**Exhibit 10.4**

 

EXCLUSIVE LICENSE AGREEMENT

 

This AGREEMENT, effective as of February 1, 2002 (the “EffectiveDate”), is between the University of Massachusetts (“University”), a publicinstitution of higher education of the Commonwealth of Massachusetts as representedby its Amherst campus, and Advanced Cell Technology, Inc. (“Company”), aDelaware corporation.

 

R E C I T A L S

 

WHEREAS, theUniversity owns certain intellectual property, including patent rights,relating to the cloning of non-human animals;

 

WHEREAS, Company isinterested in obtaining a license to develop and commercialize thatintellectual property;

 

WHEREAS, the University is interested in granting a license to Companyfor the development and commercialization of that intellectual property; and

 

WHEREAS, a license to the intellectual property to Company wouldsupport the goals of the University as a publicly supported researchinstitution.

 

THEREFORE,University and Company agree as follows:

 

1. Definitions.

 

1.1. “CombinationProduct” means a product that contains a Licensed Product component and atleast one other essential functional component.

 

1.2. “ConfidentialInformation” means any confidential or proprietary information furnished byone party (the “Disclosing Party”) to the other party (the “Receiving Party”)in connection with this Agreement that is specifically designated asconfidential.  Confidential Informationincludes, without limitation, any diligence reports furnished to Universityunder Section 3.1. and royalty reports furnished to University under Section 5.2.

 

1.3. “Field”means non-human animals for agriculture, companion animals, research and diagnosticproducts, non-human and human therapeutics, and nutriceuticals, exceptproduction of immunoglobulin in the blood of *Bostaurus*and *Bos indicus.*

 

1.4. “LicensedProduct” means any product that cannot be developed, manufactured, used, orsold without infringing one or more claims under the Patent Rights.

 

1.5. “LicensedService” means any service that cannot be developed or performed without usingat least one process that infringes one or more claims under the Patent Rights.

 

1.6. “Net Sales”means the gross amount billed or invoiced on sales by Company and its Sublicenseesof Licensed Products and Licensed Services, less the following: (a) customary trade,quantity, or cash discounts to non-affiliated brokers or agents to the extentactually allowed and taken; (b) amounts repaid or credited by reason ofrejection or return; (c) to the extent

 

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separately stated onpurchase orders, invoices, or other documents of sale, any taxes or othergovernmental charges levied on the production, sale, transportation, delivery,or use of a Licensed Product or Licensed Service which is paid by or on behalfof Company; and (d) outbound transportation costs prepaid or allowed and costsof insurance in transit.

 

In any transfersof Licensed Products between Company and a**Sublicensee,Net Sales are calculated based on the final sale of the Licensed Product to anindependent third party.  If Company or aSublicensee receives non-monetary consideration for any Licensed Products or LicensedServices, Net Sales are calculated based on the fair market value of thatconsideration.  If Company or itsSublicensees use or dispose of a Licensed Product in the provision of acommercial service other than a Licensed Service, the Licensed Product is soldand the Net Sales are calculated based on the sales price of the LicensedProduct to an independent third party during the same Royalty Period or, in theabsence of sales, on the fair market value of the Licensed Product asdetermined by the parties in good faith.

 

In the case ofCombination Products, Net Sales means the gross amount billed or invoiced onsales of the Combination Product less the deductions set forth above,multiplied by a proration factor that is determined as follows:

 

(i) If all components of the Combination Product were sold separatelyduring the same or immediately preceding Royalty Period, the proration factorshall be determined by the formula [A / (A+B)], where A is the aggregate grosssales price of all Licensed Product components during such period when soldseparately from the other essential functional components, and B is theaggregate gross sales price of the other essential functional components duringsuch period when sold separately from the Licensed Product Components; or

 

(ii) If all components of the Combination Product were not soldseparately during the same or immediately preceding Royalty Period, theproration factor shall be determined by the formula [C / (C+D)], where C is theaggregate fully absorbed cost of the Licensed Product components during theprior Royally Period and D is the aggregate fully absorbed cost of the otheressential functional components during the prior Royalty Period, with suchcosts being determined in accordance with generally accepted accountingprinciples.

 

1.7. “PatentRights” means (a) the invention disclosures listed on Exhibit A and (i) anyUnited States patent applications filed for those invention disclosures, (ii)any divisional or continuation application of those applications, (iii) anycontinuation-in-part application to the extent the claims are directed tosubject matter specifically described in those applications, (iv) any patentsissued on those applications, (v) any reissues or reexaminations of thosepatents, and (vi) any foreign counterparts to those patent applications andpatents and (b) the United States patent applications listed on Exhibit A and(i) any divisional or continuation application of those applications, (ii) anycontinuation-in-part applications to the extent the claims are directed tosubject matter specifically described in those applications, (iii) any patentsissued on these patent applications, (iv) any reissues or reexaminations ofthose patents, and (v) any foreign counterparts to those patents and patentapplications.  Exhibit A shall beperiodically amended to include any additional Patent Rights that may arise.

 

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1.8. “PriorLicense Agreement” means the Exclusive License Agreement between Companyand the University dated April 16,1996, as amended by the Amendment toExclusive License Agreement dated September 1, 1997, the Second Amendmentto Exclusive License Agreement dated May 31, 2000, and the Third Amendment toExclusive License Agreement dated September 19, 2002.

 

1.9. “RelatedTechnology” means know-how, technical information, research and developmentinformation, test results, and data necessary for the effective exercise of thePatent Rights which have been developed by the University inventors as of theEffective Date and which are owned by University.

 

1.10. “RoyaltyPeriod” means the partial calendar quarter commencing on the date on whichthe first Licensed Product is sold or used or the first Licensed Service isperformed and every complete or partial calendar quarter thereafter duringwhich either (a) this Agreement remains in effect or (b) Company has the rightto complete and sell work-in-progress and inventory of Licensed Productspursuant to Section 8.5.

 

1.11. “SublicenseIncome” means consideration that Company receives for the transfer or useof rights that are granted to Company under Section 2.1., includingwithout limitation license fees, milestone payments, royalties, equitypayments, up front fees, success fees, and license maintenance fees, butexcluding the following payments: (a) payments made in consideration for theissuance of equity or debt securities of Company at fair market value, and (b)payments specifically committed to the development of Licensed Products orLicensed Services.

 

1.12. “Sublicensee”means any permitted sublicensee of the rights granted Company under thisAgreement, as further described in Section 2.2.

 

2. Grant of Rights.

 

2.1. License Grants.

 

(a) ExclusiveRights.  University grants to Companyan exclusive, worldwide, royalty-bearing license (with the right to sublicense)under its commercial rights in the Patent Rights to develop, make, have made,use, sell, offer to sell, import, and export Licensed Products in the Field andto develop and perform Licensed Services in the Field, except for Licensed Productsand Licensed Services involving production of immunoglobulin in the blood of *Leporidae.*

 

(b) Non-exclusiveRights.  University grants to Companya non-exclusive, worldwide, royalty-bearing license (with the right to grantsublicenses) under its commercial rights in the Patent Rights to develop, make,have made, use, and sell Licensed Products consisting of immunoglobulinproduced in the blood *Leporidae*andto develop and perform Licensed Services relating to immunoglobulin produced inthe blood of *Leporidae.*

 

2.2. Sublicenses. Company may grant sublicenses of itsrights under Section 2.1 only in accordance with the followingrequirements:

 

(a) Company shallprovide a draft copy of any sublicense agreement to the University at leastthirty (30) days before execution to allow the University to comment on theterms of the sublicense.

 

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(b) Company shallprovide a fully executed copy of all sublicense agreements within thirty (30)days after execution.

 

(c) Company shallreport to University annually regarding the progress of Sublicensees indeveloping Licensed Products.

 

(d) Company shallmanage Sublicensees’ development efforts under the sublicenses to ensurereasonable and continuous progress in developing Licensed Products to commercialapplication.

 

(e) All sublicenseagreements shall expressly bind Sublicensees to the terms of the LicenseAgreement.

 

(f) Companyremains primarily accountable for performance of all sublicense agreements andfor termination of Sublicensees that fail to make diligent progress inachieving commercial application of Licensed Products.

 

(g) Company maynot transfer the right to grant further sublicenses in sublicense agreements,unless the sublicense agreement grants the exclusive right to practice thetechnology in a limited field.  Companymay not grant Sublicensees the right to transfer sublicensing rights to theirSublicensees. By way of illustration, Company may transfer the right to grant sublicensesto X Corporation in a limited field of use. X Corporation may grant asublicense to Y Corporation, but Y Corporation may not under any circumstancesgrant a sublicense to any other entity without the prior written consent ofCompany and the University, which consent may be granted in the Company’s andthe University’s discretion.

 

(h) Company shallrequire in every sublicense agreement the express, written and discretionaryconsent of Company for any assignment of the sublicense to a different entity.

 

(i) Company shallrequire in every sublicense agreement the receipt of fair value (which may bein the form of royalties, lump sum payments, or equity) in exchange for thesublicense.

 

2.3. RetainedRights.

 

(a) University. University retains the right to make anduse the Patent Rights for academic research, teaching, and non-commercialpatient care, without payment of compensation to Company.  University may license its retained rightsunder this Section to research collaborators of University facultymembers, post-doctoral fellows, and students.

 

(b) FederalGovernment.  To the extent chat anyinvention claimed in the Patent Rights has been funded by the federalgovernment, this Agreement and the grant of any rights in Patent Rights aresubject to and governed by federal law as set forth in 35 U.S.C. §§ 201-211,and the regulations promulgated thereunder, as amended, or any successorstatutes or regulations.  Companyacknowledges that these statutes and regulations reserve to the federalgovernment a royalty-free, non-exclusive, non-transferrable license to practiceany government-funded invention claimed in the Patent Rights. If any term ofthis Agreement fails to conform with those

 

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laws and regulations, therelevant term is an invalid provision and shall be modified by the partiespursuant to Section 10.11.

 

(c) OtherOrganizations.  To the extent thatany invention claimed in the Patent Rights has been funded by a non-profitorganization or state or local agency, this Agreement and the grant of anyrights in Patent Rights are subject to and governed by the terms of theapplicable research grant.  If any termof this Agreement fails to conform with those terms, the relevant term is aninvalid provision and shall be modified by the parties pursuant to Section 10.11.

 

2.4 TechnologyTransfer.  Promptly after theEffective Date, the University shall provide Company with Related Technology inits possession.

 

3. Company ObligationsRelating to Commercialization.

 

3.1. DiligenceRequirements.  Company shall usediligent efforts, or shall cause its Sublicensees to use diligent efforts, todevelop Licensed Products or Licensed Services and to introduce LicensedProducts or Licensed Services into the commercial market.  Thereafter, Company or its Sublicensees shallmake Licensed Products or Licensed Services reasonably available to the public. Specifically, Company shall fulfill thefollowing obligations:

 

(a) Within sixty(60) days after April 16 of each year, Company shall furnish Universitywith a written report on the progress of its efforts during the prior year todevelop and commercialize Licensed Products or Licensed Services, includingwithout limitation research and development efforts, efforts to obtainregulatory approval, marketing efforts, and sales figures.  The report shall also contain a discussion ofintended efforts and sales projections for the current year.

 

(b) Company shallsupport filing, prosecution, and maintenance of the Patent Rights in the UnitedStates, Japan, Canada, Europe, Australia, and New Zealand.  The University will consider in good faithwhether to waive this requirement with respect to one or more Patent Rights inone or more countries, if Company shows that there is inadequate economic justificationfor fulfilling the requirement.

 

(c) Company shallspend at least Two Hundred Thousand Dollars ($200,000) per year for the firstthree years of the term of this Agreement on research and development at Companydirected to the commercialization of the Patent Rights.

 

(d) For eachLicensed Product or Licensed Service that requires United States Food and DrugAdministration (FDA) approval, Company shall use diligent efforts in filing theappropriate application.

 

(e) Within three(3) months after the issuance of United States government regulations oncell-based human therapeutic products, Company and University shall determine ingood faith diligence requirements for Licensed Products and Licensed Servicesthat demonstrate reasonable and continuous development and progress towardcommercialization.  If the United Statesgovernment has not issued regulations on cell-based human therapeutic productsbefore two (2) years after the Effective Date, Company and University shalldetermine in good faith diligence requirements based on the reasonable businessplans of the Company.

 

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The diligencerequirements shall include specific dates that correspond to selected milestoneevents described in Section 4.3. At least two (2) times per year, Companyshall notify the University of the status of United States governmentregulations on cell-based human therapeutic products.

 

If University determinesthat Company has not fulfilled its obligations under this Section 3.1.,University shall furnish Company with written notice of the determination.  Within sixty (60) days after receipt of thenotice, Company shall either (i) fulfill the relevant obligation or (ii)negotiate with University a mutually acceptable schedule of reviseddiligence obligations, failing which University may, immediately upon writtennotice to Company, terminate this Agreement or convert the exclusive licenseinto a non-exclusive license and grant additional licenses to third parties tothe Patent Rights in the Field.

 

3.2. Indemnification.

 

(a) Indemnity. Company shall indemnify, defend, andhold harmless University and its trustees, officers, faculty, students,employees, and agents and their respective successors, heirs and assigns (the “Indemnitees”),against any liability, damage, loss, or expense (including reasonable attorneysfees and expenses of litigation) incurred by or imposed upon any of the Indemniteesin connection with any claims,suits, actions, demands or judgments arising out of any theory of liability(including without limitation actions in the form of tort, warranty, or strict liabilityand regardless of whether the action has any factual basis) concerning anyproduct, process, or service that is made, used, or sold pursuant to any rightor license granted under this Agreement.  However, indemnification does not apply to anyliability, damage, loss, or expense to the extent directly attributable to (i)the negligent activities or intentional misconduct of the Indemnitees or (ii)the settlement of a claim, suit, action, or demand by Indemnitees without the priorwritten approval of Company.

 

(b) Procedures. The Indemnitees agree to provide Companywith prompt written notice of any claim, suit, action, demand, or judgment forwhich indemnification is sought under this Agreement.  Company agrees, at its own expense, to provideattorneys reasonably acceptable to University to defend against any claim.  The Indemnitees shall cooperate fully withCompany in the defense and will permit Company to conduct and control thedefense and the disposition of the claim, suit, or action (including alldecisions relative to litigation, appeal, and settlement).  However, any Indemnitee may retain its owncounsel, at the expense of Company, if representation of the Indemnitee by thecounsel retained by Company would be inappropriate because of actual orpotential differences in the interests of the Indemnitee and any other party representedby that counsel.  Company agrees to keepUniversity informed of the progress in the defense and disposition of the claimand to consult with University regarding any proposed settlement.

 

(c) Insurance. Company shall maintain insurance orself-insurance that is reasonably adequate to fulfill any potential obligationto the Indemnitees, but not less than one million dollars ($1,000,000) forinjuries to any one person arising out of a single occurrence and five milliondollars ($5,000,000) for injuries to all persons arising out of a singleoccurrence.  Company shall provideUniversity, upon request, with written evidence of insurance or self-insurance. Company shall continue to maintain suchinsurance or self-insurance after the expiration or termination of thisAgreement during any period in which Company or Sublicensee

 

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continues (a) to make,use, or sell a product that was a Licensed Product under this Agreement or (b)to perform a service that was a Licensed Service under this Agreement, andthereafter for a period of five (5) years.

 

3.3. Use ofUniversity Name.  In accordance with Section 7.3.,Company and its Sublicensees may not use the name “University of Massachusetts”or any variation of that name in connection with the marketing or sale of anyLicensed Products or Licensed Services.

 

3.4. Markingof Licensed Products.  To the extentcommercially feasible and consistent with prevailing business practices,Company shall mark and shall cause its Sublicensees to mark all LicensedProducts that are manufactured or sold under this Agreement with the number of eachissued patent under the Patent Rights that applies to a Licensed Product.

 

3.5. Compliancewith Law.  Company shall comply with,and shall ensure that its Sublicensees comply with, all local, state, federal,and international laws and regulations relating to the development,manufacture, use, and sale of Licensed Products. Company expressly agrees tocomply with the following:

 

(a) Company or itsSublicensees shall obtain all necessary approvals from the United States Food& Drug Administration and any similar governmental authorities of any foreignjurisdiction in which Company or Sublicensee intends to make, use, or sellLicensed Products or to perform Licensed Services.

 

(b) Company andits Sublicensees shall comply with all United States laws and regulations controllingthe export of commodities and technical data, including without limitation allExport Administration Regulations of the United States Department of Commerce.  Among other things, these laws andregulations prohibit or require a license for the export of certain types ofcommodities and technical data to specified countries.  Company hereby gives written assurance that itwill comply with and will cause its Sublicensees to comply with all UnitedStates export control laws and regulations, that it bears sole responsibilityfor any violation of those laws and regulations by itself or its Sublicensees,and that it will indemnify, defend, and hold University harmless (in accordancewith Section 3.2.) for the consequences of any violation.

 

(c) To the extentthat any invention claimed in the Patent Rights has been partially funded bythe United States government, and only to the extent required by applicablelaws and regulations, Company agrees that any Licensed Products used or sold inthe United States will be manufactured substantially in the United States orits territories.  Current law providesthat if domestic manufacture is not commercially feasible under thecircumstances, University may seek a waiver of this requirement from therelevant federal agency on behalf of Company.

 

4. Consideration forGrant of Rights.

 

4.1. LicenseFee.  In partial consideration of therights granted Company under this Agreement, Company shall pay to University onthe Effective Date a license fee of Fifteen Thousand Dollars ($15,000). Thelicense fee payment is nonrefundable and is not creditable against any otherpayments due to University under this Agreement.

 

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4.2. Equity. In partial consideration of the rightsgranted Company under this Agreement, Company shall issue to UniversitySeventy-Three Thousand Two Hundred Sixty-Three (73,263) shares of common stockof Company (the “Shares”), which represents the equivalent of five percent (5%)of Company’s holdings of the issued and outstanding common stock of Cyagra,Inc.  Any error in calculation of thenumber of shares shall be corrected to equal five percent (5%) of Company’sholdings in Cyagra, Inc.  Within thirty(30) days after the Effective Date of this Agreement, Company shall deliver tothe University one or more Stock certificates representing the Shares, suchstock certificate(s) to be issued in the name of the University.  In connection with the equity considerationdescribed above, the University represents, warrants, and covenants as setforth in Exhibit B attached hereto.

 

4.3. MilestonePayments.  Company shall payUniversity the following milestone payments within thirty (30) days after theoccurrence of each event:

 
| **Event**                                                                                           | ** ** | **Amount** | ** **       |
|-----------------------------------------------------------------------------------------------------|------------|------------|------------------|
| Completion  of Each Phase I Clinical Trial in the Field of Human Therapeutics                       |       | **$**      | **100,000.00**   |   |
| Completion  of Each Phase II Clinical Trial in the Field of Human Therapeutics                      |       | **$**      | **200,000.00**   |   |
| Completion  of Each Phase III Clinical Trial in the Field of Human Therapeutics                     |       | **$**      | **300,000,00**   |   |
| Introduction  to Market of Each Licensed Product in the Field of Human Therapeutics                 |       | **$**      | **1,000,000.00** |   |
| Introduction  to Market of First Licensed Product in a Non-Human Therapeutic Field of Use |       | **$**      | **30,000.00**    |   |

 

These milestone paymentsare nonrefundable and are not creditable against any other payments due toUniversity under this Agreement.

 

4.4. Royalties.

 

(a) BaseRoyalty.  In partial consideration ofthe rights granted Company under this Agreement, Company shall pay toUniversity the following royalty rates on Net Sales of Licensed Products andLicensed Services, including products that are composed of, made in, derivedfrom, extracted from, or isolated from cells or tissues of Licensed Products byCompany (but not by Sublicensees):

 

i.                                          1.5%for use primarily in agriculture (e.g., pigs, poultry, cattle);

ii.                                       1.5%for use primarily in companion animals (e.g., dogs, cats, horses);

iii.                                    1.5%for use primarily in research and diagnostic products;

iv.                                   2.0%for use primarily in human therapeutics;

v.                                      1.5%for use primarily in fields not specified above.

 

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(b) MultipleRoyalty.  Company is required to payonly one royalty with respect to a Licensed Product or Licensed Serviceregardless of the number of patents or patent applications included within thePatent Rights whose claims cover that Licensed Product or Licensed Service.

 

(c) MultipleRoyalty – Prior License Agreement.  If a Licensed Product or Licensed Serviceincludes patent rights as defined in the Prior License Agreement, Company isrequired to pay the royalties that are required under this Agreement inaddition to the royalties that are required under the Prior License Agreement.However, notwithstanding the previous sentence, for Licensed Products orLicensed Services for use primarily in human therapeutics, the maximum totalroyalty due is six percent (6%).

 

(d) RoyaltyReduction.  If University grantsadditional licenses to third parties pursuant to Section 3.1., the royaltyrates set forth in Subsection 4.4.(a) shall be adjusted, if necessary, soas not to exceed the royalty rates charged any other licensee of the PatentRights during the term of the non-exclusive license.

 

4.5. MinimumRoyalty.  In each year during theterm of this Agreement, Company shall pay to the University the followingminimum royalty payments:

 
| **Date  Due**                     | ** ** | **Amount** | ** ** |
|-----------------------------------|------------|------------|------------|
| First  Anniversary                |       | $          | 15,000.00  |   |
| Second  Anniversary               |       | $          | 15,000.00  |   |
| Third  Anniversary                |       | $          | 20,000.00  |   |
| Fourth  Anniversary               |       | $          | 25,000.00  |   |
| Fifth  Anniversary and thereafter |       | $          | 45,000.00  |   |

 

Company shall pay theminimum royalty payments to the University within sixty (60) days after theapplicable anniversary of the Effective Date.  If the actual royalty payments to Universityin any year are less than the minimum royalty payment required for that year,Company may pay University the difference between the actual royalty paymentand the minimum royalty payment in full satisfaction of its obligations underthis Section, provided the minimum payment is made to University within sixty (60) days after the applicableanniversary of the Effective Date. Waiver of any minimum royalty payment byUniversity is not a waiver of any subsequent minimum royalty payment.  If Company fails to make any minimum royaltypayment within the sixty-day period, that failure is a material breach of itsobligations under this Agreement, and University may terminate this Agreementin accordance with Section 8.3.

 

4.6. SublicenseIncome.  Company shall pay Universitya total of eighteen percent (18%) of all Sublicense Income.  Sublicense Income is due and payable withinsixty (60) days after Company receives the relevant payment from theSublicensee.

 

4.7. Third-PartyRoyalties.  So long as Companyremains the only licensee of the Patent Rights in the Field, in the event thatCompany is legally required to make royalty payments to

 

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one or more third partiesin order to make, use, or sell Licensed Products or to perform LicensedServices, Company may offset a total of fifty percent (50%) of third-partypayments against any royalty payments that are due to University in the sameRoyalty Period.  However, the royaltypayments under Section 4.4, may never be reduced by more than fiftypercent (50%) in any Royalty Period.  However, in no event may the royalty paymentsunder Section 4.4, when aggregated with any other offsets and creditsallowed under this Agreement, be reduced below the greater of (a) fifty percent(50%) of the royalty rate set forth in Section 4.4(a) or (b) a royaltyrate of two percent (2%) of Net Sales. Company may carry forward any unusedcredits or offsets for use in subsequent Royalty Periods during the term ofthis Agreement.

 

5. Royalty Reports;Payments; Records.

 

5.1. First Sale. Company shall report to University thedate of first commercial sale of each Licensed Product and the date of firstcommercial performance of each Licensed Service within thirty (30) days afteroccurrence in each country.

 

5.2. Reportsand Payments.  Within sixty (60) daysafter the conclusion of each Royalty Period, Company shall deliver toUniversity a report containing the following information:

 

(a) the number ofLicensed Products sold to independent third parties in each country and thenumber of Licensed Products used by Company in the provision of Licensed Servicesand other services in each country;

 

(b) the number ofLicensed Services provided by Company in each country;

 

(c) the grosssales price for each Licensed Product and the gross charge for each LicensedService by Company during the applicable Royalty Period in each country;

 

(d) calculation ofNet Sales for the applicable Royalty Period in each country, including alisting of applicable deductions;

 

(e) total royaltypayable on Net Sales in United States dollars, together with the exchange ratesused for conversion; and

 

(f) SublicenseIncome due to University for the applicable Royalty Period from eachSublicensee.

 

If no royalties are dueto University for any Royalty Period, the report shall so state. Concurrentwith this report, Company shall remit to University any payment due for theapplicable Royalty Period.  Paymentsshould be sent to the following address:

 

University ofMassachusetts

Office ofCommercial Ventures and Intellectual Property

One Beacon Street,26th Floor

Boston,Massachusetts 02108

 

Attention: WilliamRosenberg, Executive Director

 

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5.3. Paymentsin United States Dollars.  Allpayments due under this Agreement are payable in United States dollars.  Conversion of foreign currency to UnitedStates dollars shall be made at the conversion rate existing in the UnitedStates (as reported in the *Wall StreetJournal)*on the last working day of the calendar quarter precedingthe applicable Royalty Period.  Paymentsshall be without deduction of exchange, collection, or other charges.

 

5.4. Paymentsin Other Currencies.  If by law,regulation, or fiscal policy of a particular country, conversion into UnitedStates dollars or transfer of funds of a convertible currency to the UnitedStates is restricted or forbidden, Company shall give University prompt writtennotice of the restriction, within the sixty-day payment deadline described in Section 5.2.Company shall pay any amounts due University through whatever lawful methodsUniversity reasonably designates.  However,if University fails to designate a payment method within thirty (30) days afterUniversity is notified of the restriction, Company may deposit payment in localcurrency to the credit of University in a**recognizedbanking institution selected by Company and identified by written notice toUniversity, and that deposit fulfills all obligations of Company to University withrespect to that payment.

 

5.5. Records. Company shall maintain and shall causeits Sublicensees to maintain complete and accurate records of Licensed Productsand Licensed Services that are made, used, sold, or performed under thisAgreement and any amounts payable to University in relation to LicensedProducts and Licensed Services, which records shall contain sufficient informationto permit University to confirm the accuracy of any reports delivered toUniversity under Section 5.2. The relevant party shall retain recordsrelating to a given Royalty Period for at least three (3) years after theconclusion of that Royalty Period, during which time University shall have the right,at its expense, to cause its internal accountants or an independent, certifiedpublic accountant to inspect records during normal business hours for the solepurpose of verifying any reports and payments delivered under this Agreement.  The accountant may not disclose to Universityany information other than information relating to accuracy of reports andpayments delivered under this Agreement, The parties shall reconcile anyunderpayment or overpayment within thirty (30) days after the accountantdelivers the results of the audit.  Ifany audit performed under this Section reveals an underpayment in excessof ten percent (10%) in any Royalty Period, Company shall bear the full cost ofthe audit.  University may exercise itsrights under this Section only once every year and only with reasonableprior notice to Company.

 

5.6. LatePayments.  Any payments by Companythat are not paid on or before the date payments are due under this Agreementbear interest to the extent permitted by law at two percentage points above thePrime Rate of interest as reported in the *WallStreet Journal*on the date payment is due, with interest calculatedbased on the number of days that payment is delinquent.

 

5.7. Method ofPayment.  All payments under thisAgreement should be made to the “University of Massachusetts” and sent to theaddress identified below.  Each paymentshould reference this Agreement and identify the obligation under thisAgreement that the payment satisfies.

 

5.8. Withholdingand Similar Taxes.  Royalty paymentsand other payments due to University under this Agreement may not be reduced byreason of any withholding or similar taxes applicable to payments toUniversity.

 

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6. Patents andInfringement.

 

6.1. Responsibilityfor Patent Rights.  Company hasprimary responsibility at its own expense for the preparation, filing,prosecution, and maintenance of all Patent Rights, using patent counselreasonably acceptable to the University. Company shall consult with University as to the preparation, filing,prosecution, and maintenance of all Patent Rights reasonably prior to anydeadline or action with the United States Patent & Trademark Office or anyforeign patent office and shall furnish University with copies of relevantdocuments reasonably in advance of consultation.

 

6.2. Abandonment. If Company desires to abandon any patentor patent application included in the Patent Rights, or if Company declines toassume responsibility for obtaining patent protection for any inventiondescribed in Exhibit A, Company shall provide University with reasonable priorwritten notice of the intended abandonment or declination of responsibility.  In that case, Company loses all rights underthis Agreement with respect to those Patent Right(s), and the University maypursue patenting at its own expense and dispose of the Patent Right(s) as itsees fit.

 

6.2. Cooperation. University and Company shall cooperatefully in the preparation, filing, prosecution, and maintenance of all PatentRights.  Cooperation includes, withoutlimitation, (a) promptly executing all papers and instruments or requiringemployees of University or Company to execute papers and instruments as reasonableand appropriate to enable Company or University to file, prosecute, andmaintain Patent Rights in any country; and (b) promptly informing Company orthe University of matters that may affect the preparation, filing, prosecution,or maintenance of Patent Rights (such as, becoming aware of an additionalinventor who is not listed as an inventor in a patent application).

 

6.3. Infringement.

 

(a) Notificationof Infringement.  Each party agreesto provide written notice to the other party promptly after becoming aware ofany infringement of the Patent Rights.

 

(b) CompanyRight to Prosecute.  So long asCompany remains the only licensee of the Patent Rights in the Field, Companymay, under its own control and at its own expense, prosecute any third party infringementof the Patent Rights in the Field or, together with licensees of the PatentRights in other fields (if any), defend the Patent Rights in any declaratoryjudgment action brought by a third party which alleges invalidity,unenforceability, or infringement of the Patent Rights.  Prior to commencing any action, Company shallconsult with University and shall consider the views of University regardingthe advisability of the proposed action and its effect on the public interest.  Company may not enter into any settlement,consent judgment, or other voluntary final disposition of any infringementaction under this Subsection without the prior written consent ofUniversity, which consent may not be unreasonably withheld or delayed.  Any recovery obtained in an action under thisSubsection shall be distributed as follows: (i) each party shall bereimbursed for any expenses incurred in the action (including the amount of anyroyalty payments withheld from University as described below); (ii) as toordinary damages, Company shall receive an amount equal to its lost profits or a**reasonable royalty on the infringingsales (whichever measure of damages the court applied), less a reasonableapproximation of the royalties that Company would have paid to University ifCompany had sold the infringing

 

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products and servicesrather than the infringer; and (iii) as to special or punitive damages, theparties shall share equally in any award. Company may offset a total of fiftypercent (50%) of any expenses incurred under this Subsection against anyroyalty payments due to University under this Agreement.  However, royalty payments under Section 4.4.,may never be reduced by more than fifty percent (50%) in any Royalty Period.

 

(c) Universityas Indispensable Party.  Universityshall permit any action under this Section to be brought in its name ifrequired by law, provided that Company shall hold University harmless from, andif necessary indemnify University against, any costs, expenses, or liabilitythat University may incur in connection with the action.

 

(d) UniversityRight to Prosecute.  If Company failsto initiate an infringement action within a reasonable time after it firstbecomes aware of the basis for the action, or to answer a declaratory judgmentaction within a reasonable time after the action is filed, University mayprosecute the infringement or answer the declaratory judgment action under itssole control and at its sole expense, and any recovery obtained shall be givento University.

 

(e) Cooperation. Both parties shall cooperate fully inany action under this Section 6.4. which is controlled by the other party,provided that the controlling party reimburses the cooperating party promptlyfor any costs and expenses incurred by the cooperating party in connection withproviding assistance.

 

7. ConfidentialInformation; Publications; Publicity.

 

7.1. ConfidentialInformation.

 

(a) Designation. Confidential Information that isdisclosed in writing shall be marked with a legend indicating its confidentialstatus (such as, “Confidential” or “Proprietary”). Confidential Informationthat is disclosed orally or visually shall be documented in a written noticeprepared by the Disclosing Party and delivered to the Receiving Party withinthirty (30) days of the date of disclosure. The notice shall summarize the Confidential Information disclosed to theReceiving Party and reference the time and place of disclosure.

 

(b) Obligations. For a period of five (5) years afterdisclosure of any portion of Confidential Information, the Receiving Partyshall (i) maintain Confidential Information in confidence, except that theReceiving Party may disclose or permit the disclosure of any ConfidentialInformation to its trustees or directors, officers, employees, consultants, andadvisors who are obligated to maintain the confidential nature of ConfidentialInformation and who need to know Confidential Information for the purposes ofthis Agreement; (ii) use Confidential Information solely for the purposes ofthis Agreement; and (iii) allow its trustees or directors, officers, employees,consultants, and advisors to reproduce the Confidential Information only to theextent necessary for the purposes of this Agreement, with all reproductionsbeing Confidential Information.

 

(c) Exceptions. The obligations of the Receiving Partyunder Subsection 7.l.(b) above do not apply to the extent that theReceiving Party can demonstrate that Confidential Information (i) was in thepublic domain prior to the time of its disclosure under this Agreement; (ii)entered the public domain after the time of its disclosure under this Agreementthrough

 

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means other than anunauthorized disclosure resulting from an act or omission by the Receiving Party;(iii) was independently developed or discovered by the Receiving Party withoutuse of the Confidential Information; (iv) is or was disclosed to the ReceivingParty at any time, whether prior to or after the time of its disclosure underthis Agreement, by a third party having no fiduciary relationship with theDisclosing Party and having no obligation of confidentiality with respect tothe Confidential Information; or (v) is required to be disclosed to comply withapplicable laws or regulations or with a court or administrative order,provided that the Disclosing Party receives reasonable prior written notice ofthe disclosure.

 

(d) Ownershipand Return.  The Receiving Partyacknowledges that the Disclosing Party (or a third party entrusting its owninformation to the Disclosing Party) owns the Confidential Information in thepossession of the Receiving Party.  Uponexpiration or termination of this Agreement, or at the request of theDisclosing Party, the Receiving Party shall return to the Disclosing Party alloriginals, copies, and summaries of documents, materials, and other tangiblemanifestations of Confidential Information in the possession or control of theReceiving Party, except that the Receiving Party may retain one copy of theConfidential Information in the possession of its legal counsel solely for thepurpose of monitoring its obligations under this Agreement.

 

7.2. Publications. University and its employees are free todisclose publicly (through journals, lectures, or otherwise) the results of anyresearch relating to the Field or the subject matter of the Patent Rights,except as otherwise provided by written agreement between University andCompany (e.g., a sponsored research agreement).

 

7.3. PublicityRestrictions.  Company may not usethe name of University or any of its trustees, officers, faculty, students,employees, or agents, or any adaptation of their names, or any terms of thisAgreement in any promotional material or other public announcement ordisclosure without the prior written consent of University.  The foregoing notwithstanding, Company may disclosethat information without the consent of University in any prospectus, offering memorandum,or other document or filing required by applicable securities laws or other applicablelaw or regulation, provided that Company provides University at least ten (10)days prior written notice of the proposed text for the purpose of givingUniversity the opportunity to comment on the text.

 

8. Term andTermination.

 

8.1. Term.  This Agreement commences on the Effective Dateand remains in effect until (a) the expiration of all issued patents within thePatent Rights or (b) for a period of ten (10) years after the Effective Date ifno patents have issued within the Patent Rights within that ten-year period,unless earlier terminated in accordance with the provisions of this Agreement.

 

8.2. VoluntaryTermination by Company.  Company mayterminate this Agreement for any reason upon ninety (90) days prior writtennotice to University.

 

8.3. Terminationfor Default.  If either party commitsa material breach of its obligations under this Agreement and fails to curethat breach within sixty (60) days after receiving written notice of thebreach, the other party may terminate this Agreement immediately upon written noticeto the party in breach.

 

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8.4. ForceMajeure.  Neither party isresponsible for delays resulting from causes beyond its reasonable control,including without limitation fire, explosion, flood, war, strike, or riot, providedthat the nonperfoming party uses commercially reasonable efforts to avoid orremove those causes of nonperformance and continues performance under thisAgreement with reasonable dispatch whenever the causes are removed.

 

8.5. Effect ofTermination.  The followingprovisions survive the expiration or termination of this Agreement: Articles 1and 9; Sections 3.2., 3.5., 5.2. (obligation to provide final report and payment), 5.5., 6.4., 7.1., 7.3.,8.5., and 10.9. Upon the early termination of this Agreement, Company maycomplete and sell any work-in-progress and inventory of Licensed Products thatexist as of the effective date of termination, provided that (a) Company iscurrent in payment of all amounts due University under this Agreement, (b)Company pays University the applicable royalty on sales of Licensed Products inaccordance with the terms of this Agreement, and (c) Company complete and sellall work-in-progress and inventory of Licensed Products within six (6) monthsafter the effective date of termination.

 

9. Dispute Resolution.

 

9.1. ProceduresMandatory.  The parties agree thatany dispute arising out of or relating to this Agreement will be resolvedsolely by means of the procedures set forth in this Article, and that theseprocedures constitute legally binding obligations that are an essentialprovision of this Agreement.  However,all procedures and deadlines specified in this Article may be modified by writtenagreement of the parties.  If eitherparty fails to observe the procedures of this Article, as modified by theirwritten agreement, the other party may bring an action for specific performancein any court of competent jurisdiction.

 

9.2. DisputeResolution Procedures.

 

(a) Negotiation. In the event of any dispute arising outof or relating to this Agreement, the affected party shall notify the otherparty, and the parties shall attempt in good faith to resolve the matter withinten (10) days after the date of notice (the “Notice Date”). Any disputes notresolved by good faith discussions shall be referred to senior executives ofeach party, who shall meet at a mutually acceptable time and location withinthirty (30) days after the Notice Date and attempt to negotiate a settlement.

 

(b) Mediation. If the matter remains unresolved withinsixty (60) days after the Notice Date, or if the senior executives fail to meetwithin thirty (30) days after the Notice Date, either party may initiatemediation upon written notice to the other party, whereupon both parties shallto engage in a mediation proceeding under the then current CPR Institute forDispute Resolution (“CPR”) Model Procedure for Mediation of Business Disputes,except that specific provisions of this Section override inconsistentprovisions of the CPR Model Procedure.  Themediator will be selected from the CPR Panels of Neutrals. If the partiescannot agree upon the selection of a mediator within ninety (90) days after theNotice Date, then upon the request of either party, the CPR shall appoint themediator.  The parties shall attempt toresolve the dispute through mediation until one of the following occurs: (i)the parties reach a written settlement; (ii) the mediator notifies the partiesin writing that they have reached an impasse; (iii) the parties agree inwriting that they have reached an impasse; or (iv) the parties have not reacheda settlement within one hundred twenty (120) days after the Notice Date.

 

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(c) TrialWithout Jury.  If the parties fail toresolve the dispute through mediation, or if neither party elects to initiatemediation, each party may pursue any other remedies legally available toresolve the dispute.  However, the partiesexpressly waive the right to a jury trial in the legal proceeding under thisSection.

 

9.3. Preservation of Rights Pending Resolution.

 

(a) Performanceto Continue.  Each party shallcontinue to perform its obligations under this Agreement pending finalresolution of any dispute arising out of or relating to this Agreement.  However, a party may suspend performance ofits obligations during any period in which the other party fails or refuses toperform its obligations.

 

(b) ProvisionalRemedies.  Although the proceduresspecified in this Article are the exclusive procedures for resolution ofdisputes arising out of or relating to this Agreement, either party may seek apreliminary injunction or other provisional equitable relief if, in itsreasonable judgment, that action is necessary to avoid irreparable harm toitself or to preserve its rights under this Agreement.

 

(c) Statute ofLimitations.  The parties agree thatall applicable statutes of limitation and time-based defenses (such as,estoppel and laches) are tolled while the procedures set forth in Subsections 9.2.(a)and 9.2(b) are pending.  The partiesshall take any actions necessary to effectuate this result.

 

10. Miscellaneous.

 

10.1. Representationsand Warranties.  Universityrepresents that its employees have assigned to University their entire right,title, and interest in the Patent Rights and that it has authority to grant therights and licenses set forth in this Agreement. UNIVERSITY MAKES NO OTHERWARRANTIES CONCERNING THE PATENT RIGHTS AND RELATED TECHNOLOGY, INCLUDINGWITHOUT LIMITATION ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY ORFITNESS FOR A PARTICULAR PURPOSE.  Specifically,University makes no warranty or representation (a) regarding the validity orscope of the Patent Rights, (b) that the exploitation of the Patent Rights orany Licensed Product or Licensed Service will not infringe any patents or otherintellectual property rights of a third party, and (c) that any third party isnot currently infringing or will not infringe the Patent Rights.

 

10.2. Compliancewith Law and Policies.  Companyagrees to comply with applicable law and the policies of University in the areaof technology transfer and shall promptly notify University of any violationthat Company knows or has reason to believe has occurred or is likely to occur. The University policies currently ineffect at the Amherst campus are the Intellectual Property Policy. Policy onConflicts of Interest Relating to Intellectual Property and Commercial Ventures,and Policy on Faculty Consulting and Outside Activities, current copies ofwhich the University has provided to Company.

 

10.3. Tax-ExemptStatus.  Company acknowledges thatUniversity, as a public institution of the Commonwealth of Massachusetts, is anexempt organization under the United States Internal Revenue Code of 1986, asamended.  Company also acknowledges thatcertain facilities in which the licensed inventions were developed may havebeen financed through offerings of

 

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tax-exempt bonds.  If the Internal Revenue Service determines, orif counsel to University reasonably determines, that any term of this Agreementjeopardizes the tax-exempt status of University or the bonds used to financeUniversity facilities, the relevant term is invalid and shall be modified inaccordance with Section 10.11.

 

10.4. Counterparts. This Agreement may be executed in one ormore counterparts, each of which is an original, and all of which together areone instrument.

 

10.5. Headings. All headings are for convenience onlyand do not affect the meaning of any provision of this Agreement.

 

10.6. BindingEffect.  This Agreement is bindingupon and inures to the benefit of the parties and their respective permittedsuccessors and assigns.

 

10.7. Assignment. This Agreement may not be assigned byeither party without the prior written consent of the other party.

 

10.8. Amendmentand Waiver.  This Agreement may beamended, supplemented, or otherwise modified only by means of a writteninstrument signed by both parties.  Anywaiver of any rights or failure to act in a specific instance relates only tothat instance and is not an agreement to waive any rights or fail to act in anyother instance.

 

10.9. GoverningLaw.  This Agreement shall begoverned by and construed in accordance with the laws of the Commonwealth ofMassachusetts irrespective of any conflicts of law principles.

 

10.10. Notice. Any notices required or permitted underthis Agreement shall be in writing, shall specifically refer to this Agreement,and shall be sent by recognized national overnight courier, or registered orcertified mail, postage prepaid, return receipt requested, to the followingaddresses:

 
| If to University:                                                                                                                                  | If to Company:                                                             |
|----------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------|
|                                                                                                                                               |                                                                       |
| Office of Commercial Ventures  and  Intellectual Property  University of Massachusetts Amherst  Goodell Building, Room 512  Amherst, MA 01003-3290 | Advanced Cell  Technology, Inc.  One Innovation Drive  Worcester, MA 01605 |
|                                                                                                                                               |                                                                       |
| Attention:                                                                                                                                         | E. Bradley Moynahan                                                        | Attention: | Michael D. West, Ph.D. |
|                                                                                                                                               | Director                                                                   |   | President & CEO |

 

notices under thisAgreement are effective upon receipt.  Aparty may change its contact information immediately upon written notice to theother party in the manner provided in this Section.

 

10.11. Severability. If any provision of this Agreement isheld invalid or unenforceable for any reason, the invalidity orunenforceability does not affect any other provision of this

 

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Agreement, and theparties shall negotiate in good faith to modify the Agreement to preserve (tothe extent possible) their original intent.  If the parties fail to reach a modifiedagreement within sixty (60) days after the relevant provision is held invalidor unenforceable, then the dispute shall be resolved in accordance with theprocedures set forth in Article 9. While the dispute is pendingresolution, this Agreement shall be construed as if the provision were deletedby agreement of the parties.

 

10.12. EntireAgreement.  This Agreement constitutesthe entire agreement between the parties with respect to its subject matter andsupersedes all prior agreements or understandings between the parties relatingto its subject matter.

 

The parties havecaused this Agreement to be executed by their duly authorized representativesas of the Effective Date.

 
| UNIVERSITY OF  MASSACHUSETTS | ADVANCED CELL  TECHNOLOGY, INC.                                                |
|------------------------------|--------------------------------------------------------------------------------|
|                         |                                                                           |
|                         |                                                                           |
| By:                          | /s/ William S.  Rosenberg                                                      |   | By: | /s/ Michael West |   |
|                         | William S. Rosenberg                                                           |   | Michael West |
|                         |                                                                           | President and CEO |
|                         | Executive Director,  Office of  Commercial Ventures and Intellectual  Property |   |
|                         |                                                                           |   |
| Date:                        |      3/27/03                                          |   | Date: |      3-31-03 |   |
|                              |                                                                                |  |  |  |  |  |  |  |  |

 

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