**Exhibit 10.11**

 

**NON-EXCLUSIVELICENSE AGREEMENT**

 

ThisNon-Exclusive License Agreement (“Agreement”) is made and entered into this 8thday of November, 2002 (the “EFFECTIVE DATE”),**by and between Advanced Cell Technology,Inc., a Delaware corporation with offices located at One Innovation Drive, Worcester,Massachusetts 01605, USA (“ACT”), and Merial Limited, a company limited by sharesregistered in England and Wales (registered number 3332751) with a registeredoffice at PO Box 327, Sandringham House, Sandringham Avenue, Harlow BusinessPark, Harlow, Essex CM19 5TG, England, domesticated in Delaware, USA as MerialLLC, and having a place of business at 3239 Satellite Blvd., Duluth, GA30096-4640, USA (“LICENSEE”). ACT and LICENSEE are sometimes hereinafter referredto individually as a “party” or collective as the “parties.” 

 

W1TNESSETH

 

WHEREAS, ACT ownsor has licensed with a sublicensable interest the PATENT RIGHTS; and

 

WHEREAS, LICENSEE desiresto obtain a nonexclusive license from ACT under the PATENT RIGHTS upon theterms and conditions hereinafter set forth; and

 

WHEREAS, ACT iswilling to grant such a license to LICENSEE upon the terms and conditions setforth below;

 

NOW, THEREFORE, inconsideration of the premises and the mutual covenants contained herein, theparties hereto agree as follows:

 

ARTICLE 1 - DEFINITIONS

 

For the purposesof this Agreement, the following words and phrases shall have the followingmeanings:

 

1.1                              “AGREEMENTYEAR” means the period of twelve (12) consecutive months commencing on theEFFECTIVE DATE and each anniversary of the EFFECTIVE DATE thereafter.

 

1.2                              “AFFILIATE”shall mean (i) any business entity fifty percent (50%) or more of which isowned directly or indirectly by a party; (ii) any business entity whichdirectly or indirectly owns fifty percent (50%) or more of a party; or (iii)any business entity under the direct or indirect control of any business entityas described in (i) or (ii) above.

 

1.3                              “KNOW-HOW”means all compositions of matter, techniques and data and other know-how andtechnical information including inventions (whether or not patentable), improvementsand developments, practices, methods, concepts, trade secrets, documents, computerdata, computer code, apparatus, clinical and regulatory strategies, test data,analytical and quality control data, formulation, manufacturing, patent data ordescriptions, development information, drawings, specifications, designs,plans, proposals and technical data and manuals

 

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and all other proprietaryinformation that is owned or controlled by ACT as of the EFFECTIVE DATE orduring the TERM of this Agreement and that relates to any of the subject matterdescribed in or claimed by the PATENT RIGHTS and is relevant to the FIELD OFUSE.

 

1.4                               “LICENSEDPRODUCT(S)” means (a) any product, the making, using, selling, offering forsale, importing or exporting of which by LICENSEE (or, as applicable, its AFFILIATES),would, but for the licenses granted to LICENSEE in Article 2 of thisAgreement (or, as applicable, by LICENSEE to its AFFILIATES), infringe a VALIDCLAIM of the PATENT RIGHTS in the country in which any such product is so made,used, sold, offered for sale, imported or exported by LICENSEE (or, asapplicable, its AFFILIATES) or (b) any product that is made by LICENSEE (or, asapplicable, its AFFILIATES) using a process or method that would, but for thelicenses granted to LICENSEE in Article 2 of this Agreement (or, as applicable,by LICENSEE to its AFFILIATES), infringe a VALID CLAIM of the PATENT RIGHTS inthe country in which any such process or method is used. By way of illustrationbut not limitation, the parties agree that LICENSED PRODUCTS include cloned,transgenic or chimeric birds, the progeny of such birds, and semen, ova orembryos obtained from such birds.

 

1.5                               “LICENSEDPROCESS(ES)” means any process or method, the practice of which by LICENSEE or,as applicable, its AFFILIATES would, but for the licenses granted to LICENSEEin Article 2 of this Agreement (or, as applicable, by LICENSEE to its AFFILIATES),infringe a VALID CLAIM of the PATENT RIGHTS in the country in which such processor method is practiced.

 

1.6                               “LICENSEDSERVICES” means any service which the selling, offering for sale, importing orexporting of which by LICENSEE (or, as applicable, its AFFILIATES), would, but forthe licenses granted to LICENSEE in Article 2 of this Agreement (or, asapplicable, by LICENSEE to its AFFILIATES), infringe a VALID CLAIM of thePATENT RIGHTS in the country in which any such product is so sold, offered forsale, imported or exported by LICENSEE (or, as applicable, its AFFILIATES).

 

1.7                               “NETSALES” means the gross amounts received for the sale of LICENSED PRODUCTS andthe provision of LICENSED PROCESSES in the FIELD OF USE by LICENSEE andLICENSEE’s AFFILIATES to third parties less, to the extent applicable, the following:

 

(a)                                 normaland customary trade, cash, quantity and other discounts, allowances and creditsallowed;

 

(b)                                sales,tariff duties, use and other taxes (including value added taxes), when includedin gross sales;

 

(c)                                 freight,postage, shipping, packaging, transportation and insurance related to deliveryof LICENSED PRODUCTS and LICENSED PROCESSES;

 

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(d)                             credits,chargebacks or allowances granted for damaged, returned, rejected, or recalledLICENSED PRODUCTS and LICENSED PROCESSES or retroactive price reductions; and

 

(e)                              anamount equal to accounts receivable for the sale or provision of LICENSEDPRODUCTS and LICENSED PROCESSES that are not collectible by LICENSEE or, asapplicable, LICENSEE’S AFFILIATES or sublicensees, provided, however, thatLICENSEE, or, as applicable, LICENSEE’S AFFILIATES or sublicensees, shall usecommercially reasonable efforts to collect such accounts receivable.

 

Sales between oramong LICENSEE and its AFFILIATES shall be excluded from the computation of NETSALES, but NET SALES shall include the first sales to third parties by any suchAFFILIATES. The supply of LICENSED PRODUCTS and LICENSED PROCESSES as samples,for use in non-clinical or clinical studies, or for use in any tests or studiesreasonably necessary to comply with any applicable law, regulation or requestby a regulatory or governmental authority or as is otherwise normal andcustomary in the industry shall not be included within the computation of NETSALES.

 

Where(i) the consideration for the sales of LICENSED PRODUCTS or the provision ofLICENSED SERVICES includes any non-cash element, or (ii) LICENSED PRODUCTS aresold or LICENSED SERVICES are provided in any manner other than an invoicedsale, the NET SALES applicable to any such transaction shall be deemed to beLICENSEE’s, or as applicable LICENSEE’s AFFILIATE’S, average NET SALES for theapplicable quantity of LICENSED PRODUCTS or LICENSED SERVICES in the applicableTERRITORY for the period in question.

 

1.8                             “PATENTRIGHTS” means the patents and patent applications identified in Exhibit Aattached hereto, all continuations, continuations-in-part, divisionals andforeign or domestic counterparts thereof or related thereto in the TERRITORY,and any and all reissues, reexaminations, extensions, supplementary protectioncertificates, and substitutions thereof. PATENT RIGHTS as they exist as of theEFFECTIVE DATE are set forth on Exhibit A. The parties agree that ExhibitA may be revised by the parties from time to time after the Effective Dateto reflect changes thereto.

 

1.9                             “FIELDOF USE” means the development, making, using, selling, offering to sell, importingor exporting of agricultural products that are composed of, made in or derived,extracted or isolated from cloned, transgenic or chimeric animals of the avianspecies. For purposes of this Agreement the term “agricultural products” meansfood or fiber (*i.e*., something of nutritionalvalue) or products that are used for the production of food or fiber, and the renderingof services that relate to the production of such products. Specificallyexcluded from agricultural products are products intended for medicinal uses oras part of the nutritional management of disease and products intended to beused for veterinary or medical therapies, including, but not limited to, theproduction of biopharmaceutical agents, proteins, peptides and polypeptides forpharmaceutical, nutraceutical or other use.

 

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1.10                       “TERM” hasthe meaning set forth in Section 8.1.

 

1.11                       “TERRITORY”means the world and all countries thereon.

 

1.12                       “UMASSLICENSE” means the Exclusive License Agreement between ACT and the University,dated April 16, 1996, as amended by the Amendment to Exclusive License Agreementdated September 1, 1999 and the Second Amendment to Exclusive License Agreementdated May 31, 2000.

 

1.13                       “UMASSPATENT RIGHTS” means those PATENT RIGHTS licensed by ACT from the Universityunder the UMASS LICENSE.

 

1.14                    “VALID CLAIM”means a claim of any issued and unexpired patent within the PATENT RIGHTS whichhas not lapsed, become abandoned or been held revoked, invalid, orunenforceable by a decision of a court or administrative or governmentauthority or agency of competent jurisdiction from which no appeal can be orhas been taken within the time allowed for such appeal, and which has not beenadmitted to be invalid or unenforceable through reissue, disclaimer orotherwise.

 

Additional terms may bedefined throughout this Agreement.

 

ARTICLE 2 - GRANT

 

2.1                             ACThereby grants to LICENSEE and its AFFILIATES, and LICENSEE and its AFFILIATESaccept, subject to the terms and conditions hereof, a royalty bearing,nonexclusive license under the PATENT RIGHTS and KNOW-HOW to research, develop,make, have made, use, sell, offer for sale, import and export LICENSED PRODUCTSand to practice LICENSED PROCESSES in the TERRITORY in the FIELD OF USE. Thelicense granted to LICENSEE and its AFFILIATES in this Section 2.1 shallnot include the right to sublicense, except that LICENSEE and its AFFILIATESshall have the right, in connection with the license to “have made,” tosublicense the rights granted in this Section 2.1 to third parties inconnection with contracting with such third parties to provide services toLICENSEE or to manufacture for LICENSEE LICENSED PRODUCTS for sale by LICENSEE.

 

2.2                             Withinthirty (30) business days of the EFFECTIVE DATE, ACT shall provide and transferto LICENSEE (i) all information and data relating to the PATENT RIGHTS and KNOW-HOWas may be reasonably necessary to allow LICENSEE to exploit the license grantedhereunder. From time to time thereafter ACT shall provide LICENSEE, at LICENSEE’sexpense, with such information and technological assistance as LICENSEEreasonably shall request.

 

2.3                             LICENSEEacknowledges that a portion of the PATENT RIGHTS licensed to LICENSEE hereunderis owned by the University and is licensed to ACT under the UMASS LICENSE. ACT,the University and LICENSEE agree that, in the event the UMASS LICENSE expiresor is terminated for any reason pursuant to the provisions of the UMASS LICENSEor otherwise, (i) LICENSEE will thereafter make any payments due to ACT underthis Agreement directly to the University, and (ii) promptly following suchtermination, the University and

 

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LICENSEE will enter intoa direct license agreement reflecting the applicable terms of this Agreementand the UMASS LICENSE. For the avoidance of doubt, the references to “Sublicensees”in Section 8.5 of the UMASS LICENSE shall not apply to LICENSEE and shall notbe construed as vitiating the provisions of this Section 2.3. ACT and theUniversity agree that the provisions of Section 2.2 of the UMASS LICENSEproviding for the automatic assignment to the University of sublicenses grantedby ACT under said Section 2.2 shall not apply to the sublicense by ACT toLICENSEE under this Agreement, and that the provisions of this Section 2.3shall govern in the event that the UMASS LICENSE is terminated. ACT and theUniversity agree that LICENSEE will not be bound by any amendment to the UMASSLICENSE that affects LICENSEE’s rights under this Agreement in any materialrespects, unless LICENSEE agrees in writing to such amendment. Neither ACT northe University will not make any change or addition to, or otherwise amend, theUMASS LICENSE in any manner that materially adversely affects LICENSEE withoutthe prior written consent of LICENSEE (such consent not to be unreasonablywithheld or delayed).

 

2.4                               ACTagrees and covenants not to challenge, object to, assert, sue or threatenLICENSEE or any of its AFFILIATES, or LICENSEE’s or its AFFILIATES’ customers,vendees, collaborators, or contractors, mediate or immediate, or any of theforegoing entities’ officers, directors, employees, agents or representatives,for any alleged infringement, misappropriation or other conflict with anypatents owned or controlled by ACT as of the EFFECTIVE DATE or at any timethereafter based upon, arising out of or resulting from, either directly orindirectly the use, sale, offer for sale, or import of any LICENSED PRODUCTmade or sold, or LICENSED SERVICE performed, by LICENSEE under the licensegranted in this Agreement and upon which royalty has been paid in accordancewith the provisions of this Agreement within the FIELD OF USE. The terms ofthis paragraph shall survive termination or expiration of this Agreement exceptfor termination of this Agreement by ACT pursuant to Section 8.2 or byLICENSEE pursuant to Sections 8.3 or 8.4.

 

2.6                                Notlater than thirty (30) days following each new AGREEMENT YEAR, LICENSEE shallfurnish ACT with a brief written summary of the progress of its efforts duringthe prior AGREEMENT YEAR to develop and commercialize LICENSED PRODUCTS andLICENSED PROCESSES in the FIELD OF USE. Any summary report prepared andfurnished to ACT pursuant to this Section 2.6 shall be deemedConfidential Information subject to the provisions of Article 9 of thisAgreement.

 

ARTICLE 3 -CONSIDERATION

 

3.1                               InitialPayment. In partial consideration of the license granted in Article 2of this Agreement, LICENSEE agrees to pay to ACT an initial license fee of OneHundred and Fifty Thousand Dollars ($150,000.00) (the “License Fee”). Onehundred percent (100%) of the License Fee shall be deemed earned and shall bepaid by LICENSEE to ACT within fifteen (15) days after the EFFECTIVE DATE. TheLicense Fee is not refundable and is not creditable against other payments dueto ACT under this Agreement.

 

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3.2                                 Royalties.

 

(a)                               Inpartial consideration of the license granted in Article 2 of this Agreement,LICENSEE agrees to pay to ACT in each AGREEMENT YEAR during the TERM and on acountry-by-country basis a royalty equal to 3% of NET SALES until all royaltypayments in that AGREEMENT YEAR total Three Million Dollars ($3,000,000.00),and thereafter for the remainder of that AGREEMENT YEAR the royalty rate shallbe reduced to 1% of NET SALES. Calculation of royalties under this Section3.2 shall be subject to Section 3.6 below. Any minimum annualroyalties paid pursuant to Section 3.3 below shall be credited fullyagainst any earned royalties due under this Section 3.2.

 

(b)                              Forthe avoidance of doubt, LICENSEE shall be required to pay only a single paymentbased upon the NET SALES of any LICENSED PRODUCT or LICENSED PROCESS,regardless of whether such LICENSED PRODUCT or LICENSED SERVICE is covered bymore than one patent within the PATENT RIGHTS.

 

(c)                               Forthe avoidance of doubt, the obligation of LICENSEE to pay royalties on NETSALES shall terminate on a country-by-country basis concurrently with theexpiration or termination of the last applicable VALID CLAIM within the PATENTRIGHTS in the country in the TERRITORY in which such LICENSED PRODUCT orLICENSED PROCESS is sold or provided.

 

3.3                                 MinimumAnnual Royalties.

 

(a)                               Commencingwith the third full AGREEMENT YEAR of this Agreement (*i.e*.,in calendar year 2005, anniversary date of the EFFECTIVE DATE), LICENSEE shallduring the TERM of this Agreement pay minimum annual royalty payments to ACT asfollows: LICENSEE shall pay ACT a minimum annual royalty payment of TWENTY-FIVETHOUSAND DOLLARS ($25,000.00), increasing by FIFTY THOUSAND DOLLARS ($50,000.00)each AGREEMENT YEAR thereafter until such time as the minimum annual royalty isTWO HUNDRED FIFTY HUNDRED THOUSAND DOLLARS ($250,000.00) at which time theminimum annual royalty payment shall continue to be TWO HUNDRED FIFTY HUNDREDTHOUSAND DOLLARS $250,000.00 for the remaining TERM of the Agreement.

 

(b)                              Ifapplicable, the minimum annual royalty payments set forth in Section 3.3(a)shall be payable within forty-five (45) days after the end of each applicableAGREEMENT YEAR. If the actual earned royalty payments by LICENSEE to ACT in anyAGREEMENT YEAR are less than the minimum annual royalty, LICENSEE shall havethe right to pay ACT the

 

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difference between theactual earned royalty payment and the minimum annual royalty in fullsatisfaction of its obligations under this Section 3.3. Waiver of anypayment of the minimum annual royalty by ACT shall not be construed as a waiverof any subsequent payment of the minimum annual royalty.

 

3.4.                              Allpayments due under Section 3.2 and not in dispute shall be paid inquarterly installments and be paid within sixty (60) days following the end ofeach calendar quarter of an AGREEMENT YEAR. Payments made within this sixty(60) day period shall be deemed timely.

 

3.5                                 Allpayments due under this Agreement shall be paid to ACT and shall be made in UnitedStates currency. Conversion of foreign currency to U.S. dollars shall be madeat the conversion rate reported in The Wall Street Journal on the lastworking day of the calendar quarter to which the payment relates. Anywithholding tax required to be withheld by LICENSEE on royalty payments underthe laws of any country in the TERRITORY will be timely paid by LICENSEE to theappropriate governmental authority, and LICENSEE will furnish ACT with proof ofpayment of such tax. Any such tax actually withheld may be deducted fromroyalty payments due to ACT under this Agreement.

 

3.6                                 Ifin LICENSEE’s reasonable business judgment it is necessary or desirable to seeka license or immunity from suit from any third party in order for LICENSEE toexercise or use the rights granted to LICENSEE hereunder, or LICENSEE isotherwise required to pay to any third party any fee, royalty or other paymentin connection with the making, using, selling, offering to sell, importing orexporting of LICENSED PRODUCTS or LICENSED PROCESSES, LICENSEE shall have theright to set off any amounts paid to such third party, including any fee,royalty or other payment, against payment of up to fifty percent (50%) of the paymentsotherwise payable to ACT hereunder in the same royalty period. Such right ofoffset shall be in addition to, and not in lieu of, any other rights or claimsLICENSEE may have under this Agreement.

 

3.7                                 Tothe extent that payments due under this Agreement and not in dispute, includingpayments under this Article 3, are not paid within the specified timeperiod, or are underpaid, such outstanding sums shall accrue interest from thedate due, such interest to be computed for such unpaid amount on the last dayof each calendar quarter (accruing quarterly) at the ninety (90) day U.S.Treasury Bill rate published in the Wall Street Journal for the last dayof the calendar quarter, and if no such U.S. Treasury Bill rate is published onsuch date, then thenext closest short term U.S. Treasury Bill ratepublished in the Wall Street Journal for such date.

 

3.8                                 Ifat any time legal restrictions prevent the prompt remittance of part or all ofany payments owed by LICENSEE to ACT hereunder with respect to any country inthe TERRITORY, payment shall be made through any lawful means or methods thatmay be available, and as LICENSEE shall reasonably determine is appropriate.

 

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ARTICLE 4 - REPORTS AND RECORDS

 

4.1                                 Followingthe first commercial sale of a LICENSED PRODUCT or LICENSED PROCESS, LICENSEEshall deliver to ACT a report that sets forth for the applicable calendar quarterthe following information:

 

(a)                                totalgross sales of all LICENSED PRODUCTS and LICENSED PROCESSES sold in theTERRITORY during such quarter;

 

(b)                               deductionsapplicable to determining NET SALES;

 

(c)                                totalNET SALES during such quarter;

 

(d)                               thetotal of payments due pursuant to Article 4.

 

Such report shall accompany each royalty payment due pursuant to Article3. If no payments are due for any reporting period, the report shall sostate.

 

4.2                                 LICENSEEshall keep accurate records for a period of at least three (3) years for eachreporting period during the TERM of this Agreement in which costs or expensesare incurred, or NET SALES of LICENSED PRODUCTS or LICENSED PROCESSES occur, showingcosts, expenses and NET SALES in sufficient detail to enable the reports providedunder Section 5.1 to be verified. ACT shall have the right, for a periodof one (1) year after receiving any report to appoint an independent certifiedpublic accounting firm to inspect the relevant records of LICENSEE and/or itsAFFILIATES to verify such report. LICENSEE shall make its records available forinspection by such independent certified public accounting firm during regularbusiness hours at such place or places where such records are customarily kept,upon reasonable notice, solely to verify the accuracy of the reports andpayments. Such inspection right shall not be exercised more than once in anycalendar year. Any examination by an independent certified public accountingfirm under this Section 4.2 is to be made at the expense of ACT, exceptthat if the results of the audit reveal that LICENSEE has underpaid ACT by tenpercent (10%) or more in any calendar year, then the audit fees shall be paidby LICENSEE. Any such discrepancies shall be promptly corrected by payment byLICENSEE to ACT. The independent certified public accounting firm shall executea confidentiality agreement reasonably acceptable to LICENSEE prior to any suchaudit and including obligations limiting the information to be provided to ACTto the numerical summary of expenses incurred and payments due and paid andprohibiting any disclosure to any third party.

 

ARTICLE 5 - PATENTPROSECUTION

 

5.1                                 ACTshall use reasonable commercial efforts to prepare, file, and prosecute allPATENT RIGHTS, including conducting any interferences, reissues,reexaminations, oppositions, nullity proceedings and any similar proceedings.All costs and expenses associated with the preparation, filing, and prosecutionof all PATENT RIGHTS shall be the responsibility of ACT. ACT shall adviseLICENSEE within ten (10) days of receiving any substantial action ordevelopment in the preparation, prosecution and maintenance of any PATENTRIGHTS, including those involving in which countries to initiate or continueprosecution (including

 

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validation), thequestion of the scope of, the issuance of, the rejection of, an interferenceinvolving, or an opposition involving any PATENT RIGHTS. Notwithstandinganything in this Agreement to the contrary, ACT shall pay, unless otherwiseagreed to in writing by LICENSEE, all maintenance, government and other fees ineach country in the TERRITORY that are required to maintain all issued patentswithin the PATENT RIGHTS; and shall submit evidence to LICENSEE upon request thatsuch fees have been timely paid. In the event ACT determines to abandon any ofthe PATENT RIGHTS it shall inform LICENSEE at least sixty (60) days prior toany relevant filing deadline or abandonment and LICENSEE shall have the optionto undertake the prosecution and maintenance of such PATENT RIGHTS, in whichevent, ACT shall assign such rights to LICENSEE.

 

5.2                                 ACTshall provide LICENSEE with a report, no less frequently than once per year (oras otherwise mutually agreed by the Parties), listing all patents and patentapplications within the PATENT RIGHTS, identifying them by country and patentor application number, and briefly describing the status thereof. In addition,ACT shall notify LICENSEE of the issuance of any patent within the PATENTRIGHTS within 10 business days of the issuance of such patent.

 

5.3                                 ACTshall not settle or consent to any judgment or decision in any reexamination,interference, opposition or similar proceeding which would have any adverseaffect on the scope of any PATENT RIGHTS, impose a financial obligation onLICENSEE, render invalid or unenforceable any of the PATENT RIGHTS or limit andof LICENSEE’S rights under this Agreement without the prior written consent ofLICENSEE (such consent not to be unreasonably withheld or delayed).

 

ARTICLE 6 - PROSECUTION OF INFRINGERS AND DEFENSE OFPATENT RIGHTS

 

6.1                                 Theparties agree to promptly notify each other in writing of any actual or suspectedinfringement by a third party of PATENT RIGHTS or of any claim of invalidity,unenforceability, or non-infringement of the PATENT RIGHTS.

 

6.2                                 ACTshall have the first right, but not the obligation, to seek to abate any actualor suspected infringement of the PATENT RIGHTS in the TERRITORY, or to filesuit against any such actually or allegedly infringing third party. If ACT doesnot, within one hundred twenty (120) days of a notice under Section 6.1,take steps to abate the actual or suspected infringement or file suit toenforce the PATENT RIGHTS against such actually or allegedly infringing thirdparty, LICENSEE shall have the right (but not the obligation) to take suchaction. The non-controlling party shall cooperate with the party controllingany such action (as may be reasonably requested by the controlling party),including by being joined as a party, and the party controlling any such actionshall keep the other party updated with respect to any such action, includingproviding copies of all documents received or filed in connection with any suchaction. LICENSEE shall have the right to credit as incurred any costs andexpenses incurred in connection with any such action against royalties and/orother payments payable to ACT under this Agreement for the year in which suchexpenses are incurred; provided, however, that such offset shall not exceedfifty percent (50%) of such royalties and/or other payments due to ACT in thesame period. LICENSEE’s rights under this Section 6.2 shall be subject to therights of the University under the UMASS LICENSE.

 

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6.3                                 Subjectto the rights of the University under the UMASS LICENSE, the party controllingany such action may settle or consent to an adverse judgment in any actiondescribed in Section 6.2 without obtaining consent from the non- controllingparty, unless any such settlement or consent judgment would eitherimpose a financial obligation upon the non-controlling party, limit the scopeof or invalidate or render unenforceable any PATENT RIGHTS or otherwise limitthe rights of the non-controlling party under this Agreement, in which event thecontrolling party shall obtain the non-controlling party’s prior writtenconsent (such consent not to be unreasonably withheld or delayed).

 

6.4                                 Subjectto the rights of the University under the UMASS LICENSE, unless otherwisemutually agreed by the parties, and subject to the respective indemnityobligations of the parties set forth in this Agreement, all monies recoveredupon the final judgment or settlement of any such action, shall be used first,to reimburse each of ACT and LICENSEE, on a *prorata*basis for its out-of-pocket expenses relating to the action,and second, any remaining balance shall belong to the party controlling suchaction.

 

6.5                                 Inthe event a third party claims that the exercise by LICENSEE of its rights inthe PATENT RIGHTS or KNOW-HOW infringe or otherwise conflict with theintellectual property rights of a third party, ACT shall have the first right,but not the obligation, to defend such claims asserted against LICENSEE,including any judicial or administrative proceedings relating to such claims.ACT shall give prompt notice to LICENSEE of any such claims. LICENSEE shallprovide, at ACT’s expense, such reasonable assistance and cooperation to ACT asmay be reasonably necessary to successfully defend any such claim. If ACT doesnot answer such claim within a reasonable time after such claim is made,LICENSEE shall have the right (but not the obligation) to take such action atits own expense. The non-controlling party shall cooperate with the partycontrolling any such action (as may be reasonably requested by the controllingparty), including by being joined as a party, and the party controlling anysuch action shall keep the other party updated with respect to any such action,including providing copies of all documents received or filed in connectionwith any such action. LICENSEE shall have the right to credit as incurred anycosts and expenses incurred in connection with its defense of any such actionagainst royalties and/or other payments payable to ACT under this Agreement forthe year in which such expenses are incurred; provided, however, that suchoffset shall not exceed fifty percent (50%) of such royalties and/or otherpayments due to ACT in the same period. LICENSEE’s rights under this Section6.2 shall be subject to the rights of the University under the UMASS LICENSE.The rights provided in this Section 6.5****shall be in addition to any other rightsof LICENSEE under this Agreement, including any right of indemnification.

 

ARTICLE 7 - INDEMNIFICATION; LIMITATION OF LIABILITY;INSURANCE

 

7.1                                 LICENSEEshall at all times during the term of this Agreement and thereafter, indemnify,defend and hold harmless ACT and the University and their trustees, directors,officers, employees and AFFILIATES against all third party liabilities of anykind whatsoever, including reasonable attorneys’ fees, arising out of the deathof or injury to any person or persons or out of any damage to propertyresulting from the development, manufacture, sale, use, performance, oradvertisement of the LICENSED PRODUCTS and LICENSED PROCESSES by

 

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LICENSEE or itsAFFILIATES or from a breach by LICENSEE of any representation or warranty ofLICENSEE in Section 11.2 of this Agreement.

 

7.2                                 ACTshall at all times during the term of this Agreement and thereafter, indemnify,defend and hold harmless LICENSEE and its AFFILIATES and their respective directors,officers, employees, agents against all third party liabilities of any kindwhatsoever, including and reasonable attorneys’ fees, arising from any breachby ACT or the University of any representation, warranty or covenant of ACT orthe University hereunder.

 

7.3                                 Anyindemnification obligations set forth in this Article 7 shall be subjectto the following conditions: (i) the indemnified party shall notify theindemnifying party in writing promptly upon learning of any claim or suit forwhich indemnification is sought; (ii) the indemnifying party shall have controlof the defense or settlement, providedthat the indemnified partyshall have the right (but not the obligation) to participate in such defense orsettlement with counsel at its selection and at its sole expense; and (iii) theindemnified party shall reasonably cooperate with the defense, at theindemnifying party’s expense.

 

7.4                                 INNO EVENT SHALL EITHER PARTY, ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES ORAFFILIATES BE LIABLE FOR INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANYKIND, INCLUDING ECONOMIC DAMAGE OR INJURY TO PROPERTY AND LOST PROFITS,REGARDLESS OF WHETHER A PARTY SHALL BE ADVISED, SHALL HAVE OTHER REASON TOKNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED,HOWEVER, THAT THIS SECTION 7.4 SHALL NOT IN ANY WAY LIMIT THE INDEMNIFYINGPARTY’S DUTY TO INDEMNIFY THE INDEMNIFIED PARTY FOR CLAIMS BROUGHT BY THIRD PARTIESAS SET FORTH IN SECTIONS 7.1 AND 7.2 OF THIS AGREEMENT (INCLUDING ANY INDIRECT,INCIDENTAL OR CONSEQUENTIAL DAMAGES SUFFERED OR INCURRED BY ANY THIRD PARTIES WHOARE, IN TURN, SEEKING THE SAME FROM THE INDEMNIFIED PARTY, WHICH SHALL BECOVERED BY THE INDEMNITY SET FORTH IN SECTION 7.1 AND 7.2, AS APPLICABLE) (ASOPPOSED TO ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES SUFFERED OR INCURREDBY A PARTY DIRECTLY).

 

7.5                                 Eachparty agrees to maintain insurance or self-insurance that is reasonably adequateto fulfill any potential obligation to the indemnified parties. Each partyshall continue to maintain such insurance or self-insurance during the term ofthis Agreement and after the expiration or termination of this Agreement for aperiod of five (5) years. Each party shall provide to the other party, uponreasonable request, proof of such insurance.

 

ARTICLE 8 - TERMINATION

 

8.1                                 Theterm of this Agreement (“TERM”) shall commence on the EFFECTIVE DATE andcontinue until the expiration of the last VALID CLAIM within the PATENT RIGHTSto expire, unless sooner terminated as provided in this Article 8.

 

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8.2                                 Ifeither party commits a material breach of this Agreement (including any failureto make any payment due under this Agreement), the non-breaching party shallhave the right to terminate this Agreement effective on ninety (90) days priorwritten notice to the party in breach, unless such breach is cured prior to theexpiration of such ninety (90) day period.

 

8.3                                 LICENSEEshall have the right to terminate this Agreement at any time on six (6) monthsprior notice to ACT, and upon payment of all amounts due ACT through theeffective date of the termination.

 

8.4                                 LICENSEEshall have the right to terminate this Agreement effective on the third anniversarydate of the EFFECTIVE DATE by providing notice to ACT at least thirty (30) daysin advance of such third anniversary date.

 

8.5.                              Notwithstandinganything herein to the contrary, in the event that this Agreement is terminatedby ACT pursuant to Section 8.2 or by LICENSEE pursuant to Sections8.3 or 8.4, LICENSEE and its AFFILIATES shall retain a license to rightsgranted in Article 2 to the extent reasonably necessary to sell anyLICENSED PRODUCTS existing or under production and to perform LICENSEDPROCESSES related to such LICENSED PRODUCTS or that are in process, subject tothe terms of this Agreement (including without limitation the obligation to payroyalties under Article 3), provided that LICENSEE shall complete andsell all such work-in-progress and inventory within six (6) months after theeffective date of termination.

 

8.6                                 Uponthe expiration of the TERM of this Agreement LICENSEE and its AFFILIATES shallhave a fully paid-up, non-exclusive, irrevocable, royalty free license underthe rights granted in Article 2.

 

8.7                                 Nothingherein shall be construed to release either party from any obligation thataccrued prior to expiration or any termination of this Agreement. The followingprovisions shall survive any termination of this Agreement:Articles/Sections 1, 2.5, 7, 8.5, 8.6, 8.7, 9, 10, 11, 12.2, 12.3, 12.5, 12.6,12.7, 12.10 and 12.11, and any other provision which by its nature isintended to survive any such termination.

 

ARTICLE 9 - CONFIDENTIALITY AND NON-DISCLOSURE

 

9.1                                 ConfidentialInformation; Non-Disclosure. “Confidential Information” shall mean anytechnical, business, financial, customer or other information disclosed by oneparty to the other party pursuant to this Agreement and is which marked as “Confidential”or “Proprietary,” or which is disclosed orally or visually and confirmed asconfidential or proprietary in writing within ten (10) business days of suchoral disclosure. Such information may be disclosed in oral, visual or writtenform (including magnetic, optical or other media). Each party’s ConfidentialInformation includes, without limitation, the respective party’s business plansand business practices, scientific knowledge, research and development orknow-how, processes, inventions, techniques, formulae, products and productplans, business operations, customer requirements, designs, sketches,photographs, drawings, specifications, reports, studies, findings, data, plansor other records, biological materials, software, margins, payment terms andsales forecasts, volumes and activities, designs, computer code, technicalinformation, costs,

 

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pricing,financing, business opportunities, personnel, and information of ACT orLICENSEE relating to the, PATENT RIGHTS, KNOW-HOW, LICENSED PRODUCTS andLICENSED SERVICES. Except to the extent expressly authorized by this Agreementor by other prior written consent by the disclosing party, each party shallduring the term of this Agreement and for a period of seven (7) yearsthereafter: (i) treat as confidential all Confidential Information of thedisclosing party; (ii) not use such Confidential Information except asauthorized herein or otherwise authorized in writing, (iii) implementreasonable procedures to prohibit the disclosure, unauthorized duplication,misuse or removal of the disclosing party’s Confidential Information; (iv)except as set forth in (v) below, not disclose such Confidential Information toany third party, and (v) only disclose the Confidential Information to those ofits employees, AFFILIATES, sublicensees and third party contractors inaccordance with Sections 2.1 and 2.2 who have need to know such ConfidentialInformation. Without limiting foregoing, each of the parties shall protect theConfidential Information using at least the same procedures and degree of carethat it uses to prevent the disclosure of its shall own confidential informationof like importance, but in no event less than reasonable care.

 

9.2                                 Exceptions.Neither party shall have any obligation or liability to the other with regardto any Confidential Information of the other: (i) that was publicly known atthe time it was disclosed or becomes publicly known through no fault, action,or inaction of the receiving party; (ii) was known to the receiving party,without restriction, at the time of disclosure; (iii) is disclosed with theprior written approval of the disclosing party; (iv) was independently developedby the receiving party without any use of the Confidential Information; (v) isdisclosed pursuant to an order or requirement of a court, administrativeagency, or other governmental body, provided that the receiving party shallprovide prompt advanced notice thereof to enable the disclosing party to seek aprotective order or otherwise take steps necessary to maintain the confidentialityof the Confidential Information; (vi) is disclosed in connection with securing regulatoryapproval or otherwise as may be necessary to comply with any regulation orrequest of any governmental or other regulatory authority, provided that thedisclosing party shall take all reasonable steps to limit disclosure of theConfidential Information and to otherwise maintain the confidentiality of theConfidential Information; or (vii) that is provided to the recipient by a thirdparty having no obligation to keep the information secret.

 

9.3                                 InjunctiveRelief. ACT and LICENSEE acknowledge and agree that any breach of theconfidentiality obligations imposed by this Article 9 will constituteimmediate and irreparable harm to the party disclosing the ConfidentialInformation and/or its permitted successors and assigns, which cannotadequately and fully be compensated by money damages and will warrant, inaddition to all other rights and remedies afforded by law, injunctive relief, specificperformance, and/or other equitable relief. The disclosing party’s rights andremedies hereunder are cumulative and not exclusive.

 

9.4                                 Termination.Upon termination (but not expiration) of this Agreement, except for terminationof this Agreement by ACT pursuant to Section 8.2 or by LICENSEE pursuantto Sections 8.3 or 8.4, and upon the request of the disclosing party,the receiving party shall promptly return to the disclosing party, at itsrequest, all copies of Confidential Information received from such party, andshall return or destroy, and document the destruction of, all summaries,abstracts, extracts, or other documents which contain any ConfidentialInformation

 

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of the other partyin any form, except that LICENSEE shall be permitted to retain a copy (orcopies, as necessary) of such Confidential Information for archival purposes oras required by any law or regulation.

 

ARTICLE 10 - PAYMENTS, NOTICES, AND OTHERCOMMUNICATIONS

 

Any payment, notice or other communication pursuant to this Agreementshall be in writing and sent by certified first class mail, postage prepaid,return receipt requested, or by nationally recognized overnight carrieraddressed to the parties at the following addresses or such other addresses assuch party furnishes to the other party in accordance with this paragraph. Suchnotices, payments, or other communications shall be effective upon receipt.

 
| In the case of  ACT:            |                                    |
|---------------------------------|-----------------------------------------|
|                            |                                    |
| Advanced Cell  Technology, Inc. |                                    |
| One Innovation Drive            |                                    |
| Worcester, MA 01605             |                                    |
| USA                             |                                    |
| Attention:                      | Michael D. West, Ph.D., President       |
|                            |                                    |
| In the case of  LICENSEE:       |                                    |
|                            |                                    |
| Merial LLC                      |                                    |
| 3239 Satellite Blvd.            |                                    |
| Duluth, GA 30096-4640           |                                    |
| USA                             |                                    |
| Attention:                      | Legal Department/W. Joseph Thesing, Jr. |
|                            | General Counsel, North America          |
|                                 |                                         |  |  |

 

ARTICLE 11 -REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS

 

11.1                           ACTrepresents, warrants and covenants that:

 

(a)                                ACTis a corporation duly organized, validly existing and in good standing underthe laws of Delaware and has full corporate power and authority to enter intothis Agreement;

 

(b)                               ACTis the sole and exclusive owner of the entire right, title and interest in andto the PATENT RIGHTS and KNOW-HOW, free and clear of any liens or otherencumbrances; and, with respect to UMASS PATENT RIGHTS, ACT possess all suchrights as**are necessary to grant to LICENSEE the rights andlicenses to the such PATENT RIGHTS and KNOW-HOW granted hereunder;

 

(c)                                thisAgreement has been validly executed and constitutes a binding and legalobligation of ACT, enforceable in accordance with its terms, and that

 

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the execution andperformance of this Agreement by ACT will not violate, contravene or conflictwith any other agreement to which ACT is a party or by which it is bound orwith any law, rule or regulation applicable to ACT;

 

(d)                               ACThas not, prior to the EFFECTIVE DATE, entered into and shall not, following theEFFECTIVE DATE, enter into any agreement and has not granted any now existing,or agreed to grant any future, license, right or privilege which agreement,license, right or privilege conflicts in any way with this Agreement or ACT’sobligations hereunder;

 

(e)                                theclaims of any and all issued patents included in the PATENT RIGHTS are validand enforceable;

 

(f)                                  exceptas set forth in Exhibit B attached hereto, no claims of infringement,misappropriation or other conflict with any intellectual property rights orother rights owned or controlled by any third party have been made orthreatened with respect to the PATENT RIGHTS or KNOW-HOW;

 

(g)                               ACTis not aware of any infringement or misappropriation of the PATENT RIGHTS orKNOW-HOW by any third party;

 

(h)                               toACT’s knowledge, the making, using, selling, offering for sale, importing andexporting of LICENSED PRODUCTS or LICENSED SERVICES in the TERRITORY in theFIELD OF USE does not and shall not infringe or otherwise conflict with anyintellectual property rights or other rights of any third party; and

 

(i)                                   ACThas provided LICENSEE with a complete, true and correct copy of the UMASSLICENSE.

 

11.2                           LICENSEErepresents and warrants that it has full corporate power and authority to enterinto this Agreement, that this Agreement constitutes the binding legalobligation of LICENSEE, enforceable in accordance with its terms, and thatexecution and performance of this Agreement by LICENSEE will not violate,contravene or conflict with any other agreement to which LICENSEE is a party orby which it is bound or with any law, rule or regulation applicable to LICENSEE.

 

11.3                           EXCEPTAS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER ACT NOR LICENSEE,OR THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AND AFFILIATES, MAKES ANYREPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS ORIMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANT ABILITY OR FITNESSFOR A PARTICULAR PURPOSE.

 

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ARTICLE 12 -MISCELLANEOUS PROVISIONS

 

12.1                           LICENSEE shall comply with all local, state,federal and international laws and regulations relating to the development,manufacture, use, provision, and sale of LICENSED PRODUCTS and LICENSEDPROCESSES. Without limitations the generality of the foregoing, LICENSEE agreesto comply with the following:

 

(a)                                LICENSEE shall obtain all necessary approvalsfrom the USDA, FDA and any similar governmental authorities of any foreignjurisdiction in the Territory in which LICENSEE intends to make, use, or sellLICENSED PRODUCTS or to perform LICENSED PROCESSES.

 

(b)                               LICENSEE shall comply fully with any and allapplicable local, state, federal and international laws and regulations relatingto the LICENSED PRODUCTS and LICENSED SERVICES, and the PATENT RIGHTS, in theTerritory, including without limitation all export or import regulations andrules now in effect or as may be issued from time to time by any governmentalauthority which has jurisdiction relating to the export of LICENSED PRODUCTS orLICENSED SERVICES and any technology relating thereto. LICENSEE hereby giveswritten assurance that it will comply with all such import or export laws andregulations (including without limitation all Export Administration Regulationsof the United States Department of Commerce), that it bears sole responsibilityfor any violation of such laws and regulations, and that it will indemnify,defend, and hold ACT and the University harmless (in accordance with Article 8)for the consequences of any such violation.

 

(c)                                To the extent that any invention claimed inthe PATENT RIGHTS has been partially funded by the United States Government,and only to the extent required by applicable laws and regulations, LICENSEEagrees that any LICENSED PRODUCTS used or sold in the United States will be manufacturedsubstantially in the United States or its territories. Current law providesthat if domestic manufacturer is not commercially feasible under the circumstances,ACT and/or the University may seek a waiver of this requirement from therelevant federal agency on behalf of LICENSEE and, upon LICENSEE’S request,shall cooperate with LICENSEE in seeking such a waiver.

 

12.2                           LICENSEE shall not create or incur or causeto be incurred or to exist any lien, encumbrance, pledge, charge, restrictionor other security interest of any kind upon the PATENT RIGHTS without the priorwritten consent of ACT and the University (which consent shall be granted ordenied in ACT’s or the University’s, as applicable, sole discretion).

 

12.3                           Neither ACT nor Merial shall originate anypublicity, news release or other public announcement, written or oral, (“Announcements”)relating to this Agreement or the existence of an arrangement between theparties, without the prior written approval of the other party, which

 

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approval shall not beunreasonably withheld or delayed, except as otherwise required by law orregulation. Any references to the University in such Announcements shall besubject to the approval of the University. The foregoing notwithstanding, ACTand LICENSEE shall have the right to make such Announcements without theconsent of the other party or the University, as applicable, in any prospectus,offering memorandum, or other document or filing required by applicablesecurities laws or other applicable law or regulation, provided that such partyshall have given the other party and the University, as applicable, at least ten(10) days prior written notice of the proposed text for the purpose of givingthe other party, as applicable, the opportunity to comment on such text.

 

12.4                           Nothing herein shall be deemed to constituteeither party as the agent or representative of the party, or both parties asjoint venturers or partners for any purpose. Each party shall be an independentcontractor, not an employee or partner of the other party, and the manner inwhich each party renders its services under this Agreement shall be within itssole discretion. Neither party shall be responsible for the acts or omissionsof the other party, nor shall either party have authority to speak for,represent or obligate the other party in any way without prior writtenauthority from the other party.

 

12.5                           To the extent commercially feasible, andconsistent with prevailing business practices and applicable law, all LICENSEDPRODUCTS sold pursuant to this Agreement will be marked with the number of eachissued patent that applies to such LICENSE PRODUCTS.

 

12.6                           This Agreement shall be construed, governed,interpreted and applied in accordance with the laws of the Commonwealth ofMassachusetts, U.S.A., without regard to the principles of conflicts of lawthereof, except that questions affecting the construction and effect of anypatents included in the PATENT RIGHTS shall be determined by the law of thecountry in which the patents were granted.

 

12.7                           This Agreement shall be binding upon andinure to the benefit of the parties and their respective permitted successorsand assigns.

 

12.8                           The parties hereto acknowledge that thisAgreement sets forth the entire Agreement and understanding of the partieshereto as to the subject matter hereof, and shall not be subject to any changeor modification except by the execution of a written instrument subscribed toby the parties.

 

12.9                           The provisions of this Agreement areseverable, and in the event that any provisions of this Agreement shall bedetermined to be invalid or unenforceable under any controlling body of thelaw, such invalidity or unenforceability shall not in any way affect the validityor enforceability of the remaining provisions hereof.

 

12.10                     The failure of either party to assert a righthereunder or to insist upon compliance with any term or condition of thisAgreement shall not constitute a waiver of that right or excuse a similarsubsequent failure to perform any such term or condition by the other party.

 

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12.11                     Except as set forth in Section 2.3:this Agreement may not be assigned by LICENSEE without the prior writtenconsent of ACT, which consent shall be granted or denied in ACT’s solediscretion; and this Agreement may not be assigned by ACT without the prior writtenconsent of LICENSEE, which consent shall not be unreasonably withheld ordelayed; provided, however, either party may assign this Agreement to anAFFILIATE or to a successor in connection with the merger, consolidation, orsale of all or substantially all of its assets or that portion of its businessto which this Agreement relates.

 

12.12                     This Agreement has been prepared jointly andno rule of strict construction shall be applied against either party. In thisAgreement, the singular shall include the plural and vice versa and the word “including”shall be deemed to be followed by the phrase “without limitation.” The sectionheadings contained in this Agreement are inserted for convenience only andshall not affect in any way the meaning or interpretation of this Agreement.

 

12.13                     This Agreement may be executed incounterparts, each of which together shall constitute one and the sameAgreement.

 

12.14                     All rights and licenses granted under orpursuant to this Agreement are, and shall otherwise be deemed to be, forpurposes of Paragraph 365(n) of the U.S. Bankruptcy Code, licenses of rights to“intellectual property” as defined under Paragraph 101(35A) of the U.S. BankruptcyCode. The parties agree that LICENSEE, as a licensee of such rights under this Agreement,shall retain and may fully exercise all of its rights and elections under theU.S. Bankruptcy Code. The parties further agree that, in the event of thecommencement of a bankruptcy proceeding by or against ACT including under theU.S. Bankruptcy Code, LICENSEE shall be entitled to a complete duplicate of (orcomplete access to, as appropriate) any such intellectual property and allembodiments of such intellectual property, including the PATENT RIGHTS andKNOW-HOW, and the same, if not already in LICENSEE’s possession, shall be promptlydelivered to LICENSEE upon any such commencement of a bankruptcy proceedingupon written request therefore by LICENSEE.

 

 

*  *  *  *  *

 

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INWITNESS WHEREOF, the parties have duly executed this Agreement the day and yearfirst set forth above.

 

 
| ADVANCED CELL TECHNOLOGY,  INC.                 |
|-------------------------------------------------|
|                                            |
|                                            |
| By:                                             |   /s/ Michael D. West |   |
| Printed Name: Michael D.  West, Ph.D.           |
| Title: President &  Chief Executive Officer |
|                                            |
| MERIAL LIMITED                                  |
|                                            |
|                                            |
| By:                                             |   /s/ Horace D.  Nalle |   |
| Printed Name: Horace D.  Nalle                  |
| Title: Company Secretary                        |
|                                            |
|                                            |
| MERIAL LEGAL                                    |
| /s/ [ILLEGIBLE]                                 |   |
|                                                 |  |  |  |  |

 

**AGREEMENT**

 

Inconsideration of sublicense income received by the University from ACT pursuantto the UMASS LICENSE, the University hereby agrees to be bound by the applicableprovisions of Section 2.3 hereof.

 
| THE UNIVERSITY OF  MASSACHUSETTS |
|----------------------------------|
|                             |
| By:                              |   /s/ William S. Rosenberg |   |
| Printed Name:                    | William S. Rosenberg |
| Title:                           | Executive Director |
|                             | Office of Commercial Ventures |
|                             | and Intellectual Property |
|                                  |  |  |  |

 

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November 15, 2002

 

Advanced Cell Technology, Inc.One Innovation DriveWorcester, MA 01605

 

Merial Limitedc/o Merial LLC3239 Satellite Blvd.Duluth, GA 30096-4640

 

Re:                               Exclusive License Option & Right of FirstNegotiation; Discounted Initial Payment under Non-Exclusive License Agreementdated November 8, 2002; and Services Agreement.

 

This Letter Agreement is to memorialize the agreement between AdvancedCell Technology, Inc., a Delaware corporation with a place of business at OneInnovation Drive, Worcester, Massachusetts 01605 (“AGT”), and Merial Limited, acompany limited by shares registered in England and Wales (registered number3332751) with a registered office at PO Box 327, Sandringham House, SandringhamAvenue, Harlow Business Park, Harlow, Essex CM19 5TG, England, domesticated inDelaware, USA as Merial LLC, and having a place of business at 3239 SatelliteBoulevard, Duluth, Georgia 30096-4640, USA (“Merial”), with respect to thematters discussed herein.

 

**1. Exclusive License Option – NutraceuticalField**. (a) ACT hereby grants to Merial a first option toobtain an exclusive, worldwide license to the patent rights identified in ExhibitA attached hereto (the “ACT Patent Rights”) for use in connection with thedevelopment, use and sale of products in the Nutraceutical Field (the “LicenseOption”) as follows: ACT shall promptly notify Merial in writing of itsintention to enter into a license for the use of the ACT Patent Rights in theNutraceutical Field, and ACT’s notice to Merial shall describe in reasonabledetail the terms of the proposed terms for such license. Merial may exercisethe License Option upon written notice to ACT within ninety (90) days afterMerial’s receipt of ACT’s notice described above. In the event Merial exercisesthe License Option, ACT and Merial shall attempt to enter into a definitivelicense agreement by negotiating in good faith to reach a license agreementcontaining commercially reasonable terms and pricing consistent with relevantindustry standards. If the parties are unable to reach agreement within ninety(90) days after the date upon which Merial exercised the License Option (the “NegotiationPeriod”), then ACT will be free to offer such rights to third parties; *provided, however,*that for aperiod of one (1) year after the Negotiation Period, ACT may only offer suchrights to third parties on terms and pricing which in the aggregate are no morefavorable than those last offered to Merial, unless the more favorable termsand pricing have first been offered in writing to Merial and either (i) Merialhas declined in writing to accept to accept such terms and pricing or (ii)Merial has not responded after a period of thirty (30) days from the date ofsuch offer. Notwithstanding anything to the contrary herein, in the event thatACT receives at any time prior to the expiration of the Negotiation Period anoffer, proposal, or bid from a third party for a license for the use of the ACTPatent Rights in the Nutraceutical Field, then ACT shall disclose promptly toMerial in writing the terms of such offer, proposal, or bid and, further, ACTshall afford Merial the opportunity to make a competing offer, proposal, or bidwithin thirty (30) days of the date of Merial’s receipt of the writtendisclosure of such offer, proposal, or bid.

 

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(b)                                 Forpurposes of this Letter Agreement, “Nutraceutical Field” means the development,making, using, selling, offering to sell or importing of nutraceutical productsthat are composed of, made in or derived, extracted or isolated from clonedanimals, provided, however, that the Nutraceutical Field does not include thecloning of animals for any purpose related to the production ofbiopharmaceutical agents in milk, including but not limited to, proteins,peptides and polypeptides for pharmaceutical, nutraceutical or other use. “Nutraceutical”or “nutraceutical product” means any food or other preparation intended fororal consumption by humans whose primary function, when taken into the humanbody, (a) serves to nourish or build up tissues or supply energy and/or (b)maintains, restores or supports adequate nutritional status or nutritionalmetabolic function and/or has pharmaceutical-like properties to enhance animalhealth and well-being.

 

(c)                                  Notwithstandinganything to the contrary in this Letter Agreement, Merial accepts the License Optionand any license resulting therefrom subject to any outstanding licenses,options to acquire license, or other rights existing in third parties underagreements executed by ACT prior to the date of this Letter Agreement,including without limitation the rights of Newco, a corporation to be formed byRobert Saglio, under the Non-Exclusive License Agreement between ACT and Newcothat is currently being negotiated by ACT and Saglio.

 

(d)                                 Merialacknowledges, understands and agrees that ACT is currently using the ACT PatentRights in connection with research and development directed to the developmentand commercialization of products in the Nutraceutical Field.  Merial further acknowledges, understands andagrees, notwithstanding anything to the contrary contained herein, that fromthe date hereof through the last day of the Negotiation Period ACT may (i)continue such research and development activities and (ii) make, use, sell,offer for sale and import products, or services (but not by way of license orsublicense to third parties) in the Nutraceutical Field that utilize orincorporate the ACT Patent Rights

 

(e)                                  TheLicense Option is effective for a period of six (6) months from the date ofthis Letter Agreement.

 

**2.**                                      **Right of First Negotiation – Supplemental PatentRights**.

 

(a)                                  ACTis currently negotiating with the University of Massachusetts to obtainexclusive rights to the patent rights identified in Exhibit B attachedhereto (the “Supplemental Patent Rights”).

 

(b)                                 ACThereby grants to Merial a right of first negotiation to acquire an exclusivelicense to use the Supplemental Patent Rights to develop, manufacture, use andsell products in the fields of animal health and breeding (the “Right of FirstNegotiation”) as follows: ACT shall notify Merial in writing of its intentionto enter into such an exclusive license. Merial may exercise the Right of FirstNegotiation upon written notice to ACT within ninety (90) days after Merial’sreceipt of ACT’s notice described above. In the event Merial exercises theRight of First Negotiation, ACT and Merial shall attempt to enter into adefinitive license agreement by negotiating in good faith to reach a licenseagreement

 

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containing commercially reasonable terms and pricing consistent withrelevant industry standards. If the parties are unable to reach agreementwithin ninety (90) days after the date upon which Merial exercised the Right ofFirst Negotiation (the “Negotiation Period”), then ACT shall be free to enterinto such exclusive licenses (i.e., the license of the SupplementalPatent Rights for the development, manufacture, use and sale of products in theNutraceutical Field or other fields discussed by the parties), but only onterms more favorable to ACT than were firmly offered by Merial in writingduring the Negotiation Period.

 

(c)                                  Notwithstandinganything in the Letter Agreement to the contrary, Merial accepts the Right of FirstNegotiation and any license resulting therefrom subject to any outstandinglicenses, options to acquire license, or other rights existing in third partiesunder agreements executed by ACT prior to the date of this Letter Agreement,including without limitation the rights of Newco, a corporation to be formed byRobert Saglio, under the Non-Exclusive License Agreement between ACT and Newcothat is currently being negotiated by ACT and Saglio.

 

(d)                                 Merialacknowledges, understands and agrees that ACT is currently using theSupplemental Patent Rights in connection with research and development directedto the development and commercialization of products in the NutraceuticalField.  Merial further acknowledges,understands and agrees, notwithstanding anything to the contrary containedherein, that from the date hereof through the last day of the NegotiationPeriod ACT may (i) continue such research and development activities and (ii)make, use, sell, offer for sale and import products or services (but not by wayof license or sublicense to third parties) in the Nutraceutical Field thatutilize or incorporate the Supplemental Patent Rights.

 

(e)                                  TheRight of First Negotiation shall be effective for a period of six (6) monthsfrom the date ACT and the University enter into an exclusive license agreementfor the Supplemental Patent Rights.

 

**3.****                                      Discounton Initial Payment.** Notwithstanding any terms to the contrary contained in the Non-ExclusiveLicense Agreement, the Initial Payment due to ACT thereunder shall be reduced toOne Hundred and Thirty Five Thousand Dollars ($135,000.00) provided that Merialmakes pays such amount before the close of business on November 15, 2002 bywire transfer to the account designated by ACT.

 

**4.****                                      TechnicalServices**. ACT agrees to provide Merial with technical assistancerelated to use of the license rights granted under the Non-Exclusive LicenseAgreement for a period of two (2) months subsequent to the date of this LetterAgreement (the “Technical Assistance Period”).  ACT shall provide such services through its employee, Don Swiatek, whoshall travel to Merial’s laboratory site(s) as reasonably requested by Merialduring the Technical Assistance Period. In exchange for such technicalservices, Merial’s shall reimburse ACT for expenses at the rate of Two HundredDollars ($200) per day plus reasonable travel expenses of Mr. Swiatek.  In the event Mr. Swiatek becomes unavailablefor any reason, including termination of his employment with ACT, then ACTshall make all reasonable efforts to provide Merial with adequate technicalassistance during the Technical

 

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Assistance Period, including but not limited to the engagement of Mr.Swiatek as an independent contractor retained by ACT. At all times in renderingTechnical Assistance, Mr. Swiatek or ACT’s alternate designee shall be anemployee or agent of ACT and not an employee or agent of Merial. Therelationship between ACT and Mr. Swiatek or ACT’s alternate designee on the onehand and Merial on the otherhand shall be that of an independent contractor, and nothing herein shall bedeemed to constitute either party as the agent or representative of the otheror both parties as joint venturers or partners for any purpose. Each partyshall be an independent contractor, not an employee or partner of the other.With respect to confidentiality, ACT shall make all reasonable efforts tosecure Mr. Swiatek’s written agreement to a confidentiality agreement in favorof Merial on substantially the same terms in Merial’s favor as theConfidentiality provisions of the Non-Exclusive License.

 

**5.****                                      Termination.**    (a) Merial may terminate this LetterAgreement by giving 30 days written notice to ACT.

 

(b)                                 ACTmay terminate this Letter Agreement upon 30 days written notice to Merial ifMerial breaches or defaults on its payments obligations under the Non-ExclusiveLicense Agreement between ACT and Merial, unless, before the end of the 30 dayperiod, Merial has cured the breach or default to the satisfaction of ACT andso notifies ACT in writing, stating the manner of the cure.

 

**6.****                                     ****Miscellaneous****.**    (a)   IN NO EVENT SHALL EITHERPARTY, ITS DIRECTORS, OFFICERS, EMPLOYEES OR AFFILIATES BE LIABLE FOR INDIRECT,INCIDENTAL OR CONSEQUENTIAL DAMAGES  OFANY KIND, INCLUDING ECONOMIC DAMAGE OR INJURY TO PROPERTY AND LOST PROFITS,ARISING OUT OF THIS LETTER AGREEMENT, REGARDLESS OF WHETHER A PARTY SHALL BEADVISED, SHALL HAVE OTHER REASONTO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF SUCH DAMAGES.

 

(b)                               NEITHER ACT NOR ITS DIRECTORS, OFFICERS,EMPLOYEES, AND AFFILIATES, MAKES ANY REPRESENTATIONS AND EXTENDS NO WARRANTIESOF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIESOF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE ACT PATENT RIGHTS AND THE SUPPLEMENTAL PATENTRIGHTS.

 

(c)                                  Nothingherein contained shall be deemed to grant Merial any rights or licensesincluding, but not limited to, any rights or licenses under the ACT PatentRights or the Supplemental Patent Rights.

 

(d)                                 The terms and conditions of this LetterAgreement are confidential and shall not be disclosed, orally or in writing byeither party to any third party without the prior written consent of the other party.Each party agrees that it will not use the name of the other party or any ofsuch party’s officers, directors, employees or agents in any promotionalmaterial or other public announcement or disclosure without the prior writtenconsent of the other party.   Any pressrelease relating to this Agreement may be released only upon the prior writtenapproval of both parties as to content, accuracy, and timing.

 

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(e)                                  ThisLetter Agreement constitutes the entire and only agreement between the partiesrelating to the matters addressed expressly herein, and all prior negotiations,representations, agreements and understandings (whether oral or written) aresuperseded hereby. No agreements altering or supplementing the terms hereof maybe made except by written mutual agreement by the parties. This**LetterAgreement shall be deemed executed simultaneously with the execution of theNon-Exclusive License Agreement.

 

(f)                                    The provisions of this Letter Agreement areseverable, and in the event any provision hereof is determined to be invalid orunenforceable, such invalidity or unenforceability shall not in any way affectthe validity or enforceability of the remaining provisions hereof.

 

(g)                                 Nothingin this Letter Agreement shall be deemed to constitute, create, give effect toor otherwise recognize a partnership, joint venture or formal business entityof any kind or create a fiduciary or similar relationship between ACT andMerial; and the rights and obligations of ACT and Merial shall be limited tothose expressly set forth herein.

 

(h)                                 ACTrepresents, warrants, and covenants that the execution and performance of thisLetter Agreement will not violate, contravene, or conflict with any otheragreement to which ACT is a party or by which it is bound or with any law, ruleor regulation applicable to ACT.

 

(i)                                     This Letter Agreement and the License Optionand Right of First Negotiation may not be assigned by Merial without the priorwritten consent of ACT, which consent may be granted or denied in ACT’s solediscretion.

 

(j)                                   Any delay in enforcing a party’s right underthis Letter Agreement or any waiver as to a particular default or other matterwill not constitute a waiver of such party’s rights to the future enforcementof its rights under this Agreement, except only as to an express written andsigned waiver to a specific matter for a specific period of time.

 

(k)                               Any notice required by this Letter Agreementwill be given by personal delivery (including delivery by reputable overnightdelivery services such as Federal Express) or by prepaid, first class,certified mail, return receipt requested, addressed in the case of ACT to:

 

AdvancedCell Technology, Inc.

OneInnovation Drive

Worcester,MA 01605

USA

Attention:Michael D. West, Ph.D., President

 

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orin the case of Merial to:

 

MerialLLC3239 Satellite Blvd.Duluth, GA 30096-4640USA
| Attention: | Legal Department/W. Joseph  Thesing, Jr. |
|------------|------------------------------------------|
|       | General Counsel, North  America          |

 

or at such other addresses as may be given from time to time inaccordance with the terms of this notice provision.

 

(l)  This Letter Agreement will be governed by, construed, andenforced in accordance with the laws of the Commonwealth of Massachusetts,without regard to principles of conflicts of law.

 

(m) This Letter Agreement may be executed in counterparts, each ofwhich together shall constitute one and the same agreement.

 

IN WITNESS WHEREOF, the parties have executed this Letter Agreementeffective as of the 8th day of November, 2002.

 
| ADVANCED CELL TECHNOLOGY,  INC. | MERIAL LIMITED                     |
|---------------------------------|------------------------------------|
|                            |                               |
|                            |                               |
| By:                             |   /s/ Michael  West      |   | BY: |   /s/ Horace D.  Nalle |   |
| Printed Name: MICHAEL WEST      | Printed Name: Horace D.  Nalle     |
| Its:  PRESIDENT       | Its:  Company  Secretary |
|                            |                               |
|                            |                               |
|                            |                               | MERIAL LEGAL |   |
|                            |                               |   | /s/ [ILLEGIBLE] |   |
|                                 |                                    |  |  |  |  |  |  |  |

 

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