

(g)                       The number of shares of “RegistrableSecurities then outstanding” shall be determined by the number of shares ofCommon Stock outstanding which are, and the number of shares of Common Stockissuable pursuant to then exercisable or convertible securities which are,Registrable Securities.

 

(h)                        The term “SEC” shall mean the Securities andExchange Commission.

 

1.2                        Request for Registration.

 

(a)                         If the Company shall receive at any timeafter the earlier of (i) December 31, 1999, or (ii) three (3) monthsafter the effective date of the first registration statement for a publicoffering of securities of the Company (other than a registration statementrelating either to the sale of securities to employees of the Company pursuant toa stock option, stock purchase or similar plan or a SEC Rule 145transaction), a written request from the Holders of a majority of theRegistrable Securities then outstanding that the Company file a registrationstatement under the Act covering the registration of at least forty percent(40%) of the Registrable Securities then outstanding (or a lesser percent ifthe anticipated aggregate offering price, net of underwriting discounts and commissions,would exceed $7,500,000), then the Company shall:

 

(i)                                     within ten (10) days of the receiptthereof, give written notice of such request to all Holders; and

 

(ii)                                  effect as soon as practicable, and in anyevent within 60 days of the receipt of such request, the registration under theAct of all Registrable Securities which the Holders request to be registered,subject to the limitations of subsection 1.2(b), within twenty (20) daysof the mailing of such notice by the Company in accordance with Section 3.5.

 

(b)                        If the Holders initiating the registrationrequest hereunder (“Initiating Holders”) intend to distribute the RegistrableSecurities covered by their request by means of an underwriting, they shall soadvise the Company as a part of their request made pursuant to subsection 1.2(a) andthe Company shall include such information in the written notice referred to insubsection 1.2(a). The underwriter will be selected by the Company andshall be reasonably acceptable to a majority in interest of the InitiatingHolders. In such event, the right of any Holder to include his Registrable Securitiesin such registration shall be conditioned upon such Holder’s participation in

 

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such underwriting and the inclusion of such Holder’s RegistrableSecurities in the underwriting (unless otherwise mutually agreed by a majorityin interest of the Initiating Holders and such Holder) to the extent providedherein. All Holders proposing to distribute their securities through suchunderwriting shall (together with the Company as provided in subsection 1.4(e))enter into an underwriting agreement in customary form with the underwriter orunderwriters selected for such underwriting. Notwithstanding any otherprovision of this Section 1.2, if the underwriter advises the InitiatingHolders in writing that marketing factors require a limitation of the number ofshares to be underwritten, then the Initiating Holders shall so advise allHolders of Registrable Securities which would otherwise be underwrittenpursuant hereto, and the number of shares of Registrable Securities that may beincluded in the underwriting shall be allocated among all Holders thereof,including the Initiating Holders, in proportion (as nearly as practicable) tothe amount of Registrable Securities of the Company owned by each Holder,provided, however, that the number of shares of Registrable Securities to beincluded in such underwriting shall not be reduced unless all other securitiesare first entirely excluded from the underwriting.

 

(c)                         Notwithstanding the foregoing, if the Companyshall furnish to Holders requesting a registration statement pursuant to this Section 1.2,a certificate signed by the Chief Executive Officer of the Company stating thatin the good faith judgment of the Board of Directors of the Company, it wouldbe seriously detrimental to the Company and its stockholders for suchregistration statement to be filed and it is therefore essential to defer thefiling of such registration statement, the Company shall have the right todefer taking action with respect to such filing for a period of not more than120 days after receipt of the request of the Initiating Holders; provided,however, that the Company may not utilize this right more than once in anytwelve-month period.

 

(d)                        In addition, the Company shall not beobligated to effect, or to take any action to effect, any registration pursuantto this Section 1.2:

 

(i)                                     After the Company has effected tworegistrations pursuant to this Section 1.2 and such registrations havebeen declared or ordered effective;

 

(ii)                                  During the period starting with the datesixty (60) days prior to the Company’s good faith estimate of the date offiling of, and ending on a date one hundred eighty (180) days after theeffective date of, a registration subject to Section 1.3 hereof; providedthat the Company is actively employing in good faith all reasonable efforts tocause such registration statement to become effective; or

 

(iii)                               If the Initiating Holders propose to disposeof shares of Registrable Securities that may be immediately registered on Form S-3pursuant to a request made pursuant to Section 1.12 below.

 

1.3                        CompanyRegistration. If (but without any obligation to do so)the Company proposes to register (including for this purpose a registrationeffected by the Company for stockholders other than the Holders) any of itsstock or other securities

 

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under the Act in connection with the public offering of such securitiessolely for cash (other than a registration relating solely to the sale ofsecurities to participants in a Company stock plan, a registration on any formwhich does not include substantially the same information as would be requiredto be included in a registration statement covering the sale of the RegistrableSecurities or a registration in which the only Common Stock being registered isCommon Stock issuable upon conversion of debt securities which are also beingregistered), the Company shall, at such time, promptly give each Holder writtennotice of such registration. Upon the written request of each Holder givenwithin twenty (20) days after mailing of such notice by the Company inaccordance with Section 3.5, the Company shall, subject to the provisionsof Section 1.8, cause to be registered under the Act all of theRegistrable Securities that each such Holder has requested to be registered.

 

1.4                        Obligations of the Company. Whenever required under this Section 1to effect the registration of any Registrable Securities, the Company shall, asexpeditiously as reasonably possible:

 

(a)                         Prepare and file with the SEC a registrationstatement with respect to such Registrable Securities and use its best effortsto cause such registration statement to become effective, and, upon the requestof the Holders of a majority of the Registrable Securities registeredthereunder, keep such registration statement effective for a period of up toone hundred twenty (120) days or until the distribution contemplated in the RegistrationStatement has been completed, provided, however, that (i) such 120-day periodshall be extended for a period of time equal to the period the Holder refrainsfrom selling any securities included in such registration at the request of anunderwriter of Common Stock (or other securities) of the Company; and (ii) inthe case of any registration of Registrable Securities on Form S-3 whichare intended to be offered on a continuous or delayed basis, such 120-dayperiod shall be extended, if necessary, to keep the registration statementeffective until all such Registrable Securities are sold, provided that Rule 415,or any successor rule under the Act, permits an offering on a continuousor delayed basis, and provided further that applicable rules under the Actgoverning the obligation to file a post-effective amendment permit, in lieu offiling a post-effective amendment which (1) includes any prospectusrequired by Section 10(a)(3) of the Act or (11) reflects facts orevents representing a material or fundamental change in the information setforth in the registration statement, the incorporation by reference of informationrequired to be included in (1) and (11) above to be contained in periodic reportsfiled pursuant to Section 13 or 15(d) of the 1934 Act in theregistration statement.

 

(b)                        Prepare and file with the SEC such amendmentsand supplements to such registration statement and the prospectus used inconnection with such registration statement as may be necessary to comply withthe provisions of the Act with respect to the disposition of all securitiescovered by such registration statement.

 

(c)                         Furnish to the Holders such numbers of copiesof a prospectus, including a preliminary prospectus, in conformity with therequirements of the Act, and

 

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such other documents as they may reasonably request in order tofacilitate the disposition of Registrable Securities owned by them.

 

(d)                        Use its best efforts to register and qualifythe securities covered by such registration statement under such othersecurities or Blue Sky laws of such jurisdictions as shall be reasonablyrequested by the Holders; provided that the Company shall not be required inconnection therewith or as a condition thereto to qualify to do business or tofile a general consent to service of process in any such states or jurisdictions,unless the Company is already subject to service in such jurisdiction and exceptas may be required by the Act.

 

(e)                         In the event of any underwritten publicoffering, enter into and perform its obligations under an underwritingagreement, in usual and customary form, with the managing underwriter of suchoffering. Each Holder participating in such underwriting shall also enter intoand perform its obligations under such an agreement.

 

(f)                           Notify each Holder of Registrable Securitiescovered by such registration statement at any time when a prospectus relatingthereto is required to be delivered under the Act of the happening of any eventas a result of which the prospectus included in such registration statement, asthen in effect, includes an untrue statement of a material fact or omits tostate a material fact required to be stated therein or necessary to make thestatements therein not misleading in the light of the circumstances thenexisting.

 

(g)                        Cause all such Registrable Securitiesregistered pursuant hereunder to be listed on each securities exchange on whichsimilar securities issued by the Company are then listed.

 

(h)                        Provide a transfer agent and registrar forall Registrable Securities registered pursuant hereunder and a CUSIP number forall such Registrable Securities, in each case not later than the effective dateof such registration.

 

(i)                            Use its best efforts to furnish, at therequest of any Holder requesting registration of Registrable Securitiespursuant to this Section 1, on the date that such Registrable Securitiesare delivered to the underwriters for sale in connection with a registrationpursuant to this Section 1, if such securities are being sold throughunderwriters, or, if such securities are not being sold through underwriters,on the date that the registration statement with respect to such securitiesbecomes effective, (i) an opinion, dated such date, of the counselrepresenting the Company for the purposes of such registration, in form andsubstance as is customarily given to underwriters in an underwritten publicoffering, addressed to the underwriters, if any, and to the Holders requestingregistration of Registrable Securities and (ii) a letter dated such date,from the independent certified public accountants of the Company, in form andsubstance as is customarily given by independent certified public accountantsto underwriters in an underwritten public offering, addressed to theunderwriters, if any, and to the Holders requesting registration of RegistrableSecurities.

 

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1.5                        Furnish Information.

 

(a)                         It shall be a condition precedent to theobligations of the Company to take any action pursuant to this Section 1with respect to the Registrable Securities of any selling Holder that suchHolder shall furnish to the Company such information regarding itself, theRegistrable Securities held by it, and the intended method of disposition ofsuch securities as shall be required to effect the registration of such Holder’sRegistrable Securities.

 

(b)                        The Company shall have no obligation withrespect to any registration requested pursuant to Section 1.2 or Section 1.12if, due to the operation of subsection 1.5(a), the number of shares or theanticipated aggregate offering price of the Registrable Securities to beincluded in the registration does not equal or exceed the number of shares orthe anticipated aggregate offering price required to originally trigger theCompany’s obligation to initiate such registration as specified in subsection 1.2(a) orsubsection 1.12(b)(2), whichever is applicable.

 

1.6                        Expenses of Demand Registration. All expenses other than underwritingdiscounts and commissions incurred in connection with registrations, filings orqualifications pursuant to Section 1.2, including (without limitation) allregistration, filing and qualification fees, printers’ and accounting fees,fees and disbursements of counsel for the Company and the reasonable fees anddisbursements of one counsel for the selling Holders shall be borne by theCompany, provided, however, that the Company shall not be required to pay forany expenses of any registration proceeding begun pursuant to Section 1.2if the registration request is subsequently withdrawn at the request of theHolders of a majority of the Registrable Securities to be registered (in whichcase all participating holders shall bear such expenses), unless the Holders ofa majority of the Registrable Securities agree to forfeit their right to onedemand registration pursuant to Section 1.2.

 

1.7                        Expenses of Company Registration. The Company shall bear and pay all expensesincurred in connection with any registration, filing or qualification of RegistrableSecurities with respect to the registrations pursuant to Section 1.3 foreach Holder (which right may be assigned as provided in Section 1.13),including (without limitation) all registration, filing, and qualificationfees, printers and accounting fees relating or apportionable thereto and thefees and disbursements of counsel for the Company in its capacity as counsel tothe selling Holders hereunder; if Company counsel does not make itselfavailable for this purpose, the Company will pay the reasonable fees anddisbursements of one counsel for the selling Holders selected by them, butexcluding underwriting discounts and commissions relating to RegistrableSecurities.

 

1.8                        Underwriting Requirements. In connection with any offering involvingan underwriting of shares of the Company’s capital stock, the Company shall notbe required under Section 1.3 to include any of the Holders’ securities insuch underwriting unless they accept the terms of the underwriting as agreedupon between the Company and the underwriters selected by it (or by otherpersons entitled to select the

 

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underwriters), and then only in such quantity as theunderwriters determine in their sole discretion will not, jeopardize thesuccess of the offering by the Company. If the total amount of securities,including Registrable Securities, requested by stockholders to be included insuch offering exceeds the amount of securities sold other than by the Companythat the underwriters determine in their sole discretion is compatible with thesuccess of the offering, then the Company shall be required to include in theoffering only that number of such securities, including Registrable Securities,which the underwriters determine in their sole discretion will not jeopardizethe success of the offering (the securities so included to be apportioned prorata among the selling stockholders according to the total amount of securitiesentitled to be included therein owned by each selling Stockholder or in suchother proportions as shall mutually be agreed to by such selling stockholders)but in no event shall (i) the amount of securities of the selling Holdersincluded in the offering be reduced below twenty percent (20%) of the totalamount of securities included in such offering, unless such offering is theinitial public offering of the Company’s securities in which case the sellingstockholders may be excluded if the underwriters make the determinationdescribed above and no other stockholder’s securities are included or (ii) notwithstanding(i) above, any shares being sold by a stockholder exercising a demand registrationright similar to that granted in Section 1.2 be excluded from suchoffering. For purposes of the preceding parenthetical concerning apportionment,for any selling stockholder which is a holder of Registrable Securities andwhich is a partnership or corporation, the partners, retired partners andstockholders of such holder, or the estates and family members of any suchpartners and retired partners and any trusts for the benefit of any of theforegoing persons shall be deemed to be a single “selling stockholder”, and anypro-rata reduction with respect to such “selling stockholder” shall be basedupon the aggregate amount of shares carrying registration rights owned by allentities and individuals included in such “selling stockholder”, as defined inthis sentence.

 

1.9                        Delayof Registration. No Holder shall have any right to obtain orseek an injunction restraining or otherwise delaying any such registration asthe result of any controversy that might arise with respect to theinterpretation or implementation of this Section 1.

 

1.10                  Indemnification. In the event any Registrable Securities are included in aregistration statement under this Section 1:

 

(a)                         To the extent permitted by law, the Companywill indemnify and hold harmless each Holder, any underwriter (as defined inthe Act) for such Holder and each person, if any, who controls such Holder orunderwriter within the meaning of the Act or the 1934 Act, against any losses,claims, damages, or liabilities (joint or several) to which they may becomesubject under the Act or the 1934 Act, insofar as such losses, claims, damages,or liabilities (or actions in respect thereof) arise out of or are based uponany of the following statements, omissions or violations (collectively a “Violation”):(i) any untrue statement or alleged untrue statement of a material factcontained in such registration statement, including any preliminary prospectusor final prospectus contained therein or any amendments or supplements thereto,(ii) the omission

 

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or alleged omission to state therein a material fact required to bestated therein, or necessary to make the statements therein not misleading, or (iii) anyviolation or alleged violation by the Company of the Act, the 1934 Act, anystate securities law or any rule or regulation promulgated under the Act,the 1934 Act or any state securities law; and the Company will pay to each suchHolder, underwriter or controlling person any legal or other expensesreasonably incurred by them in connection with investigating or defending anysuch loss, claim, damage, liability, or action, provided, however, that theindemnity agreement contained in this subsection 1.10(a) shall notapply to amounts paid in settlement of any such loss, claim, damage, liability,or action if such settlement is effected without the consent of the Company(which consent shall not be unreasonably withheld), nor shall the Company beliable in any such case for any such loss, claim, damage, liability, or actionto the extent that it arises out of or is based upon a Violation which occursin reliance upon and in conformity with written information furnished expresslyfor use in connection with such registration by any such Holder, underwriter orcontrolling person.

 

(b)                        To the extent permitted by law, each sellingHolder will indemnify and hold harmless the Company, each of its directors,each of its officers who has signed the registration statement, each person, ifany, who controls the Company within the meaning of the Act, any underwriter,any other Holder selling securities in such registration statement and anycontrolling person of any such underwriter or other Holder, against any losses,claims, damages, or liabilities (joint**or several) to which any of theforegoing persons may become subject, under the Act, the 1934 Act or other federalor state law insofar as such losses, claims, damages, or liabilities (oractions in respect thereto) arise out of or are based upon any Violation, ineach case to the extent (and only to the extent) that such Violation occurs inreliance upon and in conformity with written information furnished by suchHolder expressly for use in connection with such registration, and each suchHolder will pay any legal or other expenses reasonably incurred by any personintended to be indemnified pursuant to this subsection 1.10(b), in connectionwith investigating or defending any such loss, claim, damage, liability, or action;provided, however, that the indemnity agreement contained in this subsection 1.10(b) shallnot apply to amounts paid in settlement of any such loss, claim, damage,liability or action if such settlement is effected without the consent of theHolder, which consent shall not be unreasonably withheld, provided, that, in noevent shall any indemnity under this subsection 1.10(b) exceed the grossproceeds from the offering received by such Holder.

 

(c)                         Promptly after receipt by an indemnifiedparty under this Section 1.10 of notice of the commencement of any action(including any governmental action), such indemnified party will, if a claim inrespect thereof is to be made against any indemnifying party under this Section 1.10,deliver to the indemnifying party a written notice of the commencement thereofand the indemnifying party shall have the right to participate in, and, to theextent the indemnifying party so desires, jointly with any other indemnifyingparty similarly noticed, to assume the defense thereof with counsel mutuallysatisfactory to the parties, provided, however, that an indemnified party (togetherwith all other indemnified parties which may be represented without conflict by

 

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one counsel) shall have the right to retain one separate counsel, withthe fees and expenses to be paid by the indemnifying party, if representationof such indemnified party by the counsel retained by the indemnifying partywould be inappropriate due to actual or potential differing interests betweensuch indemnified party and any other party represented by such counsel in suchproceeding. The failure to deliver written notice to the indemnifying partywithin a reasonable time of the commencement of any such action, if prejudicialto its ability to defend such action, shall relieve such indemnifying party ofany liability to the indemnified party under this Section 1.10, but theomission so to deliver written notice to the indemnifying party will notrelieve it of any liability that it may have to any indemnified party otherwisethan under this Section 1.10.

 

(d)                        If the indemnification provided for in this Section 1.10is held by a court of competent jurisdiction to be unavailable to anindemnified party with respect to any loss, liability, claim, damage, orexpense referred to therein, then the indemnifying party, in lieu ofindemnifying such indemnified party hereunder, shall contribute to the amountpaid or payable by such indemnified party as a result of such loss, liability,claim, damage, or expense in such proportion as is appropriate to reflect therelative fault of the indemnifying party on the one hand and of the indemnifiedparty on the other in connection with the statements or omissions that resultedin such loss, liability, claim, damage, or expense as well as any other relevantequitable considerations. The relative fault of the indemnifying party and ofthe indemnified party shall be determined by reference to, among other things,whether the untrue or alleged untrue statement of a material fact or theomission to state a material fact relates to information supplied by theindemnifying party or by the indemnified party and the parties’ relativeintent, knowledge, access to information, and opportunity to correct or preventsuch statement or omission.

 

(e)                         Notwithstanding the foregoing, to the extentthat the provisions on indemnification and contribution contained in theunderwriting agreement entered into in connection with the underwritten publicoffering are in conflict with the foregoing provisions, the provisions in theunderwriting agreement shall control.

 

(f)                           The obligations of the Company and Holdersunder this Section 1.10 shall survive the completion of any offering ofRegistrable Securities in a registration statement under this Section 1,and otherwise.

 

1.11                  Reports Under Securities Exchange Act of 1934. With a view to making available to the Holders the benefits of Rule 144promulgated under the Act and any other rule or regulation of the SEC thatmay at any time permit a Holder to sell securities of the Company to the publicwithout registration or pursuant to a registration on Form S-3, theCompany agrees to:

 

(a)                         make and keep public information available,as those terms are understood and defined in SEC Rule 144, at all timesafter ninety (90) days after the effective date of the first registrationstatement filed by the Company for the offering of its securities to thegeneral public;

 

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(b)                        take such action, including the voluntaryregistration of its Common Stock under Section 12 of the 1934 Act, as isnecessary to enable the Holders to utilize Form S-3 for the sale of theirRegistrable Securities, such action to be taken as soon as practicable afterthe end of the fiscal year in which the first registration statement filed bythe Company for the offering of its securities to the general public isdeclared effective;

 

(c)                         file with the SEC in a timely manner allreports and other documents required of the Company under the Act and the 1934Act; and

 

(d)                        furnish to any Holder, so long as the Holderowns any Registrable Securities, forthwith upon request (i) a writtenstatement by the Company that it has complied with the reporting requirementsof SEC Rule 144 (at any time after ninety (90) days after the effectivedate of the first registration statement filed by the Company), the Act and the1934 Act (at any time after it has become subject to such reporting requirements),or that it qualifies as a registrant whose securities may be resold pursuant toForm S-3 (at any time after it so qualifies), (ii) a copy of the mostrecent annual or quarterly report of the Company and such other reports anddocuments so filed by the Company, and (iii) such other information as maybe reasonably requested in availing any Holder of any rule or regulationof the SEC which permits the selling of any such securities withoutregistration or pursuant to such form.

 

1.12                  Form S-3 Registration. In case the Company shall receive from anyHolder or Holders a written request or requests that the Company effect aregistration on Form S-3 and any related qualification or compliance withrespect to all or a part of the Registrable Securities owned by such Holder orHolders, the Company will:

 

(a)                         promptly give written notice of the proposedregistration, and any related qualification or compliance, to all otherHolders; and

 

(b)                        as soon as practicable, effect suchregistration and all such qualifications and compliances as may be so requestedand as would permit or facilitate the sale and distribution of all or suchportion of such Holder’s or Holders’ Registrable Securities as are specified insuch request, together with all or such portion of the Registrable Securitiesof any other Holder or Holders joining in such request as are specified in awritten request given within 15 days after receipt of such written notice fromthe Company; provided, however, that the Company shall not be obligated toeffect any such registration, qualification or compliance, pursuant to this section 1.12:(1) if Form S-3 is not available for such offering by the Holders, (2) ifthe Holders, together with the holders of any other securities of the Companyentitled to inclusion in such registration, propose to sell RegistrableSecurities and such other securities (if any) at an aggregate price to thepublic (net of any underwriters’ discounts or commissions) of less than$250,000; (3) if the Company shall furnish to the Holders a certificatesigned by the President of the Company stating that in the good faith judgmentof the Board of Directors of the Company, it would be seriously detrimental tothe Company and its

 

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stockholders for such Form S-3 Registration to be effected at suchtime, in which event the Company shall have the right to defer the filing ofthe Form S-3 registration statement for a period of not more than 60 daysafter receipt of the request of the Holder or Holders under this Section 1.12,provided, however, that the Company shall not utilize this right more than oncein any twelve month period; (4) if the Company has, within the twelve (12)month period preceding the date of such request, already effected tworegistrations on Form S-3 for the Holders pursuant to this Section 1.121or (5) in any particular jurisdiction in which the Company would berequired to qualify to do business or to execute a general consent to serviceof process in effecting such registration, qualification or compliance.

 

(c)                         Subject to the foregoing, the Company shallfile a registration statement covering the Registrable Securities and othersecurities so requested to be registered as soon as practicable after receiptof the request or requests of the Holders. All expenses incurred in connectionwith a registration requested pursuant to Section 1.12, including (withoutlimitation) all registration, filing, qualification, printer’s and accountingfees and the reasonable fees and disbursements of counsel for the sellingHolder or Holders and counsel for the Company, [but excluding any underwriters’discounts or commissions associated with Registrable Securities], shall beborne pro rata by the Holder or Holders participating in the Form S-3Registration. Registrations effected pursuant to this Section 1.12 shallnot be counted as demands for registration or registrations effected pursuantto Sections 1.2 or 1.3, respectively.

 

1.13                  Assignment of Registration Rights. The rights to cause the Company to register Registrable Securitiespursuant to this Section 1 may be assigned (but only with all relatedobligations) by a Holder to a transferee or assignee of such securities who,after such assignment or transfer, holds at least 1,000,000 shares of RegistrableSecurities (subject to appropriate adjustment for stock splits, stock dividends,combinations and other recapitalizations), provided: (a) the Company is,within a reasonable time after such transfer, furnished with written notice ofthe name and address of such transferee or assignee and the securities withrespect to which such registration rights are being assigned, (b) suchtransferee or assignee agrees in writing to be bound by and subject to theterms and conditions of this Agreement, including without limitation theprovisions of Section 1.15 below; and (c) such assignment shall beeffective only if immediately following such transfer the further dispositionof such securities by the transferee or assignee is restricted under the Act.

 

1.14                  Limitations on Subsequent Registration Rights. From and after the date of this Agreement,the Company shall not, without the prior written consent of the Holders of amajority of the outstanding Registrable Securities, enter into any agreement withany holder or prospective holder of any securities of the Company which would allowsuch holder or prospective holder (a) to include such securities in anyregistration filed under Section 1.2 hereof, unless under the terms ofsuch agreement, such holder or prospective holder may include such securitiesin any such registration only to the extent that the inclusion of hissecurities will not reduce the amount of the Registrable Securities of theHolders which is included or (b) to make a demand registration which couldresult

 

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in such registration statement being declared effective prior to theearlier of either of the dates set forth in subsection l.2(a) orwithin one hundred twenty (120) days of the effective date of any registrationeffected pursuant to Section 1.2.

 

1.15                  “MarketStand-Off” Agreement. The Investor hereby agrees that, during theperiod of duration specified by the Company and an underwriter of common stockor other securities of the Company, following the effective date of aregistration statement of the Company filed under the Act, it shall not, to theextent requested by the Company and such underwriter, directly or indirectlysell, offer to sell, contract to sell (including, without limitation, any shortsale), grant any option to purchase or otherwise transfer or dispose of (otherthan to donees who agree to be similarly bound) any securities of the Companyheld by it at any time during such period except common stock included in suchregistration; provided, however, that:

 

(a)                         such agreement shall be applicable only tothe first two such registration statements of the Company which covers commonstock (or other securities) to be sold on its behalf to the public in anunderwritten offering (during the two-year period following the effective dateof a registration statement referenced in Section 1.2(a)(ii); and

 

(b)                        all officers and directors of the Company andall other persons with registration rights (whether or not pursuant to thisAgreement) enter into similar agreements; and

 

(c)                         such market stand-off time period shall notexceed 180 days.

 

In order to enforce the foregoing covenant, the Company may imposestop-transfer instructions with respect to the Registrable Securities of theInvestor (and the shares or securities of every other person subject to theforegoing restriction) until the end of such period.

 

Notwithstanding the foregoing, the obligations described in this Section 1.15shall not apply to a registration relating solely to employee benefit plans on Form S-lor Form S-8 or similar forms which may be promulgated in the future, or aregistration relating solely to a Commission Rule 145 transaction on Form S-14or Form S-15 or similar forms which may be promulgated in the future.

 

1.16                  Termination of Registration Rights.

 

(a)                         No Holder shall be entitled to exercise anyright provided for in this Section 1 after five (5) years followingthe consummation of the sale of securities pursuant to a registration statementfiled by the Company under the Act in connection with the initial firmcommitment underwritten offering of its securities to the general public.

 

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(b)                        In addition, the right of any Holder torequest registration or inclusion in any registration pursuant to Section 1.3shall terminate on the closing of the first Company-initiated registered publicoffering of Common Stock of the Company if all shares of Registrable Securitiesheld or entitled to be held upon conversion by such Holder may immediately besold under Rule 144 during any 90-day period, or on such date after theclosing of the first Company-initiated registered public offering of CommonStock of the Company as all shares of Registrable Securities held or entitledto be held upon conversion by such Holder may immediately be sold under Rule 144during any 90-day period; provided, however, that the provisions of this Section 1.16(b)shall not apply to any Holder who owns more than two percent (2%) of theCompany’s outstanding stock until such time as such Holder owns less than twopercent (2%) of the outstanding stock of the Company.

 

2.                             Covenants of the Company.

 

2.1                       Deliveryof Financial Statements. The Company shall deliver to the Investor.

 

(a)                        as soon as practicable, but in any event within ninety (90) days afterthe end of each fiscal year of the Company, an income statement for such fiscalyear, a balance sheet of the Company and statement of stockholder’s equity asof the end of such year, and a schedule as to the sources and applicationsof funds for such year, such year-end financial reports to be in reasonabledetail, prepared in accordance with generally accepted accounting principles (“gaap”),and audited and certified by independent public accountants of nationallyrecognized standing selected by the Company;

 

(b)                         as soon as practicable, but in any event within forty-five (45) days afterthe end of each of the first three (3) quarters of each fiscal year of theCompany, an unaudited profit or loss statement, schedule as to the sourcesand application of funds for such fiscal quarter.

 

(c)                        within forty-five (45) days of the end of each month, an unaudited incomestatement and schedule as to the sources and application of funds andbalance sheet for and as of the end of such month, in reasonable detail;

 

(d)                       with respect to the financial statements called for in subsections (b) and(c) of this Section 2.1, an instrument executed by the ChiefFinancial Officer or President of the Company and certifying that suchfinancials were prepared in accordance with gaap consistently applied withprior practice for earlier periods (with the exception of footnotes that may berequired by gaap) and fairly present the financial condition of the Company andits results of operation for the period specified, subject to year-end auditadjustment;

 

(e)                        such other information relating to the financial condition, business, prospectsor corporate affairs of the Company as the Investor or any assignee of the

 

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Investor may from time to time request, provided, however, that theCompany shall not be obligated under this subsection (e) or any othersubsection of Section 2.1 to provide information which it deems ingood faith to be a trade secret or similar confidential information.

 

2.2                       Inspection. The Company shall permit the Investor, atthe Investor’s expense, to visit and inspect the Company’s properties, toexamine its books of account and records and to discuss the Company’s affairs,finances and accounts with its officers, all at such reasonable times as may berequested by the Investor, provided, however, that the Company shall not beobligated pursuant to this Section 2.2 to provide access to anyinformation which it reasonably considers to be a trade secret or similarconfidential information.

 

2.3                       Terminationof Information andInspection Covenants. Thecovenants set forth in subsections 2.1 (c), and (e) and Section 2.2shall terminate as to Investor and be of no further force or effect when thesale of securities pursuant to a registration statement filed by the Company underthe Act in connection with the firm commitment underwritten offering of itssecurities to the general public is consummated or when the Company firstbecomes subject to the periodic reporting requirements of Sections 12(g) or15(d) of the 1934 Act, whichever event shall first occur.

 

2.4                       Right of First Offer. Subject to the terms and conditionsspecified in this paragraph 2.4, the Company hereby grants to each MajorInvestor (as hereinafter defined) a right of first offer with respect to futuresales by the Company of its Shares (as hereinafter defined). For purposes ofthis Section 2.4, a Major Investor shall mean any investor (i) whoholds at least 50%**of the original investment theInvestor makes in the Company pursuant to the Series A Agreement and (ii) whoacquires at least 50% of the Series A Preferred Stock (or the common stockissued upon conversion thereof) issued pursuant to the Series A Agreement.For purposes of this Section 2.4, Investor includes any general partnersand affiliates of an Investor. An Investor shall be entitled to apportion theright of first offer hereby granted it among itself and its partners andaffiliates in such proportions as it deems appropriate.

 

Each time the Company proposes to offer anyshares of, or securities convertible into or exercisable for any shares of, anyclass of its capital stock (“Shares”), the Company shall first make an offeringof such Shares to each Major Investor in accordance with the followingprovisions:

 

(a)                        The Company shall deliver a notice by certified mail (“Notice”) to theMajor Investor stating (i) its bona fide intention to offer such Shares, (ii) thenumber of such Shares to be offered, and (iii) the price and terms, ifany, upon which it proposes to offer such Shares.

 

(b)                       By written notification received by the Company, within 20 calendardays after giving of the Notice, the Major Investor may elect to purchase or obtain,at the price and on the terms specified in the Notice, up to that portion ofsuch

 

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Shares which equals the proportion that the number of shares of commonstock issued and held, or issuable upon conversion of the Series APreferred Stock then held, by such Major Investor bears to the total number ofshares of common stock of the Company then outstanding (assuming fullconversion and exercise of all convertible (or exercisable) securities). TheCompany shall promptly, in writing, inform each Major Investor which purchasesall the shares available to it (“Fully-Exercising Investor”) of any other MajorInvestor’s failure to do likewise. During the ten-day period commencing aftersuch information is given, each Fully-Exercising Investor shall be entitled toobtain that portion of the Shares not subscribed for by the Major Investorwhich is equal to the proportion that the number of shares of common stockissued and held, or issuable upon conversion of Series A Preferred Stockthen held, by such Fully-Exercising Investor bears to the total number ofshares of common stock issued and held, or issuable upon conversion of the Series APreferred Stock then held, by all Fully-Exercising Investor who wish topurchase some of the unsubscribed shares.

 

(c)                        If all Shares which Investor are entitled to obtain pursuant to subsection 2.4(b) arenot elected to be obtained as provided in subsection 2.4(b) hereof, theCompany may, during the 30-day period following the expiration of the period providedin subsection 2.4(b) hereof, offer the remaining unsubscribed portionof such Shares to any person or persons at a price not less than, and uponterms no more favorable to the offeree than those specified in the Notice. Ifthe Company does not enter into an agreement for the sale of the Shares withinsuch period, or if such agreement is not consummated within 30 days of theexecution thereof, the right provided hereunder shall be deemed to be revivedand such Shares shall not be offered unless first reoffered to the MajorInvestor in accordance herewith.

 

(d)                       The right of first offer in this paragraph 2.4 shall not be applicable (i) tothe issuance or sale of not to exceed 4,535,761 shares of common stock (oroptions therefor) to employees for the primary purpose of soliciting orretaining their employment, provided each employee executes an agreement, insubstantially the form of the Stockholder Agreement attached as Exhibit Dhereto, (ii) to or after consummation of a bona fide, firmly underwrittenpublic offering of shares of common stock, registered under the Act pursuant toa registration statement on Form S-l, resulting in aggregate net cashproceeds to the Company of at least $15,000,000, (iii) the issuance ofsecurities pursuant to the conversion or exercise of convertible or exercisablesecurities, (iv) the issuance of securities in connection with a bona fidebusiness acquisition of or by the Company, whether by merger, consolidation,sale of assets, sale or exchange of stock or otherwise or (v) the issuanceof stock, warrants or other securities or rights to persons or entities withwhich the Company has business relationships provided such issuances are forother than primarily equity financing purposes and provided that at the time ofany such issuance, the aggregate of such issuance and similar issuances in thepreceding twelve month period do not exceed 2% of the then outstanding CommonStock of the Company (assuming full conversion and exercise of all convertibleand exercisable securities).

 

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(e)                        The right of first refusal set forth in this Section 2.4 may not beassigned or transferred, except that (i) such right is assignable by eachHolder to any wholly owned subsidiary or parent of, or to any corporation orentity that is, within the meaning of the Act, controlling, controlled by or undercommon control with, any such Holder, and (ii) such right is assignablebetween and among any of the Holders.

 

2.5                       Negative Covenants. So long as fifty percent (50%) or more ofthe Series A Preferred Stock is still outstanding, the Company shall not,without the prior written consent of the holders of fifty percent (50%) of theoutstanding Series A Preferred Stock:

 

(a)                        Authorize or issue any other class or series of stock in addition to CommonStock and Series A Preferred Stock;

 

(b)                       Declare or pay any dividends on Common Stock other than dividendspayable solely in Common Stock;

 

(c)                        Make, or permit any subsidiary to make, any loan or advance to, or ownany stock or other securities of, any subsidiary or other corporation,partnership, or other entity unless it is wholly owned by the Company;

 

(d)                       Make, or permit any subsidiary to make, any loan or advance to any,person, including, without limitation, any employee or director of the Companyor any subsidiary, except advances and similar expenditures in the ordinarycourse of business or under the terms of a employee stock or option planapproved by the Board of Directors;

 

(e)                        Guarantee, directly or indirectly, or permit any subsidiary to guarantee,directly or indirectly, any indebtedness except for trade accounts of the Companyor any subsidiary arising in the ordinary course of business, or

 

(f)                          Merge with or into or consolidate with any other corporation, or sell,lease, or otherwise dispose of all or substantially all of its properties orassets.

 

(g)                       Incur any indebtedness in excess of $500,000, other than trade creditincurred in the ordinary course of business.

 

2.6                       Terminationof CertainCovenants. The covenants setforth in Section 2.5 shall terminate and be of no further force or effectupon the consummation of the sale of securities pursuant to a registrationstatement filed by the Company under the Act in connection with the firmcommitment underwritten offering of its securities to the general public.

 

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3.                                       Miscellaneous.

 

3.1                       Successorsand Assigns. Except as otherwise provided herein, the termsand conditions of this Agreement shall inure to the benefit of and be bindingupon the respective successors and assigns of the parties (including transfereesof any shares of Registrable Securities). Nothing in this Agreement, express orimplied, is intended to confer upon any party other than the parties hereto ortheir respective successors and assigns any rights, remedies, obligations, orliabilities under or by reason of this Agreement, except as expressly providedin this Agreement.

 

3.2                       Governing Law. This Agreement shall be governed by and construedunder the laws of the State of Maine as applied to agreements among Maine residentsentered into and to be performed entirely within Maine.

 

3.3                       Counterparts. This Agreement may be executed in two ormore counterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument.

 

3.4                       Titlesand Subtitles. The titles and subtitles used in thisAgreement are used for convenience only and are not to be considered inconstruing or interpreting this Agreement.

 

3.5                       Notices. Unless otherwise provided, any noticerequired or permitted under this Agreement shall be given in writing and shallbe deemed effectively given upon personal delivery to the party to be notifiedor upon deposit with the United States Post Office, by registered or certifiedmail, postage prepaid and addressed to the party to be notified at the addressindicated for such party on the signature page hereof, or at such otheraddress as such party may designate by ten (10) days’ advance written noticeto the other parties.

 

3.6                       Expenses. If any action at law or in equity isnecessary to enforce or interpret the terms of this Agreement, the prevailingparty shall be entitled to reasonable attorneys’ fees, costs and necessarydisbursements in addition to any other relief to which such party may beentitled.

 

3.7                       Amendmentsand Waivers. Any term of this Agreement may be amendedand the observance of any term of this Agreement may be waived (either generallyor in a particular instance and either retroactively or prospectively), onlywith the written consent of the Company and the holders of a majority of theRegistrable Securities then outstanding. Any amendment or waiver effected inaccordance with this paragraph shall be binding upon each holder of anyRegistrable Securities then outstanding, each future holder of all suchRegistrable Securities, and the Company.

 

3.8                       Severability. If one or more provisions of this Agreementare held to be unenforceable under applicable law, such provision shall beexcluded from this

 

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Agreement and the balance of the Agreement shall**be interpreted as if such provision wereso excluded and shall be enforceable in accordance with its terms.

 

3.9                       Aggregationof Stock. All shares of Registrable Securities heldor acquired by affiliated entities or persons shall be aggregated together forthe purpose of determining the availability of any rights under this Agreement.

 

3.10                 Entire Agreement, Amendment, Waiver. This Agreement (including the Exhibits hereto, if any) constitutesthe full and entire understanding and agreement between the parties with regardto the subjects hereof and thereof.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of thedate first above written.

 
|   | ADVANCED  CELL TECHNOLOGY    |
|--------|------------------------------|
|   |                         |
|   |                         |
|   | By:                          |   /s/ Daniel Chiu |   |
|   |                         |  Daniel Chiu, Treasurer |   |
|   |                         |
|   |                         |
|   | INVESTOR:  AVIAN FARMS, INC. |
|   |                         |
|   |                         |
|   | By:                          |   /s/  [ILLEGIBLE] |   |
|   | , President                  |

 

 

Advanced Cell TechJBZInvestor Rights Agreement

 

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