Document:

Exhibit 10.18

 

OPTION

TO LICENSE INTELLECTUAL PROPERTY

 

This OPTION TO LICENSE
INTELLECTUAL PROPERTY (the “Agreement”) is dated as of December 31,
2003 (the “Effective Date”), by and between

 

PACGEN CELLCO, LLC (“Cellco”),

A California Limited Liability Company

as “Licensee”

and

ADVANCED CELL TECHNOLOGY, INC (“ACT”)

A Delaware Corporation

as “Licensor”

 

Licensee and Licensor are
sometimes hereinafter referred to as “Cellco” and “ACT”, respectively,
collectively as the “Parties,” or individually, as a “Party”.

 

W  I  T
N  E  S  S  E  T  H:

 

WHEREAS,
ACT wishes to License, and Cellco wishes to acquire a license to certain
intellectual property of ACT embodied in patents and/or patent applications
filed with the United States Patent and Trademark Office and certain proprietary
techniques and know-how, all as more particularly described herein and referred
to as the “IP” herein; and

 

WHEREAS,
the exact scope and terms of the licenses that are the subject of this
Agreement will require a period of due diligence and investigation to define
accurately, and the creation of a formal licensing agreement will also require
time to prepare;

 

NOW,
THEREFORE, in consideration of the mutual covenants and other consideration
described herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto covenant and
agree that ACT will grant to Cellco an option to license the IP on the terms
set forth below.

 

1.               Option Fee.  As consideration for the option herein granted
to a non-exclusive right to license the IP on the terms outlined herein, Cellco
shall pay non-refundable fees totaling $75,000, payable as follows:

a)              $40,000
upon execution of this Letter of Intent and completion of the 10 day Due
Diligence period specified in paragraph 3 hereof, which sum shall be non-refundable;
and

b)             $35,000
upon execution of the Definitive Agreement described in paragraph 4 hereof.

Such
fees shall be in addition to the Licensing Fee, Royalties, and Minimum
Royalties specified herein.  Should
Cellco fail or elect not to make any of the payments specified in subparagraphs
(a) or (b) above, this Agreement shall terminate and neither Party
shall have any further rights hereunder.

 

2.               Licensing Fee.  In the event Cellco elects to enter into a
non-exclusive license from ACT, Cellco shall pay a $300,000 non-refundable
licensing fee as follows:

 

 

a)              $100,000
in cash upon completion of the training required by paragraph 16 hereof; and

 

b)             $200,000
in a promissory note convertible into equity in Cellco.  The note shall automatically convert at the
same per share value into the same type of securities offered by Cellco in its
first round of financing whereby an independent third-party investor (or group
of investors) invests at least $5 million in Cellco.

 

3.               Due Diligence Period.  Upon execution hereof, ACT shall make
available to Cellco such information as shall be necessary for Cellco to
evaluate and analyze the IP.  Cellco
shall then have a due diligence period of 10 business days from the date of
such delivery to perform its due diligence review.  All such review materials and information
shall be subject to the terms of a Non-disclosure and Confidentiality agreement
mutually satisfactory to the Parties.  ACT shall notify Cellco of any infringements
or other material events affecting the IP that it knows of or becomes aware of
during the due diligence period.

 

4.               Definitive Agreement.  Following the Due Diligence Period, the
Parties shall commence diligently and in good faith to draft and execute a
Definitive Agreement for the licensing of the IP, which Definitive Agreement shall
be completed within 45 days of the end of the Due Diligence Period.

 

5.               No Publicity.  Neither the Cellco nor ACT, nor any other
person directly involved with the due diligence, shall release any information
or statements regarding the potential licensing relationship between the Cellco
and ACT to the press or any other person not directly involved with the due
diligence or financing efforts of the Parties until the Definitive Agreement is
signed.

 

6.               Scope.  The scope of the license shall be a non-exclusive worldwide license to the
IP, as defined below, for the life of any patents involved and for the economic
life of any non-patented proprietary information covered by the license.

 

7.               Definition of IP.  “IP” means the various technologies, processes
and methods from Advanced Cell Technology (ACT) used to produce human embryonic
stem (hES) cells from mammalian cultured inner cell mass (CICM) cells,
including the technology known as somatic
cell nuclear transfer (SCNT).

 

This
method is described in patents held by the University of Massachusetts, Amherst
Campus and exclusively licensed to ACT, including specifically the claims found
in US patents 5,945,577 and 6,235,970.  IP
also includes the rights to use these technologies, methods and processes to
produce mammalian embryonic stem (ES) cells and to produce from those mammalian
embryonic cells, differentiated cells for human therapeutic purposes or for
commercial research purposes, including drug screening assays.

 

IP
shall also include other technologies to produce pluripotent cells including ES
cells, including the rights to use these technologies to produce differentiated
human cells for human diagnostic and therapeutic purposes and/or for commercial
research purposes, including drug screening assays.  These other technologies include:

 

 

a)              The
technology known as “parthenogenesis” to produce parthenogenetic embryos as
described in US patent application 20030129745.

 

b)             The
technology known as “De-differentiation” to produce pluripotent cells from
fully differentiated somatic cells as described in US pat apps.  20030044976.

 

c)              For
purposes of this Agreement, IP shall include commercial rights to any existing
potential research products (“Existing Research Products”), including reagents,
produced by ACT in the course of its in-house research.  An example of this is the proprietary culture
medium developed by ACT in the course of the development of ACT’s proprietary
Ooplasmic transfer technology.

 

8.               Fields.  The manufacture and selling of human cells (1) for
commercial research use, including drug testing and basic research, and (2) for
therapeutic and diagnostic use in the treatment of human (a) diabetes and (b) liver
diseases.

 

9.               Conversion to Exclusive Licenses.  The
Parties anticipate that to render the licenses commercially viable, Cellco may
require exclusivity as to one or all of the Fields.  Cellco shall therefore have the right for a
period of 30 months following execution of the Definitive Agreement to convert
its non-exclusive license to an exclusive license upon payment of additional
license fees in the amount of $300,000, $100,000 to be paid in cash and $200,000 to be paid in the form
of equity in Cellco, for each of the three Fields described as numbers
1, 2(a) and 2(b) under “Fields” above.  Equity shall be in the form of common stock,
valued as of the date of the most recent round of outside financing.

 

10.         Right to Negotiate
for Additional Fields.  ACT
agrees that prior to granting to a third party any exclusive or non-exclusive
license with respect to therapeutic or diagnostic use of IP relating to the
treatment of human (a) heart disease or (b) neuronal disease it will
offer to Cellco a first right to negotiate for such rights for a period of 90
days and if it thereafter elects to grant a non-exclusive license to a third
for either of these additional fields, it will offer to Cellco a non-exclusive
license on comparable terms.

 

11.         Right to Sublicense for Manufacture and Sale.  ACT
agrees to allow Cellco the right to grant sublicenses to third parties for the
limited purpose of manufacturing and sale of products derived from the IP
licensed herein on behalf of or under contract to Cellco.

 

12.         Royalties.  Cellco shall pay ACT
royalties (the “Royalties”) equal to the following percentages of collected net
sales (“net sales” being defined
as gross sales less rebates,
refunds or discounts) received by Cellco or its affiliates from commercial
application of the IP made, provided, distributed, sold or manufactured
directly by Cellco or its affiliates:

a)              6%
on therapeutics

b)             3%
on diagnostics

c)              10%
on commercial research use.

 

The Royalties
shall be payable quarterly, commencing on the first day of the calendar quarter
following the first date of receipt by Cellco or its affiliates of revenues and
quarterly thereafter for revenues received in the second preceding quarter.

 

 

13.         Minimum Royalties.  Commencing 12 months following the execution
of the Definitive Agreement, Cellco shall pay to ACT a minimum royalty fee
equal to the difference between total Royalties actually paid in the preceding
12 months and the following minimum amounts:

a)              At
12 months, $25,000;

b)             At
24 months, $50,000;

c)              At
36 months, $75,000;

d)             At
48 months, $100,000;

e)              Annually
thereafter, $100,000.

Upon
the exercise of the right to convert from a non-exclusive to an exclusive
license with respect to any of the Fields, the minimum annual royalty shall
become $100,000 in lieu of the minimums set forth above.

 

14.         Minimum R&D Requirements.  Commencing 24 months from the date of the Definitive
Agreement, Cellco shall be required to invest a minimum of $200,000 per year in
research and development of the Fields covered by this Agreement in order to
maintain the non-exclusive license rights granted hereunder.  In the event Cellco exercises its right to
convert any of its non-exclusive licenses to exclusive licenses as provided
herein, such minimum research and development investment shall be increased to
$400,000 per year, commencing with the date of such conversion to exclusive
rights.

 

15.         Milestone Payments.  In the event Cellco exercises its right to
convert its license for human therapeutic applications as defined in items 2(a) or
2(b) of paragraph 8 hereof, it shall pay additional Milestone
Payments totaling $2,500,000 on the following schedule:

a)              $500,000
upon the launch of the first commercial product;

b)             $1,000,000
upon reaching $5,000,000 in sales from one or both product Fields;

c)              $1,000,000
upon reaching $10,000,000 in sales from one or both product Fields.

These payments shall be in addition to the
royalties specified in paragraph 12 hereof, but shall not apply to diagnostic
or commercial research uses.

 

16.         Technical Training and Technology Transfer.
 ACT shall work with Cellco in good faith
to provide the necessary training for up to a total of 60 days, at Cellco
and/or ACT’s facilities, necessary to allow Cellco to utilize the IP.  Cellco shall pay to ACT all reasonable and
customary fees and expenses for such training and technology transfer.

 

17.         Other Provisions.  The Parties recognize that the Definitive
Agreement will require other provisions not delineated herein and agree to
negotiate in good faith commercially reasonable terms and conditions to deal
with such requirements, which shall be included in the Definitive Agreement.

 

18.         Termination.  Either party may terminate this Agreement if
the Definitive Agreement has not been signed within the time period specified
in Paragraph 4 hereof unless failure to sign has been caused by delays caused
by the other Party or a failure to negotiate in good faith.

 

19.         Other Provisions.  The Parties recognize that the Definitive
Agreement will require other provisions not delineated herein and agree to
negotiate in good faith commercially reasonable terms and conditions to deal
with such requirements.

 

 

20.         Conditions to Closing.  The closing of the non-exclusive license will
be conditioned upon:

 

a)              The
approval of the Board of Directors of ACT and Cellco.

b)             Execution
by ACT and Cellco of the Definitive Agreements.

 

21.         Non-Exclusive Dealing.  Subject to the rights granted by ACT herein,
nothing in this Agreement shall be construed as granting Cellco any exclusive
rights, nor prevent ACT from engaging in negotiations with other parties
regarding transactions relating to any subject matter herein.

 

22.         Merger of Joint Venture Agreement.  The Parties acknowledge that a significant
inducement to both Parties to enter into this Agreement is the possibility that
a merger or joint venture of the Parties can be effected that will create a
significantly more powerful company than either Party acting alone.  The Parties therefore agree to work together
in good faith during the Due Diligence Period to seek agreement on the terms of
such a merger or joint venture; provided, however, that the success or failure
of such merger or joint venture efforts shall not affect in any way the
validity of this Agreement or the rights of the Parties hereto.

 

IN WITNESS WHEREOF, each
of the Parties hereto has caused this Agreement to be executed on its behalf as
of the date first above written.

 

 

	
  ADVANCED CELL TECHOLOGY,
  INC.

  a Delaware corporation

  	
  PACGEN CELLCO, LLC

  a California limited liability Company

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Michael D. West

  	
   

  	
  By:

  	
  /s/ Kenneth Aldrich

  	
   

  
	
  Michael D. West

  	
  Kenneth Aldrich

  
	
  Chairman

  	
   

  	
  Managing MemberExhibit 10.18.1

 

FIRST AMENDMENT TO OPTION TO LICENSE
INTELLECTUAL

PROPERTY

 

This First
Amendment to Option to License Intellectual Property (the
“Amendment”) is dated February 13, 2004 (the “Effective Date”) by and between:

 

PACGEN CELLCO, LLC (“Cellco”)

A California Limited Liability
Company

As “Licensor”

And

ADVANCED CELL TECHNOLOGY, INC. (“ACT”)

A Delaware Corporation

As “Licensee”

 

Licensee and Licensor are
sometimes hereinafter referred to collectively
as the “Parties”.

 

W
I  T  N  E  S  S  E  T  H:

 

WHEREAS, ACT and
Cellco entered into an Option To License Intellectual Property agreement dated December 31,
2003 (the “Agreement”), and 

 

Whereas, ACT and Cellco wish to amend the Agreement

 

NOW, THEREFORE, in
consideration of the mutual covenants and other consideration described herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties hereto covenant and agree to amend
the Agreement as follows:

 

1.               Cellco will pay
$12,500 in additional option fees to ACT and ACT will use those funds to
reimburse ACT in part for
payment of international filings for Australia,
Canada, Europe and Mexico for the method patent application
PCT/US02/26945.  In consideration for the
above additional option fee and the fee described in section 4 below, the Agreement is hereby amended to include the additions described in Sections 2-3
below:

 

2.

a.               A
30 day first right to negotiate for exclusive rights to “Nerve Diseases” as an
additional subparagraph 2(c) under the definition of “Field” in Article 8
of the Agreement and a “most favored nation” right to acquire non-exclusive
rights to such IP on the same basis as ACT may grant a nonexclusive license in
the field in “Nerve Diseases” to any third party.

b.              The
rights to Chromatin Transfer under same terms and fields as described in the
Agreement.

c.               The
rights to Gene Trap technology as described in International Application
PCT/US02/26945.  In the case of the Gene
Trap technology only, the field of use shall be:

 

 

i.                  Exclusive
rights for the field of diabetes (islets) and liver disease (hepatocytes).

ii.               Non-exclusive
rights for other cell types.

 

I.                 In
return for the rights granted hereunder, Cellco will add a sublicense clause to
the Agreement to

a.               In
event Cellco does a corporate partnership, ACT shall receive a percentage of
fees and payments at a rate normal to the industry.

b.              Terms
may exclude money for sponsored research or equity investments.  However, to protect ACT, some other equitable
combination of terms for fees, sponsored research and equity payments will be
worked out between ACT and Cellco.

iii.            Commercialization
rights to sell reagents (including gene trap cell lines) and rights to set up a
service business based on the gene trap technology.

d.              Non-exclusive
rights to use the ACT invention as disclosed in the invention disclosure “Novel
Culture System for Ex-Vivo Development” (culture of cells in an unfertilized telolecithal
or entelolecithal egg of the avian or egg-laying mammal species).

 

2.                                       As
additional compensation to ACT for the rights granted hereby, Cellco agrees to
license to ACT on a non-exclusive basis for therapeutic uses the rights to any
intellectual property it develops using or involving the IP covered by the
Agreement for fields outside the fields of diabetes and liver disease.

 

3.                                       The
parties will make good faith efforts to negotiate pre-arranged terms for the
license of additional ACT IP useful in the future to commercialize the
technology and to include those terms in the definitive license agreement
described in the Agreement.  In this
regard, language would be provided that in the event any of its technology now
perfected or pending as of the date of this agreement would, if perfected, lead
to improved efficiencies in deriving embryonic cells as compared to the
technologies licensed under the Agreement, as amended hereby, or would cause
Cellco to necessarily infringe issued patents controlled by ACT when Cellco
produces product within the Field described in Article 8 of the Agreement, ACT shall
waive any claim of infringement to the extent necessary to permit Cellco to
continue the use of the IP it is licensing under the Agreement.

 

4.                                       Cellco
will pay an additional $10,000 in option fees for filing in Japan and Israel,
which filings shall be made by ACT, with the understanding that the $10,000
will be deducted from the minimum royalties owed to ACT by Cellco under
paragraph 13 of the Agreement.

a.               Cellco
will receive in exchange for this payment a royalty free license to the gene
trap technology in the country of Japan and Israel.

 

 

b.              Cellco
shall pay ACT the $12,500 and $10,000 payments described above within 30 days
of the effective date of this Amendment.

5.                                       Cellco
and ACT shall each pay when due one half 1/2 of the
Annuity Fees applicable to the Country licenses described herein.  ACT shall notify Cellco 30 days prior to the required payment date of such fees.

 

	
  ADVANCED CELL
  TECHNOLOGY, INC.

  	
  PACGEN CELLCO, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Michael West

  	
   

  	
  By:

  	
  /s/ Kenneth C. Aldrich

  	
   

  
	
  MICHAEL WEST

  	
   

  	
  Kenneth C. Aldrich

  
	
  President

  	
   

  	
  Managing Member

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