**Exhibit 10.40**

 

**EMPLOYMENT AGREEMENT**

 

This Agreement is made and entered into as of February 1, 2005 byand between Robert P. Lanza, of Massachusetts, (hereinafter referred to as the “Executive”)and Advanced Cell Technology, Inc., a corporation duly organized andexisting under the laws of the State of Delaware, and having a place ofbusiness at Worcester, MA (hereinafter referred to as the “Company”) and itsparent, Advanced Cell Technology Holdings, Inc a Nevada Corporation.  The Company hereby agrees to employ theExecutive and Executive accepts such employment upon the terms and conditionsset forth in this Agreement.

 

**1. Duties.**

 

1.1 Executive shall serve Company as Vice-President of Medical &Scientific Development during the term of this Agreement and shall perform theduties as determined by the Chief Scientific Officer who he will report to forall scientific matters.  Executive shallperform his duties at such places and times as the Company may reasonablyprescribe, it being understood that these duties are initially intended to beperformed in Massachusetts but may require domestic and international travelduring the Employment Term.

 

1.2 Executive shall devote all of his time (adjustable to accommodatean academic appointment) and best efforts to the performance of his duties forthe Company.

 

**2. Term and Termination.**

 

2.1 Term: The term of Executive’s employment under this Agreement willcommence on February 1, 2005 (the “Commencement Date”) and continue forfour (4) years through January 31, 2009 (the “Employment Term”)unless sooner terminated as set forth in Section 2.2 of this Agreement.  Upon expiration of the Employment Term, theparties may by mutual agreement renew this Agreement.  Such renewal must be in writing.  Upon expiration of the Employment Term,should Executive continue in the Company’s employ and the parties do notexecute a written renewal or new employment agreement, Executive shall be an “Executiveat will” at the same level of compensation and with the same insurance andfringe benefits as set forth herein. With the exception of Sections 5.1 and 6 below, no other terms of thisAgreement shall be applicable subsequent to the Employment Term.

 

2.2 Termination:

 

(a) Executive’s employment under thisAgreement shall be terminated upon the earliest to occur of any of thefollowing:

 

(i) the death of the Executive;

 

(ii) the Executive’s mental or physicalinability to perform his duties on account of disability or incapacity for aperiod of six (6) or more consecutive months, as determined by a physicianmutually agreed upon.

 

(iii) written notice to Executive thatthe Company(s) is terminating Executive’s employment hereunder withoutcause.  The executive will receive aseverance payment of one year’s salary; or (b) terminating the Executive’semployment hereunder for cause.  (iv) thetermination of Executive’s employment by Executive because of a material changein the duties of Executive at the direction of the Company after written noticefrom Executive to the Company of the specific duties and material changes inExecutive’s duties to which he objects, the reasons for his objections, and hisintent to terminate his employment because of such material changes, saidwritten notice to be served on

 

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the Company by the Executive within 90 daysof the Executive’s knowledge of such alleged material changes, and the Company’sfailure to modify within thirty (30) days the duties of the Executive toconform to those duties currently in existence for the previous 90 days.  The sale of the Company or any other changein control of the Company shall not, in and of itself, constitute a materialchange in duties of the Executive.  Therelocation for more than 50 miles of Executive will constitute constructivetermination of executive’s employment without cause.

 

(v) the termination of Executive’semployment by Executive at any time for any reason including, withoutlimitation, resignation or retirement.

 

(vi) the termination of Executive’semployment by Executive at any time for a material breach by the Company afterwritten notice of such breach to the Company and the Company’s failure to curesuch breach within thirty (30) days.  Inthat event, the company should pay the executive one year salary.  If the Executive is terminated as a result ofthe company being sold, merged or acquired by another company, the companyshould pay the executive one year of salary.

 

(vii) the termination of Executive’semployment by the Company at any time “for cause,” such termination to takeeffect immediately upon written notice from the Company to Executive.  The term “for cause” means: (i) beingconvicted or pleading guilty (or no contest) of a felony, fraud or convicted ofa violation of criminal or civil law relating to or impacting the Executive’sperformance of his duties as determined by the Board of Directors; (ii) thefailure to properly perform executive’s job responsibilities, as determinedreasonably and in good faith by the Board; “for cause” in this instance willmean that the executive did not make a reasonable and good faith effort tocorrect such failure within 30 days of notification; (iii) commission ofany act of gross fraud or misconduct with respect to the Company. Upon suchtermination for cause, the only obligation the Company will have under thisAgreement will be to pay Executive’s unpaid base salary accrued through thedate of termination.

 

(b) Upon the termination of thisAgreement pursuant to clauses (ii), (iii) except if terminated for cause, (iv) or(vi) only of Section 2.2 (a), Executive shall be entitled to receiveas a severance payment an amount equal to one (1) year of his base salaryor the salary, payable in regular semi-monthly installments during the twelve(12) months immediately following the Company’s termination of his employment.  Executive’s severance payments shall bereduced by the amount of disability insurance received by Executive.  Company will pay for disability insurance (atleast 70% of base salary).  The severancepayments will be paid in accordance with the Company’s applicable payrollprovisions and shall be reduced by any applicable withholding requirements.

 

(c) A breach by Executive of anyundertaking set forth in Section (iii) as it relates to “for cause”only, (v) or (vi) hereof shall result in an immediate termination ofthis Agreement and the rights of Executive hereunder.

 

Upon the termination of Executive’s employment for any reason, byeither party, the Executive shall immediately return to the Company anyproperty of the Company in his possession; return of this property

 

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shall be a precondition to the payment of any further compensation owedby the Company to the Executive, if any,pursuant to this Section 2.2**(b).

 

**3. Compensation.**  For all services rendered by the Executive,the Company shall pay to the Executive:

 

3.1 Base Salary: Base salary**at the rate of $215,000 per annum,payable in equal semi-monthly installments. Base salary is adjustable based on inflation and only upward.

 

3.2 Bonuses: The Companymay, in its sole discretion, award additional bonuses or increase Executive’sbase salary during the Employment Term based upon the Executive’s performanceas determined unilaterally by the Company. The Executive will have the opportunity to achieve a $35,000 bonus forfiscal year 2005 based upon accomplishing certain milestones established by theChief Scientific Officer.

 

3.3**Stock Options: The Company shall grant toExecutive stock options issued under a new Employee Stock Ownership Plan issuedby Advanced Cell Technology Holdings, Inc which must have approval byshareholders and appropriate Regulatory Agencies The options granted to theemployee will be in accordance with the terms and conditions under the plan.  The employee will be issued at a minimum500,000 or (5%)**of the authorizedplan whichever is greater as an initial grant. He will be eligible for future grants during the life of this contractto be recommended by the Chief Scientific Officer and the Chief ExecutiveOfficer and approved by the Board of Directors in their sole discretion.

 

Stock optionswill be fully vested if the company is sold, merged or acquired by anothercompany and the employee is not retained by the new company.  Vesting will accelerate one year if the company is sold, merged or acquired byanother company and the employee is retained by the new company.

 

**4. Executive Benefit Plans; FringeBenefits.**

Upon satisfaction of any applicable eligibility requirements, Executiveshall be entitled to participate in whatever other executive benefit plans aremaintained by Company and to enjoy such other fringe benefits at the same leveland on the same terms Company may offer to other Executives who have similarjob responsibilities.  Disability; thecompany will purchase a policy on behalf of the executive of 70% of base salary,adjustable for inflation.  In case ofdisability, the company will continue to pay the 30% of the salary for a year.

 

**5. Restrictive Covenants.**

In consideration of this Employment Agreement and the severancebenefits conferred herein, Executive agrees to the following:

 

5.1 Confidentiality:Executive agrees to maintain in strictest confidence all proprietary data andother confidential information (whether concerning the Company or any of itscustomers or proposed customers) obtained or developed by Executive in thecourse of his employment with the Company, Such information and data shallinclude but not be limited to the Company’s trade secrets, patents, inventions,

 

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systems, computer programs and software, procedures, manuals,confidential reports and communications and lists of customers and clients, aswell as Information that the Company may obtain from third parties inconfidence or subject to non-disclosure or similar agreements.  All such information and data is and shallremain the exclusive property of the Company (or, in certain circumstances, itsparticular customer) and shall be used solely for the benefit of the Company.  Any such information and data in Executive’spossession after termination of his employment shall be promptly returned tothe Company.  Executive’s obligationsunder this Section 5.1 shall survive any termination of his employment.

 

5.2 Non-Competition: Executive acknowledges thathe is a key employee of the Company and his talents and services are ofa special, unique, unusual and extraordinary character and are of particularand peculiar benefit and importance to the Company.  In order for the Company to protect itsinterests against the competitive use of any**confidential information, knowledge or relationships concerning theCompany and its business to which Executive will have access by virtue of thespecial nature of his relationship with the Company and his involvement in itsaffairs, and in consideration of the payments made to Executive hereunder andthe agreements of the parties herein.  Executiveagrees that, for so long as this Agreement is in effect and for a period of one(1) year after this Agreement terminates, Executive will not own (byownership of securities or otherwise), manage, operate, control, engage in asan equity participant or be employed by or act as a consultant to, or beconnected in any manner with, the ownership, management or control of anybusiness which is competitive with the business presently conducted by theCompany or any prospective business under active consideration by the Companyat the time of termination. In recognition of the geographic extent of theCompany’s existing and anticipated operations and the nature of the Company’sbusiness and competitive circumstances, the restrictive covenant contained inthis Section 5.2**shall applyin the US.

 

5.3**Solicitation:Executive agrees that, for so long as this Agreement is in effect and for aperiod of one (1) year after this Agreement terminates, executive shallnot solicit or induce any employee of the Company to leave the employ of theCompany, or to hire or attempt to hire any such employee on behalf of Executiveor on behalf of any other person or entity, and Executive further agrees not tointerfere with, disrupt or attempt to disrupt any past, present or prospectivecontractual or other relationship between the Company and any of its clients,customers, suppliers or employees.

 

5.4 Remedy for Breach: The parties recognize that the services to berendered under this Agreement by Executive are special, unique, and of anextraordinary character, and that in the event of a breach of this Section 5by Executive, then the Company shall be entitled to institute and prosecuteproceedings in any court of competent jurisdiction in equity, to enforce thespecific performance of any terms, conditions, obligations and requirements ofthis Section 5, and/or to enjoin the Executive from continuing thoseactions which are in breach of this Agreement, or to take any or all of theforegoing actions. Nothing herein contained shall be construed to prevent thepursuit of any other remedy, judicial or otherwise, in case of any breach ofthis Section 5.

 

6. Inventions/Intellectual Property and Disclosure of Inventions; Anyand all inventions, discoveries, improvements or intellectual property whichExecutive has conceived or made or may conceive or make during the period ofemployment relating to or to any**waypertaining to or connected with the systems, products, apparatus, or methodsemployed, manufactured, constructed or researched by the Company shall be thesole and exclusive property of the Company. The obligations provided for by this Agreement do not apply to anyrights the Executive may have acquired in connection with any rights theExecutive may have developed entirely on the Executive’s own time so long thatit does not relate directly or indirectly to the business of the Company or theCompany’s actual or demonstrable anticipated research or which does not resultfrom any work performed by the Executive for the Company.  The Executive agrees to disclose promptly tothe Company all such improvements, discoveries, or inventions which theExecutive has made or may make solely, jointly, or commonly with others.  He further agrees to assign as appropriatesuch

 

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improvements, discoveries, inventions or intellectual property to theCompany, where the rights are the property of the Company and agrees to executeand sign any and all applications, assignments, or other instruments which theCompany may deem necessary in order to enable it, at its expense, to apply for,prosecute and obtain Letters of Patent of the United States or foreigncountries for said improvements, discoveries, inventions or intellectualproperty or in order to assign or convey to or vest in the Company the sole andexclusive right, title, and interest in and to said improvements, discoveries,inventions, or patents.

 

**7. Section Headings****.**  Section headingscontained in this Agreement are for convenience only and shall in no manner beconstrued as a part of this Agreement.

 

**8. Amendment.**  ThisAgreement may be amended or modified only in writing signed by both parties.

 

**9. Counterparts.**  ThisAgreement may be executed in two or more counterparts each of which shall bedeemed to be an original but all of which together shall constitute one and thesame instrument.

 

**10. Waiver. **The failure of either party hereto in anyone or more incidences toinsist upon the performance of any of the terms or conditions of thisAgreement, or to exercise any rights or privileges conferred in this Agreement,or the waiver of any breach of any of the terms of this Agreement shall not beconstrued as waiving any such terms and the same shall continue to remain infull force and effect as if no such forbearance or waiver had occurred.

 

**11. Applicable Law.**  ThisAgreement shall be construed according to and governed by the laws of the Stateof California, and Executive expressly consents to submit himself to thejurisdiction of the federal and state courts of the State of California 

 

**12. Reformation andSeverability.**  In the event any provision or portion of thisAgreement shall be held invalid or unenforceable by any court of competentjurisdiction, any such provision or portion may be reformed by the Court so asto make it valid or enforceable, whereupon the parties agree that saidprovision or portion shall be valid and enforceable by or upon them.  Any such holding shall not invalidate orrender unenforceable any other term contained in this Agreement.

 

**13. Entire Agreement.**  ThisAgreement embodies the entire understanding of the parties with respect toExecutive’s employment with Company and incorporates any previous agreement,written or oral, relating to such employment. The Executive agrees that no other promises or representations of anykind were made to him by**theCompany prior to or coincident with his signing of this Agreement.

 

**14. Assignment and Successors.**  Executive’srights under this Agreement shall not be assignable by the Executive.  This Agreement may be assigned by Company andshall inure to the benefit of and be binding upon Company, its successors andassigns.

 

**15. Notices.**  Anynotice to be given under this Agreement must be in writing and either deliveredin person or sent by first class certified or registered mail, return receiptrequested, postage prepaid, if to the Company, in care of its CEO, William M.Caldwell, IV, and/or Michael West at 381 Plantation Street, Worcester, MA01605, and if to the Executive, at his home address or addresses as eitherparty shall have designated in writing to the other party hereto.

 

IN WITNESS WHEREOF, Company has hereunto caused itscorporate name to be signed and sealed, and Executive has hereunto set his hand,all being done in duplicate originals, with one original being delivered toeach party as of the day and year first above written.

 

IN WITNESS WHEREOF, Company and Executive haveexecuted this Agreement as of the date first above written.

 

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| Accepted by Executive:                                                     |
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| /s/ Robert P. Lanza                                                        |   |
| Robert P. Lanza                                                            |
| Vice-President                                                             |
| Medical & Scientific Development                                  |
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| ADVANCED CELL TECHNOLOGY, INC. and  ADVANCED CELL TECHNOLOGY HOLDINGS, INC |
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| /s/ William M. Caldwell                                                    |   |
| William M. Caldwell                                                        |
| Chief Executive Officer                                                    |

 

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