Document:

Exhibit 10.13.1

 

LETTER OF INTENT BY AND BETWEEN
EXETER LIFE SCIENCES,

INC. AND ADVANCED CELL TECHNOLOGY, INC.

 

This letter, dated March 16, 2003, confirms the
intention of Exeter Life Sciences, an Arizona corporation (referred to herein
as either “Exeter” or “Buyer”), to acquire all of the outstanding shares of
capital stock of Advanced Cell Technology, Inc. (“ACT”), (the “Acquisition”).  For purposes hereof, the term “Sellers” shall
mean the persons or entities selling their shares of capital stock of ACT as
contemplated herein.  This letter merely
states the intentions of the parties and does not create any legal obligations
except for the provisions of paragraphs 8 through 17 hereof.  Consummation of the Acquisition contemplated
hereby is subject in all respects to Buyer’s and ACT’s review of the legal, tax
and accounting issues associated with this transaction and the execution and
delivery of a definitive agreement (“Definitive Agreement”) and satisfaction of
the other conditions specified below.

 

The intended principal terms of the acquisition are
as follows:

 

1.               Outline of Basic Transaction.  Buyer intends to acquire all of the shares of
capital stock of ACT (the “Acquired Stock”), all of which Acquired Stock is
owned beneficially and of record by the owners of 100% of the outstanding
common and preferred stock of ACT (hereinafter the “Sellers”) as set forth on Schedule 1.  The parties intend that the Acquisition will
be accomplished using the following structure:

 

•                  Exeter
and ACT will merge, with Exeter as the surviving company (the “Exeter/ACT
Merger”).  All of the Acquired Stock will
be converted into shares of Exeter Series T Preferred Stock at a
conversion ratio to be determined based upon the relative value of shares of
ACT and Exeter, determined on a fully diluted basis, assuming an equity value
of $10 million for ACT and $143.8 million for Exeter (the “Conversion Ratio”).

 

2.                                                               Exeter/ACT Merger Consideration.  At
the closing of the Exeter/ACT Merger, (a) all outstanding shares of Common
Stock of ACT will be converted into Exeter Series T Preferred Stock at the
Conversion Ratio; and (b) all issued employee stock options of ACT will be
reissued under the Exeter Employee Stock Option Plan (“Exeter ESOP”) at the
Conversion Ratio, with a new option price determined by multiplying the current
option price by the multiplier determined by the Conversion Ratio.  In addition, at the closing of the Exeter/ACT
Merger, Exeter will assume all outstanding debt obligations of ACT (as set
forth on Schedule 2), and all matured debt, plus interest, if any, will be
paid in full at the closing.  Prior to
closing all options to acquire ACT stock held by ACT Group, Inc. shall be
exercised by ACT Group, Inc. on a cashless exercise basis, meaning that the
stated exercise price shall be paid through surrender of options representing
shares with a value equal to the exercise price applying ACT’s implied equity
value in the merger.

 

 

3.                                       Stock Conversion.

 

At the time of a liquidity event of ACT (to be
defined in the Definitive Agreement), all Holders of Exeter Series T
Preferred Stock will convert these shares into shares of ACT at a conversion
ratio to be determined by the Board of Exeter based upon the relationship
between the implied equity value of ACT in the liquidity event and the equity
value of Exeter, excluding any value associated with ACT.  At the time of a liquidity event of the entire
Exeter organization, the present ACT shareholders will be afforded the
opportunity to participate in the liquidity event in a manner not less
favorable than all other Exeter shareholders.  In the event of a liquidity event with a non-ACT
subsidiary of Exeter, the present ACT shareholders will be afforded the
opportunity to participate in the liquidity event through the ability to convert
their Exeter shares into shares of the non-ACT subsidiary on a basis to be
negotiated with the investment bankers at the time of the transaction, but in
no event upon terms less favorable than shareholders in the non-ACT
subsidiaries of Exeter.  A liquidity
event is a (i) registered offering, (ii) sale of a significant
subsidiary or substantially all the assets of Exeter (excluding the
contemplated sale of Kronos Science to Blue Horse Labs) or (iii) a private
placement by Exeter that would create value to any class or series of stock in
Exeter.  The term liquidity event specifically
excludes a sale by a shareholder of any or all of their holdings for personal
reasons.

 

4.                                       Primary Conditions to the
Acquisition.  The completion of the Acquisition will be subject
to the following conditions:

 

a.                                       A
Definitive Agreement, in a form acceptable to the parties and their respective
counsel, and any related agreements contemplated hereby or thereby, shall have
been approved by the Board of Directors of Buyer and the Board of Directors of
Seller, and shall have been executed by all parties.  

 

b.             Except as otherwise approved by
Buyer, there shall not have been any material adverse change in the operations
or business (financial or otherwise) of ACT.

 

c.                                       There
shall not be any pending or threatened litigation regarding the transactions
contemplated hereby or against ACT or ACT Group or any subsidiary.

 

d.                                      Prior
to the execution of the Definitive Agreement, anticipated to be within sixty
(60) days of the date hereof, Buyer shall have completed to its satisfaction
its due diligence review of ACT, including a review of the intellectual
property, legal, tax and accounting issues implicated by the transaction
contemplated herein.

 

e.                                       Prior
to the closing of the Acquisition, ACT will buy out the debt instruments held
by Anthem/CIC Venture Partners and Gary Aronson, or secure the right for Exeter
to purchase those debt instruments from the current holders at or prior to the
closing.

 

 

f.                                         Prior to the closing of the Acquisition, the
Board of ACT Group shall approve a plan of dissolution whereby it will cease
all operations and make a liquidating distribution to the members of its
capital structure in order of the priority of their interests in ACT Group.

 

5.                                       Definitive Agreement and Closing.  The
Definitive Agreement will contain customary representations, warranties,
covenants and indemnities of ACT and Buyer.  The parties shall use best efforts to
consummate the transactions contemplated hereby on or before May 31, 2003.  If the Acquisition is not closed by June 30,
2003, then either party may terminate the transaction.

 

6.                                       Employment of Key Staff.  For
the purposes of this paragraph, Key Staff shall be defined as Michael West,
Gunnar Engstrom and Robert Lanza.  Buyer
and ACT shall negotiate and accept offers of employment with the Key Staff
prior to the execution of the Definitive Agreement.  Such Key Staff and other staff shall renounce
their existing employment agreements with ACT prior to the execution of the
Definitive Agreement.

 

An option pool of 20% of the fully diluted equity of
ACT shall be established and allocated among Key Staff and other current
employees of ACT, as agreed to by Buyer and ACT prior to the execution of the
Definitive Agreement.

 

7.                                       Board Representation.  For
a minimum period of three (3) years following the Closing, the Surviving
Company will allow a representative from ACT to sit on Exeter’s Board of
Directors.  The ACT representative will
be subject to an annual review and reappointment at Exeter’s reasonable
discretion.  In the event ACT’s
representative is removed from Exeter’s Board or not reappointed after an
annual review, ACT may appoint a new representative to fill this position,
subject to the same annual review and reappointment process as set forth in the
previous sentence.  Recusal or other
appropriate measures may be sought against the ACT representative in areas of
actual or potential “conflicts of interest.” 
For purposes of this Section, “conflicts of interest” shall consist of
the ACT representative on Exeter’s Board or any immediate family member having
a “material financial interest” in a competitor of Exeter or any Exeter
subsidiary, or any material involvement, whether as a director, officer,
employee, promoter or consultant, with an enterprise that (a) is a
competitor of Exeter or any Exeter subsidiary, (b) has business dealings
with Exeter or any Exeter subsidiary in which the representative or family
member participates or is able to exert influence, or (c) operates in a
manner that reflects adversely upon Exeter or any Exeter subsidiary.  In addition to the Exeter Board, ACT will be
allowed one representative to sit on ACT’s Board of Directors under similar
terms and conditions as outlined above for Exeter’s Board.

 

                For
purposes of this Section, the following shall not constitute a “material
financial interest”: (i) being or becoming a passive investor in any fund
or any privately or publicly owned competitor so long as the ACT representative
on Exeter’s Board or any immediate family member does not hold or assume a
management position therein; (ii) making any non-directed blind
investment; or (iii) serving in any otherwise proscribed capacity or
taking

 

 

any
otherwise proscribed action with respect to a competitor where its competing
activity does not constitute and does not propose to constitute a significant
line of business.

 

8.                                       Conduct of Business.  During
the period from the date hereof to the earlier of the termination of this
letter of intent in accordance with its terms or the execution and delivery of
the Definitive Agreement, ACT shall:

 

a.                                       conduct its business in the same manner as it
has been regularly conducted including maintaining all contracts and permits in
full force and effect;

 

b.                                      use its best efforts to preserve the assets
and associated interests and to maintain its business and employees, sales
representatives, customers, assets, suppliers, licenses and operations in
accordance with past custom and practice;

 

c.                                       use its best efforts to satisfy each of the
closing conditions contained herein and to consummate the transactions
contemplated hereby;

 

d.                                      not enter into any transaction other than in
the ordinary course of business, nor any transaction with affiliated persons or
entities, other than as contemplated in the Definitive Agreement or as required
to allow maturing loans to roll over until completion of the Acquisition; and

 

e.                                       not (i) redeem or repurchase any stock, (ii) issue
additional stock, stock options (except where approved by Buyer for the
Scientific Advisory Board), or warrants (except those necessary to allow
maturing loans to roll over until completion of the Acquisition), (iii) incur
any debt except in the ordinary course of business consistent with past
practices, (iv) make any loans, or (v) increase the compensation,
incentive arrangements or other benefits of any employee other than in the
ordinary course of business consistent with past practices, without prior
consent of Buyer.

 

9.                                       Representations of ACT and Buyer.  ACT
represents and warrants to Buyer that: (a) it has the power and authority
to execute and deliver this letter of intent, (b) the execution and
delivery of this letter of intent does not breach or violate any commitment or
obligation to which it is bound, and (c) all of the Sellers set forth on Schedule 1
own 100% of the capital stock of ACT, free and clear of any claims, liens or
encumbrances whatsoever.  Buyer
represents and warrants to Sellers that: (a) it has the power and
authority to execute and deliver this letter of intent; and (b) the
execution and delivery of this letter of intent does not breach or violate any
commitment or obligation to which it is bound.

 

10.                                 Available Information.  Unless and until this letter
is terminated, ACT shall make available to Buyer, and permit complete access to
Buyer, its attorneys, accountants, representatives, advisors and other agents,
all records, books of account, documents and information of ACT so that Buyer
may conduct a complete due diligence review and may investigate any and all
aspects of the business, assets, prospects and financial condition.  Further,

 

 

they
shall cooperate with Buyer in communicating with all relevant third parties in
connection with such review.

 

11.                                 All Information Confidential.  Except
as otherwise required by law, all proprietary information concerning a party
provided to the other party (oral, written or otherwise), including all
documents and copies of documents or papers containing proprietary information
(“Evaluation Information”) will be kept in confidence by the receiving party.  The party receiving such Evaluation
Information will take reasonable steps necessary to ensure the confidentiality
of the Evaluation Information by itself, its employees, agents, consultants,
advisors and affiliates.  Evaluation
Information does not include information that (i) is or becomes generally
available to the public other than as a result of an unauthorized disclosure by
the receiving party or its affiliates or representatives; (ii) was within
or comes into the receiving party’s possession, provided that the source of
such information was not known by the receiving party to be bound by a
confidentiality agreement with, or other contractual, legal, or fiduciary
obligation of confidentiality to the party providing the information; (iii) is
disclosed by the receiving party to others with the consent of the other party;
or (iv) is independently developed by the receiving party.  The foregoing shall in no way limit, negate or
restrict the terms and provisions of the Mutual Confidentiality Agreement
between the parties hereto dated February 4, 2003, and in the event of
conflict, the Mutual Confidentiality Agreement shall control.

 

12.                                 Fees.  Each party shall bear their own legal and
accounting fees and other expenses relating to this transaction, including any
finder or broker acting on their behalf.

 

13.                                 Exclusivity.  Buyer shall, contemporaneously with the
execution of this Agreement, pay Seller $200,000 in return for Seller’s
agreement that, prior to the termination or expiration of this Letter of
Intent, neither ACT nor any of its affiliates or representatives will
negotiate, solicit or encourage in any way (including by way of furnishing any
non-public information concerning the business, properties or assets) the
possible sale to any other person or entity of all or a material portion of the
business or assets of ACT (whether by sale of assets, merger, or sale of stock
or other business combination), other than sales of inventory or immaterial
portions of its assets in the ordinary course.  ACT shall promptly notify Buyer if it is
approached by any person interested in acquiring its assets or capital stock.  If Exeter decides not to proceed with the
transactions contemplated in this Letter of Intent, then ACT will issue in Exeter’s
behalf capital stock of ACT at $1.14 per share to Exeter, to be issued credited
as fully paid.

 

13.                                 Publicity.  The parties hereto agree that neither party
will issue any press release concerning the subject of this letter of intent or
otherwise disclose the same to any person (except its officers, employees,
agents, and advisors having a need to know in order to effect the transaction
contemplated hereby) unless mutually agreed.

 

15.                                 Termination.  The provisions of Paragraphs 11, 12 and 13
hereof will survive any termination of this letter on the terms set forth
therein.

 

 

16.                                 Governing Law.  This letter shall be governed by and
construed in accordance with the internal laws of the State of Arizona, without
regard to conflict of laws principles.

 

17.                                 Counterparts.  This letter may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.  One or more counterparts of this letter may be
delivered via facsimile with the intention that they shall have the same effect
as an original executed counterpart hereof.

 

18.                                 Entire Agreement.  This letter constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.  Any previous letter
of agreement (with the exception of the Convertible Bridge Note) among the
parties relative to the specific subject matter hereof is superseded by this
letter.

 

 

	
   

  	
  Exeter Life Sciences, Inc.,

  an Arizona corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Jonathan Thatcher

  	
   

  
	
   

  	
  By:

  	
  Jonathan Thatcher

  
	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  
	
   

  	
  Advanced Cell Technology, Inc.

  A Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Michael West

  	
   

  
	
   

  	
  By:

  	
  Michael West

  	
   

  
	
   

  	
  Its:

  	
  President

  	
   

  
	
   

  	
   

  	
  3-16-03

  

 

 

Schedule 1

 

List of Sellers

 

	
  Seller

  	
   

  	
  Number of Shares

  	
   

  
	
  ACT Group, Inc.

  	
   

  	
  6,811,146

  	
   

  
	
  Avian Farms, Inc.

  	
   

  	
  1,060,000

  	
   

  
	
  University
  of Massachusetts*

  	
   

  	
  357,263

  	
   

  
	
  Wendy Ingles

  	
   

  	
  1,474

  	
   

  
	
  James Robl

  	
   

  	
  96,000

  	
   

  

 

*In the context of a new license, ACT and UMass
have agreed to issue to UMass an additional 73,263 shares.  This transaction has not been consummated and
is not reflected in the above numbers.

 

 

Schedule 2

 

List of Debt Obligations

 

	
  Accounts
  Payable

  	
   

  	
  $

  	
  1,531,510.92

  	
   

  
	
  Accrued
  Payroll & Benefit

  	
   

  	
  $

  	
  231,294.46

  	
   

  
	
  Related
  Party Notes SOMA

  	
   

  	
  $

  	
  15,000

  	
   

  
	
  Interest
  Payable SOMA

  	
   

  	
  $

  	
  2505.89

  	
   

  
	
  Note Payable
  ACT Group

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  Interest
  Payable ACT Group

  	
   

  	
  $

  	
  56,876.70

  	
   

  
	
  Total

  	
   

  	
  $

  	
  2,837,187.97Exhibit 10.13.2

 

SPONSORED RESEARCH AGREEMENT

 

THIS SPONSORED RESEARCH
AND LICENSING AGREEMENT (“Agreement”) is made this 16th day of
March, 2003, by and between Blue Horse Labs, Inc. (“Blue Horse,”) and
Advanced Cell Technology; Inc. (“Contractor”).

 

Blue
Horse desires to have certain research conducted as set forth in the research
protocol attached hereto as Exhibit A (“Research”); and

 

Contractor
desires to conduct this research for Blue Horse and to subsequently
commercialize the results of the research where Blue Horse so requests;

 

NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

 

Agreement

 

1.             Funding.
 Blue Horse will pay Contractor the
amount and according to the schedule and terms as set forth on the
attached Exhibit B.

 

2.             Progress
Reports.  Contractor shall provide
written progress reports concerning the conduct and results of the Research as
requested by Blue Horse, in any event no more frequently than once per calendar
quarter.  Where such request is made,
reports shall be forwarded within thirty (30) calendar days of such request.

 

3.             Conduct
of Research.  Contractor agrees to
use its commercially reasonable best efforts to conduct the Research as set
forth and described on Exhibit A attached hereto.

 

4.             Intellectual
Property.  “Intellectual Property”
shall mean all inventions, discoveries, know-how, technical information, works
of authorship, improvements and other information, together with all patent
rights, trade secret rights, copyright rights and other intellectual property
and proprietary rights therein, hereunder and thereto, which are or were
conceived (whether or not reduced to practice), invented, created and/or made (i) by
employees of Contractor, (ii) jointly by at least one employee or
consultant of Contractor and at least one employee or consultant of Blue Horse
or Blue Horse affiliates, if any, or (iii) by consultants to Contractor,
if any, in all such cases (i), (ii) and/or (iii) in the course of
performance of the Research hereunder.

 

5.             Ownership
of Intellectual Property.  In
consideration of the research support set out above and other good and valuable
consideration.  Contractor hereby assigns
to Blue Horse all of its rights to all Intellectual Property resulting, or
arising from or in connection with, the performance of the Research hereunder,
including all patents and patent applications.

 

6.             Disclosure
and Protection of Intellectual Property.  Contractor hereby agrees that it will promptly
disclose to Blue Horse all material and potentially parentable Intellectual

 

1

 

Property, and that, upon
request, authorized officials of Contractor will execute and deliver any and
all documents or instruments and take any other action which Blue Horse shall
reasonably deem necessary to transfer and vest the rights and licenses granted
hereunder, to perfect copyright and patent protection with respect to, or to
protect Blue Horse’s interest in, any rights, title and interests in and to
such Intellectual Property.  Blue Horse
shall have the sole right to prepare, file, prosecute and maintain, at its own
expenses, by counsel of its choice, any U.S. and foreign patent applications
covering inventions within the Intellectual Property.  Contractor shall cooperate with Blue Horse in
connection with the filing, prosecution and maintenance of such patents and
patent applications.  Contractor
specifically agrees to execute all documents, to ensure the cooperation of its
employees and independent contractors, and take any other reasonable actions
necessary to assist Blue Horse in filing, prosecuting and maintaining such
patents and patent applications in the U.S. Patent and Trademark Office and in
applicable foreign patent offices.  The
obligations of this section shall continue beyond the termination of this
agreement with respect to such Intellectual Property and shall be binding upon
the successors and assigns of Contractor. 
Blue Horse agrees to pay all copyright and patent fees and expenses
incurred by the Contractor for any assistance rendered pursuant to the
foregoing.

 

7.             License.
 Blue Horse hereby grants, and agrees to
grant, to Contractor an exclusive, worldwide license, with unlimited rights to
sublicense, to all rights in, to and under the Intellectual Property, including
the right to make, use, sell, offer to sell, import and otherwise practice and
exploit products, processes and services, subject to the Net Sales Minimums set
forth in Exhibit B.  In return for
this license, Contractor shall pay royalties to Blue Horse as set forth in Exhibit B
on all Net Sales of Licensed Products and Net Royalty Revenue.  Net Royalty Revenue shall mean revenue
received from sublicenses of any patent rights within the Intellectual Property
licensed to Contractor hereunder.  The
foregoing royalty obligation shall last from the date hereof until the date the
last remaining patent within the Intellectual Property has expired, is
abandoned or is invalidated.  For
purposes of this Agreement “Net Sales” shall mean the gross amount billed or
invoiced by Contractor for the sale or other disposition of Licensed Products,
less the following deductions: (a) discounts, chargebacks, allowances for
bad debts or uncollectible amounts, Medicaid/Medicare rebates (other than as
described in (d) below) and allowances actually taken; (b) sales,
use, value added and excise taxes, import and custom duties, tariffs, and any
other similar taxes, duties or tariffs, to the extent actually paid by the
selling party; (c) freight, insurance, packaging costs and other
transportation charges to the extent added to the sales price; and (d) amounts
repaid or credits taken by reason of rejections, defects or returns or because
of retroactive price reductions or due to recalls or government laws or
regulations requiring rebates. “Licensed Product” shall mean any product,
device, or procedure, the manufacture, use or sale of which would infringe a
valid claim of any issued, unexpired patent within the intellectual Property
(which patent has not been invalidated) in the country of such manufacture, use
or sale, but for the license granted herein.

 

8.             Net
Sales Minimums.  Contractor shall use
its commercially reasonable best efforts to commercialize the Intellectual
Property as set forth in Exhibit B.  Where one or more commercialization provisions
of Exhibit B are not met, it shall be deemed a material default under
paragraph 16.

 

2

 

9.             Royalty
Payments and Reporting.  On or before
the forty-fifth (45th) day following the end of each fiscal quarter, Contractor
shall submit to Blue Horse full and accurate statements showing the quantity,
description and Net Sales of any Licensed Products distributed and/or sold
during the preceding fiscal quarter and the amount of any sublicense revenue
received by Contractor during such fiscal quarter (together with the
calculation of Net Sales, net sublicense revenue and corresponding royalties
owned hereunder), including any additional information kept in the ordinary
course of business by Contractor.  All
payments for royalties with respect to such fiscal quarter and statement shall
be made by Contractor to Blue Horse simultaneously with the submission of the
statements.  Such quarterly statements
shall be submitted only when they reflect any amounts due hereunder.  Contractor shall inform Blue Horse within
thirty (30) days of the first sale of License Products and the first receipt of
net sublicense revenue.  In addition,
Contractor will provide Blue Horse with its audited financial statement within
one hundred eighty (180) days of the end of Contractor’s fiscal year provided,
however, that Contractor shall not be required to deliver audited financial
statements until such time as there are Net Sales or net sublicense revenue
hereunder.

 

10.           Duty
to Maintain Blue Horse Rights.  Where
Contractor subcontracts any part of the conduct of the Research, Contractor
shall require the subcontractor to perform subcontractor’s duties under the
same requirements as those set forth for Contractor under this Agreement.

 

11.           Infringement.
 In the event a party to this Agreement
acquires information that a third party is infringing one or more of the
patents within the Intellectual Property, the party acquiring such information
shall promptly notify the other party to the Agreement in writing of such
infringement.

 

In the event of an
infringement of an Intellectual Property patent Contractor shall have an
exclusive right (but not the obligation) to bring suit against the infringer
for a period of six (6) months after acquiring information that a third
party is infringing.  Should Contractor
elect to bring suit against an infringer and Blue Horse is joined as a party
plaintiff in any such suit, Blue Horse shall have the right to approve the
counsel selected by Contractor to represent Contractor and Blue Horse, which
approval shall not be unreasonably withheld.  The expenses of such suit or suits that
Contractor elects to bring, including any reasonable out-of-pocket expenses of
Blue Horse incurred in conjunction with the prosecution of such suit or the
settlement thereof, shall be paid for entirely by Contractor and Contractor
shall hold Blue Horse free, clear and harmless from and against any and all
costs of such litigation, including attorneys’ fees.  In the event Contractor exercises the right to
sue herein conferred, it shall have the right to first reimburse itself out of
any sums actually recovered in such suit or in settlement thereof for all costs
and expenses of every kind and character, including attorneys’ fees,
necessarily involved in the prosecution of any such suit, and if after such
reimbursement, any funds shall remain from said recovery, Contractor shall
promptly pay to Blue Horse a percentage of such remainder according to the
Infringement Recovery

 

3

 

Percentage set forth in
Exhibit B, and Contractor shall be entitled to receive and retain the balance
of the remainder of such recovery.

 

In the event Contractor
does not bring suit by the end of the six (6) month period described
above, Blue Horse shall have the right (but not the obligation) to bring suit,
after written notice to Contractor of its intention.  If Contractor is joined as a party plaintiff
in any such suit, Contractor shall have the right to approve the counsel
selected by Blue Horse to represent Blue Horse and Contractor, which approval
shall not be unreasonably withheld.  The
expense of such suit or suits that Blue Horse elects to bring, including any reasonable
out-of-pocket expenses of Contractor incurred in conjunction with the
prosecution of such suit or the settlement thereof, shall be paid for entirely
by Blue Horse and Blue Horse shall hold Contractor free, clear and harmless
from and against any and all costs of such litigation, including attorneys'
fees.  In the event Blue Horse exercises
the right to sue herein conferred, it shall have the right to first reimburse
itself out of any sums actually recovered in such suit or in settlement thereof
for all costs and expenses of every kind and character, including attorneys’
fees, necessarily involved in the prosecution of any such suit, and if after
such reimbursement, any funds shall remain from said recovery, Blue Horse shall
pay Contractor a percentage of such remainder according to the infringement
Recovery Percentage set forth in Exhibit B, and Blue Horse shall be
entitled to receive and retain the balance of the remainder of such recovery.

 

12.           Indemnification.  Each Party shall indemnify and hold harmless
the other, its parent, subsidiaries, affiliates, successors, assigns,
employees, officers, directors, agents, or subcontractors from and against any
and all suits, claims, losses, forfeitures, demands, fees, damages,
liabilities, costs, expenses, obligations, proceedings, or injuries, of any
kind or nature, including reasonable attorney’s fees which that Party may
hereafter incur, become responsible for, or pay out as a result of death or
personal injury (including bodily injury) to any person, destruction or damage
to any property, contamination of or adverse effects on the environment, or
violation of governmental law, regulation, or orders, arising out of or
connected with the other Party’s breach of any term or provision of this
Agreement or any negligent act or omission or willful misconduct of the other
Party, its agents, employees or subcontractors in the course of performing this
Agreement.

 

13.           Legal
Matters.  This Agreement shall be
governed in all respects by the laws of the State of Arizona (without reference
to or application of its conflicts of laws rules or principles) and the
United States of America.  Each of the
Parties irrevocably consents to the exclusive personal jurisdiction of the
federal and state courts located in Arizona, as applicable, for any matter
arising out of or relating to this Agreement, except that in actions seeking to
enforce any order or any judgment of such federal or state courts located in
Arizona, such personal jurisdiction shall be nonexclusive.  If any dispute arises between the Parties with
respect to this Agreement which leads to a proceeding to resolve such dispute,
the prevailing Party shall be entitled to receive reasonable attorneys’ fees,
expert witness fees and out-of-pocket costs incurred in such proceeding, in
addition to any other relief.

 

Notwithstanding the
foregoing, the Parties agree that prior to initiating any legal proceedings
against the other, the Parties will engage a neutral mediator who will be
charged with

 

4

 

assisting the parties to
reach a mutually agreeable resolution of all contested matters.  The mediation shall take place in Arizona.  The mediator shall be chosen by mutual
agreement of the Parties and the mediator’s fees shall be borne equally by the
Parties.  In the event that a mediator
cannot be agreed upon by the Parties, each Party shall chose a mediator and the
two mediators shall together chose a third mediator who will conduct the
mediation.  The costs of the two
mediators chosen to choose the third mediator shall be borne equally by the
Parties.  The Parties agree to
participate in the mediation in good faith.

 

14.           Publicity.  Neither party may use each other’s names or
that of any affiliates, officers or employees in any public announcement,
advertising, promotional, or sales literature without the prior written consent
of the named party.

 

15.           Headings.  The descriptive headings contained in this
Agreement are included for convenience and reference only and shall not be held
to expand, modify or aid in the interpretation, construction or meaning of this
Agreement.

 

16.           Term/Termination.  This Agreement may be terminated by either
party immediately by written notice upon the occurrence of any of the following
events: (i) if the other ceases to do business, or otherwise terminates
its business; (ii) if the other breaches any material provision of this
Agreement and fails to fully cure such breach within forty-five (45) days’ of written
notice describing the breach; or (iii) if the other seeks protection under
any bankruptcy, receivership, trust, deed, creditor’s arrangement, or
comparable proceeding, or if any such proceeding is instituted against the
other and not dismissed within forty-five (45) days.  Upon termination or expiration of this
Agreement, all rights and licenses of Contractor hereunder shall terminate.

 

Notwithstanding the
foregoing, where Contractor receives notice that Blue Horse is terminating this
Agreement according to the provisions of section 16(i), Contractor shall
have thirty (30) days in which to exercise a first right of refusal to purchase
all of Blue Horse’s rights in and to this Agreement.  Contractor may exercise this right by
notifying Blue Horse in writing of its election (“Notice of Election”).  Where no Notice of Election has been received
by Blue Horse within the time set forth herein.  Contractor shall have waived its purchase
rights.  The purchase price of Blue Horse’s
rights herein shall be the fair market value of the underlying Intellectual
Property as determined by averaging the appraised value of the intellectual
property proposed to be purchased as determined in good faith by an appraiser
retained by Blue Horse and an appraiser retained by Contractor.  The party who hires the appraiser shall pay
that appraiser.  The payment of fair
market value and documentation of any resulting assignment shall occur within
ninety (90) days of Contractor’s Notice of Election unless mutually agreed in
writing by the parties.  Where Contractor
elects not to purchase Blue Horse’s rights herein, and any rights of Blue Horse
in this Agreement or the underlying Intellectual Property are transferred to a
third party as a result of the termination or cessation of business of Blue
Horse, this Agreement shall not terminate and the successor in interest to Blue
Horse shall automatically succeed to all Blue Horse’s rights and obligations
hereunder without change in the terms or other provisions of this Agreement.

 

5

 

If Contractor is declared
insolvent or is subject to liquidation in bankruptcy, all rights granted to
Contractor herein shall revert to Blue Horse exclusively and Contractor’s
bankruptcy estate shall have no right or claim to any Intellectual Property or
other assets funded by Blue Horse.  All
Contractor obligations related to the Intellectual Property shall survive any
expiration or termination of this Agreement.  Notwithstanding the foregoing, Contractor may,
by written notice to Blue Horse, terminate the licenses in, to and under the
Intellectual Property granted to it hereunder, or any portion thereof, and all
corresponding royalty obligations shall thereupon terminate as well.  All other provisions that logically ought to
survive termination or expiration of this Agreement, as well as any obligations
that have accrued prior to termination or expiration, shall survive.

 

17.           Confidentiality.
 The Parties hereto have executed a
mutual confidentiality agreement attached as Exhibit C hereto which shall
be considered a part of this Agreement.

 

18.           Disclaimer
of Warranty.  EXCEPT AS EXPRESSLY
PROVIDED FOR IN THIS AGREEMENT, NEITHER PARTY MAKES, AND EACH PARTY HEREBY
DISCLAIMS, ANY AND ALL REPRESENTATIONS AND WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING
WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE AND NON-INFRINGEMENT.

 

19.           Assignment.
 This Agreement and the rights and
privileges thereof are not assignable or otherwise transferable by either party
without the express written consent of the other party, provided however that
either party may assign this agreement to a successor in connection with a
merger, acquisition or sale of the substantially all the business related to
the subject matter of this agreement.

 

20.           Notices.
 All notices required to be given
hereunder shall be deemed so given when hand-delivered, by registered mail,
postage prepaid and return-receipt requested, or by a courier service
guaranteeing next-day delivery, charges prepaid, and properly addressed to such
other party as set forth below or at such other address as may be specified by
either party hereto by written notice similarly sent or delivered.

 

	
  To Blue Horse:

  	
   

  	
  To Contractor:

  
	
   

  	
   

  	
   

  
	
  Blue Horse Labs, Inc.

  	
   

  	
  Advanced Cell
  Technology, Inc.

  
	
  4455 East
  Camelback Road, Suite B100

  	
   

  	
  One Innovation
  Drive

  
	
  Phoenix AZ 85018

  	
   

  	
  Worcester, MA
  01605

  

 

21.           Independent Contractor.  Contractor is an independent contractor and,
as such, will not be entitled to any benefits applicable to employees of Blue
Horse.  Neither party is authorized or
empowered to act as agent for the other for any purpose and shall not on behalf
of the other enter into any Agreement, warranty, or representation as to any
matter.  Neither shall be bound by the
acts or conduct of the other.

 

6

 

22.           Compliance
with Laws.  Contractor shall comply
with all applicable laws, rules, ordinances and regulations governing conduct
of the Research.  If approvals from any
government or other agencies are required by Contractor to perform its duties
and obligations under this Agreement, Contractor will obtain those approvals
prior to the effective date of this Agreement.

 

23.           Limit
on Liability.  IN NO EVENT SHALL
EITHER PARTY BE LIABLE TO THE OTHER IN CONTRACT, TORT OR OTHERWISE FOR
INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY KIND ARISING OUT OF OR RELATING
TO THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ECONOMIC DAMAGE OR LOST
PROFITS, REGARDLESS OF WHETHER THE PARTY SHALL BE ADVISED, SHALL HAVE OTHER
REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF SUCH DAMAGES.

 

24.           Survival.
 If any provision of this Agreement is
held by a court of law to be illegal, invalid or unenforceable that provision
shall be deemed amended to achieve as nearly as possible the same economic
effect as the original provision, and the legality, validity and enforceability
of the remaining provisions of this Agreement shall not be affected or
impaired.

 

25.           Entire
Agreement.  This Agreement, along
with the referenced mutual confidentiality agreement executed by the parties
prior to or contemporaneously with this Agreement, supersedes, terminates, and
otherwise readers null and void any and all prior written or oral agreements or
understandings between the Parties relating to the subject matter of this
Agreement.  Except as otherwise provided
in this Agreement, only a written instrument signed by both Parties may modify
this Agreement.

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first set forth above.

 

	
  BLUE HORSE LABS,
  INC.

  	
  ADVANCED CELL
  TECHNOLOGY

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Jonathan
  Thatcher

  	
   

  	
  By:

  	
  /s/ Michael West

  	
   

  
	
  Name:

  	
  Jonathan
  Thatcher

  	
   

  	
  Name:

  	
  MICHAEL WEST

  	
   

  
	
  Title:

  	
  Treasurer

  	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  3-16-03

  	
   

  
											

 

7

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