FORM
10-Q
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
(Mark
One)
[X] QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
quarterly period ended September 30, 2008
OR
[ ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
transition period from to
Commission
file number 1-12830
BioTime,
Inc.
(Exact
name of registrant as specified in its charter)
|
California
|
94-3127919
|
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification
No.)
|
1301
Harbor Bay Parkway, Suite 100
Alameda,
California 94502
(Address
of principal executive offices)
(510)
521-3390
(Registrant's
telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90
days. SYes £
No
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act).
Large accelerated filer £ Accelerat
ed filer £
Non-accelerated filer £ (Do not check if a smaller reporting
company)
Smaller reporting
company S
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). £Yes SNo
APPLICABLE
ONLY TO CORPORATE ISSUERS:
Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date. 23,794,374 common shares, no par value, as of
September 30, 2008.
PART
1--FINANCIAL INFORMATION
Statements made in this Report that are
not historical facts may constitute forward-looking statements that are subject
to risks and uncertainties that could cause actual results to differ materially
from those discussed. Such risks and uncertainties include but are
not limited to those discussed in this report under Item 1 of the Notes to
Financial Statements, and in BioTime's Annual Report on Form 10-K filed with the
Securities and Exchange Commission. Words such as “expects,” “may,” “will,”
“anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and similar
expressions identify forward-looking statements.
Item
1. Financial Statements
BIOTIME,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
ASSETS
|
September
30,
2008
(unaudited)
|
December
31, 2007
|
||||||
|
CURRENT
ASSETS:
|
||||||||
|
Cash
and cash equivalents
|
$52,082 | $9,501 | ||||||
|
Accounts
receivable
|
4,846 | 3,502 | ||||||
|
Prepaid
expenses and other current assets
|
37,114 | 128,643 | ||||||
|
Total
current assets
|
94,042 | 141,646 | ||||||
|
Equipment,
net of accumulated depreciation of $594,506 and $585,765,
respectively
|
110,817 | 12,480 | ||||||
|
Advance
license fee and others
|
820,976 | 20,976 | ||||||
|
TOTAL
ASSETS
|
$ 1,025,835 | $175,102 | ||||||
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
||||||||
|
CURRENT
LIABILITIES:
|
||||||||
|
Accounts
payable and accrued liabilities
|
$958,537 | $480,374 | ||||||
|
Lines
of credit payable
|
2,645,577 | 716,537 | ||||||
|
Capital
lease liability
|
45,121 | - | ||||||
|
Other
current liabilities
|
315,291 | 261,091 | ||||||
|
Total
current liabilities
|
3,964,526 | 1,458,002 | ||||||
|
LONG-TERM
LIABILITIES:
|
||||||||
|
Stock
appreciation rights compensation liability
|
244,774 | 13,151 | ||||||
|
Deferred
license revenue, net of current portion
|
1,576,574 | 1,740,702 | ||||||
|
Capital
lease liability, net of current portion
|
52,641 | - | ||||||
|
Other
liabilities
|
8,049 | 9,636 | ||||||
|
Total
long-term liabilities
|
1,882,038 | 1,763,489 | ||||||
|
COMMITMENTS
AND CONTINGENCIES
|
||||||||
|
SHAREHOLDERS'
DEFICIT:
|
||||||||
|
Common
shares, no par value, authorized 50,000,000 shares; issued and outstanding
23,794,374 and 23,034,374 shares at September 30, 2008 and December 31,
2007, respectively
|
41,145,731 | 40,704,136 | ||||||
|
Contributed
capital
|
93,972 | 93,972 | ||||||
|
Accumulated
deficit
|
(46,060,432 | ) | (43,844,497 | ) | ||||
|
Total
shareholders' deficit
|
(4,820,729 | ) | (3,046,389 | ) | ||||
|
TOTAL
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
$1,025,835 | $175,102 | ||||||
See
accompanying notes to the condensed consolidated financial
statements.
2
BIOTIME,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
30, 2008
|
September
30, 2007
|
September
30, 2008
|
September
30, 2007
|
|||||||||||||
|
REVENUES:
|
||||||||||||||||
|
License
fees
|
$70,850 | $48,066 | $204,728 | $141,565 | ||||||||||||
|
Royalties
from product sales
|
341,391 | 183,093 | 991,444 | 546,033 | ||||||||||||
|
Other
revenue
|
14,690 | — | 22,340 | — | ||||||||||||
|
Total
revenues
|
426,931 | 231,159 | 1,218,512 | 687,598 | ||||||||||||
|
EXPENSES:
|
||||||||||||||||
|
Research
and development
|
(548,478 | ) | (170,382 | ) | (1,312,607 | ) | (724,699 | ) | ||||||||
|
General
and administrative
|
(792,306 | ) | (216,443 | ) | (1,760,514 | ) | (927,877 | ) | ||||||||
|
Total
expenses
|
(1,340,784 | ) | (386,825 | ) | (3,073,121 | ) | (1,652,576 | ) | ||||||||
|
Loss
from operations
|
(913,853 | ) | (155,666 | ) | (1,854,609 | ) | (964,978 | ) | ||||||||
|
Interest
expenses and other income
|
(163,341 | ) | (57,825 | ) | (361,326 | ) | (146,452 | ) | ||||||||
|
Net
Loss
|
$(1,077,194 | ) | $(213,491 | ) | $(2,215,935 | ) | $(1,111,430 | ) | ||||||||
|
Loss
per common share – basic and diluted
|
$(0.05 | ) | $(0.01 | ) | $(0.09 | ) | $(0.05 | ) | ||||||||
|
Weighted
average number of common shares outstanding – basic and
diluted
|
23,738,939 | 22,834,374 | 23,492,987 | 22,803,971 | ||||||||||||
See
accompanying notes to the condensed consolidated financial
statements.
3
BIOTIME,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
Nine
months Ended
|
||||||||
|
September
30, 2008
|
September
30, 2007
|
|||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net
loss
|
$(2,215,935 | ) | $(1,111,430 | ) | ||||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
|
Depreciation
|
8,335 | 4,115 | ||||||
|
Amortization
of deferred finance cost on lines of credit
|
188,221 | 18,162 | ||||||
|
Interest
on royalty obligation
|
– | 129,458 | ||||||
|
Interest
on lines of credit
|
87,095 | 13,931 | ||||||
|
Common
stock issued for services
|
43,500 | – | ||||||
|
Stock-based
compensation
|
376,518 | 74,043 | ||||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Accounts
receivable
|
(1,344 | ) | 2,268 | |||||
|
Prepaid
expenses and other current assets
|
54,401 | 18,454 | ||||||
|
Accounts
payable and accrued liabilities
|
480,382 | 69,945 | ||||||
|
Deferred
license revenue
|
(121,759 | ) | (104,836 | ) | ||||
|
Deferred
rent
|
2,999 | – | ||||||
|
Other
liabilities
|
5,026 | 412 | ||||||
|
Net
cash used in operating activities
|
(1,092,561 | ) | (885,478 | ) | ||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Payments
of royalty fees
|
(750,000 | ) | – | |||||
|
Purchase
of equipment
|
(1,390 | ) | (1,779 | ) | ||||
|
Security
deposit
|
(50,000 | ) | – | |||||
|
Net
cash used in investing activities
|
(861,390 | ) | (1,779 | ) | ||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Repayments
of line of credit and capital leases
|
(21,802 | ) | – | |||||
|
Borrowings
under lines of credit
|
1,858,334 | 340,000 | ||||||
|
Issuance
of common shares
|
100,000 | – | ||||||
|
Net
cash provided by financing activities
|
1,936,532 | 340,000 | ||||||
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
|
42,581 | (547,257 | ) | |||||
|
Cash
and cash equivalents at beginning of period
|
9,501 | 561,017 | ||||||
|
Cash
and cash equivalents at end of period
|
$52,082 | $13,760 | ||||||
|
Supplemental
disclosure of cash flow statement
|
||||||||
|
Cash
paid for interest
|
$59,389 | – | ||||||
|
NON-CASH
FINANCING AND INVESTING ACTIVITIES:
|
||||||||
|
Issuance
of stock related to line of credit agreement
|
(153,200 | ) | – | |||||
|
Issuance
of stock related to outside services
|
(43,500 | ) | – | |||||
See
accompanying notes to the condensed consolidated financial
statements.
4
BIOTIME,
INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization
General - BioTime, Inc.
(“BioTime”) was organized November 30, 1990 as a California corporation. BioTime
is a biomedical organization which is engaged in the research and development of
synthetic plasma expanders, blood volume substitute solutions, and organ
preservation solutions, for use in surgery, trauma care, organ transplant
procedures, and other areas of medicine. In October 2007, BioTime
announced its entry into the field of regenerative medicine by initiating the
development of advanced human stem cell products and technology for diagnostic,
therapeutic and research use. Regenerative medicine refers to
therapies based on human embryonic stem cell technology that are designed to
rebuild cell and tissue function lost due to degenerative disease or
injury. Human embryonic stem cells are the first human cells ever
discovered that are capable of infinite cell division while possessing the
potential to differentiate into all of the cell types of the human body.
Stem cells may also have commercial uses in screening for the discovery of
experimental new drugs.
The
unaudited condensed balance sheet as of September 30, 2008, the unaudited
condensed statements of operations for the three and nine months ended September
30, 2008 and 2007, and the unaudited condensed statements of cash flows for the
nine months ended September 30, 2008 and 2007 have been prepared by BioTime’s
management in accordance with the instructions from the Form 10-Q and Article
8-03 of Regulation S-X. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the financial position, results of operations, and cash flows at September 30,
2008 and for all interim periods presented have been made. The
balance sheet as of December 31, 2007 is derived from BioTime's audited
financial statements as of that date. The results of operations for
the three and nine months ended September 30, 2008 and 2007 are not necessarily
indicative of the operating results anticipated for the full year.
Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted as permitted by regulations of the Securities and Exchange
Commission (the “SEC”) except for the condensed consolidated balance sheet as of
December 31, 2007, which was derived from audited financial
statements. Certain previously furnished amounts have been
reclassified to conform with presentations made during the current
periods. It is suggested that these condensed consolidated financial
statements be read in conjunction with the annual audited financial statements
and notes thereto included in BioTime's Form 10-KSB for the year ended December
31, 2007.
Principles of Consolidation – The accompanying condensed consolidated
financial statements include the accounts of Embryome Sciences, Inc. (“Embryome
Sciences”), a wholly-owned subsidiary of BioTime. As of September 30,
2008, the only significant transactions with respect to this subsidiary were:
(i) a Product Production and Distribution Agreement was executed with Lifeline
Cell Technology, LLC, for the production and marketing of embryonic progenitor
cells or progenitor cell lines, and products derived from those embryonic
progenitor cells, and (ii) certain license agreements with Advanced Cell
Technology, Inc. under which Embryome Sciences acquired rights to use certain
technology and stem cell lines.
5
Certain Significant Risks and
Uncertainties - BioTime’s operations are subject to a number of factors
that can affect its operating results and financial condition. Such factors
include but are not limited to the following: the results of clinical trials of
BioTime’s pharmaceutical products; BioTime’s ability to obtain United States
Food and Drug Administration and foreign regulatory approval to market its
pharmaceutical products; BioTime’s ability to develop new stem cell research
products and technologies; competition from products manufactured and sold or
being developed by other companies; the price and demand for BioTime products;
BioTime’s ability to obtain additional financing and the terms of any such
financing that may be obtained; BioTime’s ability to negotiate favorable
licensing or other manufacturing and marketing agreements for its products; the
availability of ingredients used in BioTime’s products; and the availability of
reimbursement for the cost of BioTime’s pharmaceutical products (and related
treatment) from government health administration authorities, private health
coverage insurers and other organizations.
Liquidity and Going Concern -
The accompanying unaudited condensed financial statements have been prepared
assuming BioTime will continue as a going concern. At September 30, 2008,
BioTime had $52,082 of cash on hand and negative working capital of $3,870,484,
a shareholders’ deficit of $4,820,729 and an accumulated deficit of
$46,060,432. BioTime will continue to need additional capital and
greater revenues to continue its current operations and to continue to conduct
its product development and research programs. Sales of additional
equity securities could result in the dilution of the interests of present
shareholders. BioTime is also continuing to seek new agreements with
pharmaceutical companies to provide product and technology licensing fees and
royalties. The availability and terms of equity financing and new
license agreements are uncertain. The unavailability or inadequacy of
additional financing or future revenues to meet capital needs could force
BioTime to modify, curtail, delay or suspend some or all aspects of its planned
operations. To mitigate these factors, management has instituted a
cost-cutting plan which included a reduction in discretionary general and
administrative expenses such as public relations. Additionally, in
October 2007, March 2008, and again in November 2008, BioTime’s line
of credit for working capital was increased and the maturity date was extended
(see Notes 3 and 7). BioTime will continue to seek additional
financing or capital as well as additional licensing revenues from its current
and future patents. In view of the matters described above, BioTime’s
continued operations are dependent on its ability to raise additional capital,
obtain additional financing, reduce its operating costs, and succeed in
generating more revenue from its operations. The condensed
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts and classification
of liabilities should BioTime be unable to continue as a going
concern.
2. Summary
of Select Significant Accounting Policies
Financial Statement Estimates
- - The preparation of unaudited condensed consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the unaudited condensed consolidated financial
statements and the reported amounts of
6
revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Revenue Recognition – BioTime
complies with the SEC Staff Accounting Bulletin (“SAB”) No. 101, Revenue
Recognition, as amended by SAB No. 104. Royalty and license fee revenues consist
of product royalty payments and fees under license agreements and are recognized
when earned and reasonably estimable. BioTime recognizes revenue in
the quarter in which the royalty report is received rather than the quarter in
which the sales took place, as it does not have sufficient sales history to
accurately predict quarterly sales. Up-front nonrefundable fees where
BioTime has no continuing performance obligations are recognized as revenues
when collection is reasonably assured. In situations where continuing
performance obligations exist, up-front nonrefundable fees are deferred and
amortized ratably over the performance period. If the performance
period cannot be reasonably estimated, BioTime amortizes nonrefundable fees over
the life of the contract until such time that the performance period can be more
reasonably estimated. Milestones, if any, related to scientific or
technical achievements are recognized in income when the milestone is
accomplished if (a) substantive effort was required to achieve the milestone,
(b) the amount of the milestone payment appears reasonably commensurate with the
effort expended and (c) collection of the payment is reasonably
assured.
BioTime
also defers costs, including finders’ fees, which are directly related to
license agreements for which revenue has been deferred. Deferred
costs are charged to expense proportionally and over the same period that
related deferred revenue is recognized as revenue. Deferred costs are
net against deferred revenues in BioTime’s balance sheet.
Grant
income is recognized as revenue when earned.
Recently Adopted Accounting Pronouncements – On December
21, 2007, the SEC issued SAB No. 110, which amends SAB No. 107 to allow for the
continued use of the simplified method to estimate the expected term in valuing
stock options beyond December 31, 2007. The simplified method can
only be applied to certain types of stock options for which sufficient exercise
history is not available. BioTime has concluded that its historical
share option exercise experience does not provide a reasonable basis upon which
to estimate the expected term due to the significant structural changes in its
business. Therefore, BioTime will continue to use the "simplified" method in
developing its estimate of the expected term of the stock options granted under
its 1992 and 2002 Stock Option Plans.
In
September 2006, the Financial Accounting Standards Board (the “FASB”) issued
FASB Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value
Measurements (“SFAS No. 157”), which defines fair value, establishes a framework
for measuring fair value under GAAP, and expands disclosures about fair value
measurements. SFAS No. 157 applies to other accounting pronouncements
that require or permit fair value measurements. The new guidance is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and for interim periods within those fiscal
years. BioTime adopted SFAS No. 157 during the quarter ended March
31, 2008 which had no impact on its condensed balance sheets, condensed
statement of operations, condensed statement of stockholders' equity and cash
flows.
7
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.” SFAS No. 159 permits entities
to choose to measure many financial instruments, and certain other items, at
fair value. SFAS No. 159 was effective January 1, 2008. The adoption of
SFAS No. 159 did not have an impact on the consolidated financial statements
since BioTime did not elect the fair value option for any of its existing assets
or liabilities.
Recently Issued Accounting
Pronouncements –
In December 2007, the FASB issued SFAS No. 141R (revised 2007), “Business Combinations” (“SFAS
No. 141R”), which replaces SFAS No. 141. SFAS No. 141R establishes
the principles and requirements for how an acquirer: (i) recognizes and measures
in its financial statements the identifiable assets acquired, the liabilities
assumed, and any non-controlling interest in the acquiree; (ii) recognizes and
measures the goodwill acquired in the business combination or a gain from a
bargain purchase; and (iii) determines what information to disclose to enable
users of the financial statements to evaluate the nature and financial effects
of the business combination. Additionally, SFAS No. 141R requires
that acquisition-related costs be expensed as incurred. The
provisions of SFAS No. 141R will become effective for acquisitions completed on
or after January 1, 2009; however, the income tax provisions of SFAS No. 141R
will become effective as of that date for all acquisitions, regardless of the
acquisition date. SFAS No. 141R amends SFAS No. 109, to require the acquirer to
recognize changes in the amount of its deferred tax benefits recognizable due to
a business combination either in income from continuing operations in the period
of the combination or directly in contributed capital, depending on the
circumstances. SFAS No. 141R further amends SFAS No. 109 and FIN 48,
to require, subsequent to a prescribed measurement period, changes to
acquisition-date income tax uncertainties to be reported in income from
continuing operations and changes to acquisition-date acquiree deferred tax
benefits to be reported in income from continuing operations or directly in
contributed capital, depending on the circumstances. BioTime is
currently evaluating the impact SFAS No. 141R will have on its future business
combinations.
In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements—An Amendment of ARB No. 51” (“SFAS No.
160”). SFAS No. 160 establishes new accounting and reporting
standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal
years beginning on or after December 15, 2008. BioTime does not
believe the adoption of this statement will have a material effect on its
financial position, results of operations, and cash flows.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities—An Amendment of FASB Statement No. 133”
(“SFAS No. 161”). SFAS No. 161 applies to all derivative
instruments and related hedged items accounted for under FASB Statement No. 133,
Accounting for Derivative
Instruments and Hedging Activities. It requires entities to
provide greater transparency about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement No. 133 and its related interpretations, and (c)
how derivative instruments and related hedged items affect an entity’s financial
position, results of operations, and cash flows. SFAS No. 161 is
effective for fiscal years and interim periods beginning after November 15,
2008. BioTime does not believe the adoption of this statement will
have a material effect on the results of operations or financial
condition.
8
In May
2008, the FASB issued FASB Staff Position ("FSP") Emerging Issues Task Force
("EITF") No. 03-6-1, "Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities" ("EITF 03-6-1"). EITF 03-6-1
addresses whether instruments granted in share-based payment transactions, with
rights to dividends or dividend equivalents, are participating securities prior
to vesting and, therefore, need to be included in the earnings allocation in
computing earnings per share ("EPS") under the two-class method described in
FASB Statement No. 128, "Earnings per Share." Unvested share-based payment
awards that contain nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and shall be included in
the computation of EPS pursuant to the two-class method. In contrast, the right
to receive dividends or dividend equivalents that the holder will forfeit if the
award does not vest does not constitute a participation right. EITF 03-6-1 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. All
prior-period EPS data presented shall be adjusted retrospectively (including
interim financial statements, summaries of earnings, and selected financial
data). Early adoption of EITF 03-6-1 is prohibited. BioTime will adopt EITF
03-6-1 as of January 1, 2009, and does not currently believe that the adoption
will have a material impact on its consolidated financial
statements.
In
October 2008, the FASB issued FSP No. 157-3, "Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active" ("FSP
157-3"). FSP 157-3 clarifies the application of SFAS 157 in a market
that is not active and provides an example to illustrate key considerations in
determining the fair value of a financial asset when the market for that
financial asset is not active. BioTime is still in the process of
evaluating the impact that FSP 157-3 will have on its related financial
assets.
3. Lines
of Credit
BioTime
has a revolving line of credit Agreement (the “Credit Agreement”) with certain
private lenders. On February 15, 2008, Credit Agreement was amended
to increase the line of credit from $1,000,000 to $1,100,000. BioTime
agreed to issue to the new lender 10,000 common shares in return for making the
additional credit available. The market value for those shares was
$3,200 on the date of issue, and that cost was fully amortized over the life of
the Credit Agreement. The Credit Agreement was subsequently amended
again on March 31, 2008 to permit BioTime to borrow up to a total of $2,500,000,
and the maturity date of the revolving line of credit was extended to November
15, 2008. The loans may become payable prior to the maturity date if
BioTime receives an aggregate of $4,000,000 through (A) the sale of capital
stock, (B) the collection of license fees, signing fees, milestone fees, or
similar fees (excluding royalties) in excess of $2,500,000 under any present or
future agreement pursuant to which BioTime grants one or more licenses to use
its patents or technology, (C) funds borrowed from other lenders, or (D) any
combination of sources under clauses (A) through (C).
9
In
consideration for making the additional credit available and for extending the
maturity date of outstanding loans, BioTime agreed to issue the lenders one
common share for each $5 principal amount of their loan
commitment. In total, 500,000 shares were issued on March 31, 2008;
those shares had a market value of $150,000 on that date, and the cost is being
amortized over the life of the Credit Agreement. Unamortized cost of
$30,000 is included in prepaid expenses and other current assets as of September
30, 2008.
The
lenders have been given the right to exchange their line of credit promissory
notes for BioTime’s common shares at a price of $1.00 per share, and/or for
common stock of BioTime’s subsidiary, Embryome Sciences, Inc., at a price of
$2.00 per share.
At
September 30, 2008, BioTime had drawn $2,483,334 under the Credit Agreement.
This line of credit matures on November 15, 2008, and BioTime will seek to
obtain the agreement of the lenders to extend the maturity date and to increase
the amount of the line of credit under the Credit Agreement.
BioTime
also obtained a line of credit from American Express in August 2004, which
allows for borrowings up to $25,300; at September 30, 2008, BioTime had drawn
$23,045 against this line. Interest is paid monthly on borrowings at a total
rate equal to the prime rate plus 3.99%; however, regardless of the prime rate,
the interest rate payable will at no time be less than 9.49%.
BioTime
also secured a line of credit from Advanta in November 2006, which allows for
borrowings up to $35,000; at September 30, 2008, BioTime had drawn $32,612
against this line. Interest is payable on borrowings at a Variable
Rate Index, which will at no time be less than 8.25%.
BioTime has accrued interest of
$106,586 as of September 30, 2008.
4.
License and Collaboration Agreements
BioTime’s
principle product, Hextend, is a physiologically balanced blood plasma volume
expander, for the treatment of hypovolemia. Hextend is being
distributed in the United States by Hospira, Inc. and in South Korea by CJ
CheilJedang Corp. (“CJ”) under exclusive licenses from
BioTime. Summit Pharmaceuticals International Corporation (“Summit”)
has a license to develop Hextend and PentaLyte in Japan, the People’s Republic
of China, and Taiwan. Summit has entered into sublicenses with
Maruishi Pharmaceutical Co., Ltd. (“Maruishi”) to obtain regulatory approval,
manufacture, and market Hextend in Japan, and Hextend and PentaLyte in China and
Taiwan.
In December 2004, BioTime entered into
an agreement with Summit Pharmaceuticals International Corporation (“Summit”) to
co-develop Hextend and PentaLyte for the Japanese market. Under the
agreement, BioTime received $300,000 in December 2004, $450,000 in April 2005,
and $150,000 in October 2005. The payments represent a partial
reimbursement of BioTime’s development cost of Hextend and
PentaLyte. In June 2005, following BioTime’s approval of Summit’s
business plan for Hextend, BioTime paid to Summit a one-time fee of $130,000 for
their services in preparing the plan. The agreement states that
revenues from
10
Hextend
and PentaLyte in Japan will be shared between BioTime and Summit as follows:
BioTime 40% and Summit 60%. Additionally, BioTime will pay Summit 8%
of all net royalties received from the sale of PentaLyte in the United
States.
The accounting treatment of the
payments from Summit fell under the guidance of Emerging Issues Task Force
(“EITF”) Issue No. 88-18, “Sales of Future Revenues.” EITF No. 88-18
addresses the accounting treatment when an enterprise (BioTime) receives cash
from an investor (Summit) and agrees to pay to the investor a specified
percentage or amount of the revenue or a measure of income of a particular
product line, business segment, trademark, patent, or contractual right. The
EITF reached a consensus on six independent factors that would require
reclassification of the proceeds as debt. BioTime met one of the
factors: BioTime was determined to have had significant continuing involvement
in the generation of the cash flows to the investor due to BioTime’s supervision
of the Phase II clinical trials of PentaLyte. As a result, BioTime
initially recorded the net proceeds from Summit to date of $770,000 as long-term
debt to comply with EITF No. 88-18 even though BioTime is not legally indebted
to Summit for that amount.
In July 2005, Summit sublicensed the
rights to Hextend in Japan to Maruishi. In consideration for the
license, Maruishi agreed to pay Summit a series of milestone payments: Yen
70,000,000, (or $593,390 based on foreign currency conversion rates at the time)
upon executing the agreement, Yen 100,000,000 upon regulatory filing in Japan,
and Yen 100,000,000 upon regulatory approval of Hextend in
Japan. Consistent with the terms of the BioTime-Summit agreement,
Summit paid 40% of that amount, or $237,356, to BioTime during October
2005. BioTime does not expect the regulatory filing and approval
milestones to be attained for several years.
The initial accounting viewed the
potential repayment of the $770,000 imputed debt to come only from the 8% share
of U.S. PentaLyte revenues generated by BioTime and paid to
Summit. BioTime first became aware of the terms of the Maruishi and
Summit agreement during the fourth quarter of 2005, prepared an estimate of the
future cash flows, and determined that Summit would earn a majority of their
return on investment from their agreement with Maruishi, and not the 8% of
BioTime’s U.S. PentaLyte sales. Considering this, the $770,000 was
viewed as a royalty obligation which would be reduced by Summit’s 8% share of
BioTime’s U.S. PentaLyte sales plus Summit’s 60% share of Japanese
revenue. Accordingly, BioTime recorded the entire amount paid by
Maruishi to Summit for the sublicense of $593,390 as deferred revenue, to be
amortized over the remaining life of the patent through
2019. BioTime’s 40% share of this payment was collected in October
2005 and the remaining 60% share was recorded as a reduction of the long-term
royalty obligation of BioTime to Summit. Interest on the long-term
royalty obligation was accrued monthly using the effective interest method
beginning October 2005, using a rate of 25.2% per annum, which BioTime had
determined was the appropriate interest rate when the future cash flows from the
transaction were considered.
In 2007, BioTime completed its Phase II
trials of PentaLyte, however was unable to find a suitable licensing agreement
for the product. At this time, BioTime has deemed the continuation of
the clinical trials necessary to bring this product to market to be a
significantly lower priority than it had been in the
past. Correspondingly, it is less likely that proceeds from the 8% of
PentaLyte U.S. sales will be sufficient to pay down the Summit Royalty
Obligation
11
prior to
the expiration of the patents. As a result of this change in
accounting estimates, BioTime has reevaluated treatment of this
transaction. The transaction no longer meets any of the factors that
require it to fall under the guidance from EITF 88-18. Consequently,
BioTime has reclassified the royalty obligation to deferred revenue and is
amortizing it over the remaining life of the underlying patents.
On January 3, 2008, BioTime
entered into a Commercial License and Option Agreement with Wisconsin Alumni
Research Foundation (“WARF”). The WARF license permits BioTime to use
certain patented and patent pending technology belonging to WARF, as well as
certain stem cell materials, for research and development purposes, and for the
production and marketing of products used as research tools, including in drug
discovery and development.
BioTime
will pay WARF a license fee of $225,000 in two installments. The
first installment, in the amount of $10,000, was paid and charged to operations
during January 2008. The remaining $215,000 is due on the earlier of
(i) thirty (30) days after BioTime raises $5,000,000 or more of new equity
financing, or (ii) January 3, 2009. A maintenance fee of $25,000 will
be due annually on January 3 of each year during the term of the
License.
BioTime
or Embryome Sciences will pay WARF royalties on the sale of products and
services using the technology or stem cells licensed from WARF. The
royalty will range from 2% to 4%, depending on the kind of products
sold. The royalty rate is subject to certain reductions if BioTime
also becomes obligated to pay royalties to a third party in order to sell a
product.
BioTime
will also pay WARF $25,000 toward reimbursement of the costs associated with
preparing, filing and maintaining the licensed WARF patents. That fee
is payable in two installments. The first installment of $5,000 was
paid and charged to operations during January 2008, and the remaining $20,000 is
due on the earlier of (i) thirty (30) days after BioTime raises $5,000,000 or
more of new equity financing, or (ii) January 3, 2009.
On June
24, 2008, BioTime, along with its subsidiary, Embryome Sciences, entered into a
Product Production and Distribution Agreement with Lifeline Cell Technology, LLC
for the production and marketing of embryonic progenitor cells or progenitor
cell lines, and products derived from those embryonic progenitor
cells. The products developed under the agreement with Lifeline will
be produced and sold for research purposes, such as drug discovery and drug
development uses.
The
proceeds from the sale of products to certain distributors with which Lifeline
has a pre-existing relationship will be shared equally by Embryome Sciences and
Lifeline, after deducting royalties payable to licensors of the technology used,
and certain production and marketing costs. The proceeds from
products produced for distribution by both Embryome Sciences and Lifeline, and
products produced by one party at the request of the other party, will be shared
in the same manner. Proceeds from the sale of other products, which
are produced for distribution by one party, generally will be shared 90% by the
party that produced the product for distribution, and 10% by the other party
after deducting royalties payable to licensors of technology used. In
the case of the sale of these products, the party that produces the product and
receives 90% of the sales proceeds will bear all of the production and marketing
costs of the product.
12
The
products will be produced using technology and stem cell lines licensed from
WARF, technology developed by Embryome Sciences, technology developed by
Lifeline, and technology licensed from Advanced Cell Technology,
Inc. WARF and Advanced Cell Technology will receive royalties from
the sale of the products developed using their licensed technology and stem
cells.
BioTime
and Embryome Sciences paid Lifeline $250,000 to facilitate their product
production and marketing efforts. BioTime has accounted for this
payment on the balance sheet in the “Advanced license fee and others” line
item. Embryome Sciences will be entitled to recover that amount from
the share of product sale proceeds that otherwise would have been allocated to
Lifeline.
On July
10, 2008, BioTime’s subsidiary Embryome Sciences, Inc. entered into a License
Agreement with Advanced Cell Technology, Inc. (“ACT”) under which Embryome
Sciences acquired exclusive world-wide rights to use ACT’s “ACTCellerate”
technology for methods to accelerate the isolation of novel cell strains from
pluripotent stem cells. Embryome Sciences paid ACT a $250,000
license fee – this payment has also been accounted for on the balance sheet in
the “Advanced license fee and others” line item – and will pay an 8% royalty on
sales of products, services, and processes that utilize the licensed
technology. Once a total of $1,000,000 of royalties has been paid, no
further royalties will be due. The licenses will expire in twenty years or upon
the expiration of the last to expire of the licensed patents, whichever is
later.
On August
15, 2008, Embryome Sciences entered into a License Agreement and a Sublicense
Agreement with ACT under which Embryome Sciences acquired world-wide rights to
use an array of ACT technology (the “ACT License”) and technology licensed by
ACT from affiliates of Kirin Pharma Company, Limited (the “Kirin
Sublicense”). The ACT License and Kirin Sublicense permit the
commercialization of products in human therapeutic and diagnostic product
markets.
The
technology licensed by Embryome Sciences covers methods to transform cells of
the human body, such as skin cells, into an embryonic state in which the cells
will be pluripotent. Under the ACT License, Embryome Sciences paid ACT a
$200,000 license fee – this payment has also been accounted for on the balance
sheet in the “Advanced license fee and others” line item – and will pay a 5%
royalty on sales of products, services, and processes that utilize the licensed
ACT technology, and 20% of any fees or other payments (other than equity
investments, research and development costs, loans and royalties) received by
Embryome Sciences from sublicensing the ACT technology to third
parties. Once a total of $600,000 of royalties has been paid, no
further royalties will be due. The licenses will expire in twenty years or
upon the expiration of the last to expire of the licensed patents, whichever is
later.
Under the Kirin Sublicense, Embryome
Sciences has paid ACT a $50,000 license fee – this payment has also been
accounted for on the balance sheet in the “Advanced license fee and others” line
item – and will pay a 3.5% royalty on sales of products, services, and processes
that utilize the licensed ACT technology, and 20% of any fees or other payments
(other than equity investments, research and development costs, loans and
royalties) received by Embryome Sciences from sublicensing the Kirin Technology
to third parties. Embryome Sciences will also
13
pay to
ACT or to an affiliate of Kirin Pharma Company, Limited (“Kirin”), annually, the
amount, if any, by which royalties payable by ACT under its license agreement
with Kirin are less than the $50,000 annual minimum royalty
due. Those payments by Embryome Sciences will be credited against
other royalties payable to ACT under the Kirin Sublicense. The
licenses will expire upon the expiration of the last to expire of the licensed
patents, or May 9, 2016 if no patents are issued.
5. Shareholders’
Deficit
During April 1998, BioTime entered into
a financial advisory services agreement with Greenbelt Corp. (“Greenbelt”), a corporation controlled by Alfred D.
Kingsley and Gary K. Duberstein, who are also shareholders of BioTime. BioTime agreed
to indemnify Greenbelt and its officers, affiliates,
employees, agents, assignees, and controlling person from any liabilities
arising out of or in connection with actions taken on BioTime's behalf under the
agreement. The agreement was renewed annually through March 31,
2007. BioTime paid Greenbelt $90,000 in cash and issued 200,000
common shares for the twelve months ending March 31,
2007. Greenbelt permitted BioTime to defer paying
certain cash fees until October 2007. In return for allowing the
deferral, Greenbelt was issued an additional 60,000 common
shares by BioTime.
On March
31, 2008, BioTime entered into an amendment to its financial adviser agreement
with Greenbelt, renewing that agreement through December 31, 2008. Under
the amendment, BioTime will pay Greenbelt a total fee of $135,000 in cash and
will issue a total of 300,000 common shares. BioTime issued 150,000
common shares to Greenbelt on April 1, 2008, issued another 75,000 common shares
on October 1, 2008, and will issue a final 75,000 common shares on January 2,
2009. The cash fee is payable in three equal installments of $45,000
each on July 1, 2008, October 1, 2008, and January 2, 2009. In
accordance with its rights under the agreement, BioTime has elected to defer
until January 2, 2009 the cash payments due on July 1, 2008 and October 1, 2008,
and in consideration for these deferrals will issue to Greenbelt 30,000
additional common shares for each payment deferred; these additional shares will
be issued in conjunction with the cash payments on January 2, 2009.
The
agreement will terminate on December 31, 2008, unless BioTime or Greenbelt
terminates it on an earlier date. In the event of an early
termination, BioTime will pay Greenbelt a pro rata portion of the cash and
shares earned during the calendar quarter in which the agreement terminated,
based upon the number of days elapsed.
Activity
related to the Greenbelt agreement is presented in the table below:
|
Balance
included in Accounts Payable at January 1,
|
Add:
Cash-based
expense accrued
|
Add:
Stock-based
expense accrued
|
Less:
Cash
payments
|
Less:
Value
of stock-based payments
|
Balance
included in Accounts Payable at September 30,
|
|
|
2008
|
$
90,000
|
$
101,250
|
$172,650
|
$(0)
|
$
(43,500)
|
$
320,400
|
|
2007
|
$108,000
|
$
22,500
|
$
62,500
|
$(0)
|
$(103,000)
|
$
90,000
|
During the third quarter of 2008,
BioTime sold 100,000 common shares to a private investor
for $100,000.
14
6.
Loss Per Share
Basic
loss per share excludes dilution and is computed by dividing net loss by the
weighted average number of common shares outstanding during the
period. Diluted loss per share reflects the potential dilution from
securities and other contracts which are exercisable or convertible into common
shares. For the three and nine months ended September 30, 2008 and
2007, options to purchase 3,548,332 and 1,691,664 common shares, respectively,
and warrants to purchase 7,947,867 and 7,847,867 common shares, respectively,
were excluded from the computation of loss per share, as their inclusion would
be antidilutive. As a result, there is no difference between basic
and diluted calculations of loss per share for all periods
presented.
7.
Subsequent Events
BioTime received royalties in the
amount of $231,896 during October 2008 based on sales of Hextend made by
Hospira, Inc. and CJ CheilJedang Corp. in the third quarter of
2008. This revenue will be reflected in BioTime’s consolidated
financial statements for the year ending December 31, 2008.
On
October 1, 2008, under the terms of its current financial adviser agreement,
BioTime issued 75,000 common shares to Greenbelt Corp. BioTime also
elected to defer until January 1, 2009 a cash payment of $45,000 that was
otherwise payable on October 1, 2008. As consideration for this
deferral, BioTime will issue to Greenbelt an additional 30,000 common shares at
the time the cash payment is made.
BioTime
has a revolving line of credit Agreement (the “Credit Agreement”) with certain
private lenders. In November 2008, BioTime amended the Credit
Agreement to increase the total amount of permissible borrowings from $2,500,000
to $3,500,000 to the extent BioTime is able to obtain additional lending
commitments. The maturity date for the amended line of credit has
been extended from November 15, 2008 to April 15, 2009. As of
November 17, 2008, certain lenders elected to convert $1,050,000 in principal
and $62,013 of accrued interest on their loans to 1,112,013 BioTime common
shares. Loans in the aggregate principal amount of $1,450,000 remain outstanding
under the Credit Agreement and will mature on April 15, 2009.
The
lenders have been given the right to exchange their line of credit promissory
notes that mature on April 15, 2009 for BioTime’s common shares at prices
ranging from $1.25 to $1.50 per share, and/or for common stock of BioTime’s
subsidiary, Embryome Sciences, Inc., at prices ranging from $2.25 to $2.50 per
share.
In
consideration for making the additional credit available and for extending the
maturity date of outstanding loans, BioTime agreed to issue the lenders a number
of common shares having an aggregate market value equal to six percent (6%) of
the lender’s loan commitment.
Also in
November 2008, BioTime’s subsidiary, Embryome Sciences, entered into new loan
agreements with certain private lenders under which the lenders agreed to loan
$275,000 to Embryome Sciences. Interest on the loans shall accrue and
be payable at the rate of 9.8% per annum on the outstanding principal balance
until the maturity date, which is April 15, 2009.
Embryome
Sciences may prepay the principal, in whole or in part, with accrued interest,
at any time. As consideration for arranging the loans, BioTime will
issue warrants to purchase up to 277,919 common shares. The warrants
will be exercisable at a price of $2.00 per share, and will expire on October
31, 2010 if not exercised prior to that date.
15
Item
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
Since our
inception in November 1990, we have been engaged primarily in research and
development activities, which have culminated in the commercial launch of
Hextend®, our
lead product, and a clinical trial of PentaLyte®. Our
operating revenues have been generated primarily from licensing fees and from
royalties on the sale of Hextend. During October 2007, we entered the
field of regenerative medicine where we plan to develop stem cell related
products and technology for diagnostic, therapeutic and research
use. Our ability to generate substantial operating revenue depends
upon our success in developing and marketing or licensing our plasma volume
expanders, stem cell products, and organ preservation solutions and technology
for medical and research use.
Plasma
Volume Expander Products
Our
principal product, Hextend, is a physiologically balanced blood plasma volume
expander, for the treatment of hypovolemia. Hextend is being
distributed in the United States by Hospira, Inc. and in South Korea by CJ
CheilJedang Corp. (“CJ”) under exclusive licenses from us. Summit
Pharmaceuticals International Corporation (“Summit”) has a license to develop
Hextend and PentaLyte in Japan, the People’s Republic of China, and
Taiwan. Summit has entered into sublicenses with Maruishi
Pharmaceutical Co., Ltd. (“Maruishi”) to obtain regulatory approval,
manufacture, and market Hextend in Japan, and Hextend and PentaLyte in China and
Taiwan.
Hextend
has become the standard plasma volume expander at a number of prominent teaching
hospitals and leading medical centers and is part of the Tactical Combat
Casualty Care protocol. We believe that as Hextend use proliferates
within the leading U.S. hospitals, other smaller hospitals will follow their
lead, contributing to sales growth.
Under our
license agreements, Hospira and CJ will report sales of Hextend and pay us the
royalties and license fees due on account of such sales after the end of each
calendar quarter. We recognize such revenues in the quarter in which
the sales report is received, rather than the quarter in which the sales took
place.
Our
royalty revenues for the three months ended September 30, 2008 consist of
royalties on sales of Hextend made by Hospira during the period beginning April
1, 2008 and ending June 30, 2008. Royalty revenues recognized for
that three-month period were $341,391, an 86% increase from the $183,093 of
royalty revenue during the same period last year. The increase in
royalties reflects an increase in sales to the United States Armed
Forces. Purchases by the Armed Forces generally take the form of
intermittent, large volume orders, and cannot be predicted with
certainty.
16
We
received royalties of $212,009 from Hospira and $19,887 from CJ during October
2008 based on sales of Hextend during the three months ended September 30,
2008. This revenue will be reflected in our financial statements for
the fourth quarter of 2008. For the same period last year, we
received royalties of $230,646 from Hospira and $15,036 from
CJ. Royalties from CJ were included in license fees during prior
accounting periods.
We have
completed a Phase II clinical trial of PentaLyte in which PentaLyte was used to
treat hypovolemia in cardiac surgery. Our ability to commence and
complete additional clinical studies of PentaLyte depends on our cash resources
and the costs involved, which are not presently determinable as we do not know
yet the actual scope or cost of the clinical trials that the FDA will require
for PentaLyte.
Stem
Cells and Products for Regenerative Medicine Research
We are
conducting our stem cell business through our new, wholly-owned subsidiary,
Embryome Sciences, Inc. (“Embryome Sciences”). We plan to focus our
initial efforts in the regenerative medicine field on the development and sale
of advanced human stem cell products and technology for diagnostic, therapeutic
and research use. Regenerative medicine refers to therapies based on
human embryonic stem (“hES”) cell technology that are designed to rebuild cell
and tissue function lost due to degenerative disease or injury. Our
initial marketing efforts will be directed to researchers at universities and
other institutions, to companies in the bioscience and biopharmaceutical
industries, and to other companies that provide research products to companies
in those industries.
Embryome Sciences has already
introduced its first stem cell research products, and is implementing plans to
develop additional research products over the next two years. Our
first products include a relational database, available at our website
embryome.com, that will permit researchers to chart the cell lineages of human
development, the genes expressed in those cell types, and antigens present on
the cell surface of those cells that can be used in
purification. This database will provide the first detailed map of
the embryome, thereby aiding researchers in navigating the complexities of human
development and in identifying the many hundreds of cell types coming from
embryonic stem cells.
Embryome Sciences is also now marketing
cell growth media called ESpanTM in
collaboration with Lifeline Cell Technology, LLC. These growth media
are designed for the growth of human embryonic progenitor
cells. Additional new products that Embryome Sciences has targeted
for development are ESpyTM
cell lines, which will be derivatives of hES cells that send beacons of light in
response to the activation of particular genes. The ESpy™ cell lines
will be developed in conjunction with Lifeline using the ACTCellerate technology
licensed from ACT and other technology sublicensed from
Lifeline. Embryome Sciences also plans to bring to market other new
growth and differentiation factors that will permit researchers to manufacture
specific cell types from embryonic stem cells, and purification tools useful to
researchers in quality control of products for regenerative
medicine. As new products are developed, they will become available
for purchase on embryome.com.
17
We are in
the process of launching our first products for stem cell
research. We cannot predict the amount of revenue that the new
products we offer might generate.
Hextend®,
PentaLyte®, and HetaCool® are registered trademarks of BioTime, Inc., and
ESpanTM
and EspyTM are
trademarks of Embryome Sciences, Inc.
Results
of Operations
We
incurred a net loss of $1,077,194 during the three months, and a net loss of
$2,215,935 during the nine months, ended September 30, 2008. Because
our research and development expenses and production and marketing expenses will
be charged against earnings for financial reporting purposes, management expects
that there will be losses from operations in the near term.
Revenues
For the
three months ended September 30, 2008, we recognized $341,391 in royalty
revenue, whereas we recognized $183,093 for the three months September 30,
2007. This increase of 86% in royalties is attributable to an
increase in product sales by Hospira, and reflects an increase in sales both to
hospitals and to the United States Armed Forces.
We
recognized $70,850 and $48,066 of license fees from CJ and Summit during the
three months ended September 30, 2008 and the three months ended September 30,
2007, respectively. These licensing fee amounts were received in
earlier accounting periods, but full recognition of license fees has been
deferred, and is being recognized over the life of the contract, which has been
estimated to last until approximately 2019 based on the current expected life of
the governing patent covering our products in Korea and Japan. See
Notes 2 and 4 to the condensed consolidated financial statements.
Operating
Expenses
Research
and development expenses were $548,478 for the three months ended September 30,
2008, compared to $170,382 for the three months ended September 30,
2007. This increase is primarily attributable to a $118,361 increase
in salaries allocated to research and development, an increase of $25,567 in
payroll fees and taxes allocated to research and development expense, an
increase of $9,347 in fees paid to scientific consultants, an increase of $8,380
in miscellaneous research and development costs, an increase of $15,228 in
insurance costs allocated to research and development expense, an increase of
$68,985 in expenditures made to cover laboratory expenses and supplies, and an
increase of $121,953 in rent costs allocated to research and development
expense. Research and development expenses were $1,312,607 for the
nine months ended September 30, 2008, compared to $724,699 for the nine months
ended September 30, 2007. This increase is primarily attributable to
a $224,641 increase in salaries allocated to research and development, an
increase of $67,540 in payroll fees and taxes allocated to research and
development expense, an increase of $44,350 in insurance costs allocated to
research and development expense, an increase of $8,380 in miscellaneous
research and development costs, an increase of $140,610 in expenditures made to
cover laboratory expenses and supplies,
18
and
an increase of $180,160 in rent costs allocated to research and development
expense; these increases were offset to some extent by a decrease of $108,766 in
expenses paid for outside research. Research and development expenses
include laboratory study expenses, salaries, and consultants’ fees.
General
and administrative expenses increased to $792,306 for the three months ended
September 30, 2008, from $216,443 for the three months ended September 30,
2007. This increase is primarily
attributable to an increase of $270,358 in stock-based expense allocated to
general and administrative costs, an increase of $18,766 in legal fees, an
increase of $30,672 in patent expenses, an increase of $34,365 in travel and
entertainment expenses, an increase of $12,889 in salaries allocated to general
and administrative expense, an increase of $34,263 in accounting fees, an
increase of $9,295 in investor relations expenses, an increase of $30,487 in
rent costs allocated to general and administrative expense, and an increase of
$127,368 in general and administrative consulting fees. General and
administrative expenses increased to $1,760,514 for the nine months ended
September 30, 2008, from $927,877 for the nine months ended September 30,
2007. This increase is primarily
attributable to an increase of $347,275 in stock-based expense allocated to
general and administrative costs, an increase of $89,789 in legal fees, an
increase of $91,010 in travel and entertainment expenses, an increase of $19,368
in expenses related to outside services, an increase of $15,000 in licensing
fees, an increase of $30,078 in office expenses, an increase of $45,039 in rent
costs allocated to general and administrative expense, an increase of $22,004 in
payroll fees and taxes allocated to general and administrative expense, an
increase of $16,956 in investor relations expenses, and an increase of $155,828
in general and administrative consulting fees.
Research
and development expenses and general and administrative expenses for the three
months and nine months ended September 30, 2008 increased over the same periods
in 2007 due primarily to our entry into the fields of stem cell research and
regenerative medicine.
Interest
and Other Income (Expense)
For the three months ended Sept. 30,
2008, we incurred a total of $164,460 of
net interest expense, compared to net interest expense of $59,234 for
the three months ended September 30, 2007. For the nine months ended
September 30, 2008, we incurred a total of $366,795 of
net interest expense, compared to net interest expense of $163,053 for
the nine months ended September 30, 2007.
Income
Taxes
During the three months ended September
30, 2008, we incurred no foreign withholding taxes. With respect to
Federal and state income taxes, our effective income tax rate differs from the
statutory rate due to the 100% valuation allowance established for our deferred
tax assets, which relate primarily to net operating loss carryforwards, as
realization of such benefits is not deemed to be likely.
19
Liquidity and Capital
Resources
We need to obtain additional debt or equity capital in order to finance our operations. Since inception, we have primarily financed our operations through the sale of equity securities, licensing fees, royalties on product sales by our licensees, and borrowings. The amount of license fees and royalties that may be earned through the licensing and sale of our products and technology, the timing of the receipt of license fee payments, and the future availability and terms of equity financing, are uncertain. The unavailability or inadequacy of financing or revenues to meet future capital needs could force us to modify, curtail, delay or suspend some or all aspects of our planned operations. Sales of additional equity securities could result in the dilution of the interests of present shareholders.
The major
components of our net cash used in operations of approximately $1,100,000 in the
nine months ended September 30, 2008 can be summarized as follows: net loss of
approximately $2,200,000 was reduced by non-cash expenses of approximately
$704,000, resulting in the cash loss of approximately $1,500,000 which was
partly funded with a net overall change in working capital of approximately
$412,000.
At
September 30, 2008, we had $52,082 cash and cash equivalents on hand, and lines
of credit for $2,578,600, from which $2,538,991 had been drawn.
During
the three months ended June 30, 2008, Embryome Sciences paid a total of $500,000
in license fees to acquire stem cell technology licenses for its research and
development program.
We have a
Revolving Line of Credit Agreement (the “Credit Agreement”) with certain private
lenders that is collateralized by a security interest in our right to receive
royalty and other payments under our license agreement with
Hospira. In November 2008, we amended the Credit Agreement to
increase the total amount of permissible borrowings from $2,500,000 to
$3,500,000 to the extent we are able to obtain additional lending
commitments. The maturity date for the amended line of credit has
been extended from November 15, 2008 to April 15, 2009. As of
November 17, 2008, certain lenders elected to convert $1,050,000 in principal
and $62,013 of accrued interest on their loans to 1,112,013 BioTime common
shares. Loans in the aggregate principal amount of $1,450,000 remain outstanding
under the Credit Agreement and will mature on April 15, 2009. We intend to seek
additional loan commitments up to the $3,500,000 maximum allowable amount
under the Credit Agreement. There is no assurance that we will be successful in
obtaining additional commitments from lenders.
The
lenders have been given the right to exchange their line of credit promissory
notes that mature on April 15, 2009, for our common shares at prices ranging
from $1.25 to $1.50 per share, and/or for common stock of our subsidiary,
Embryome Sciences, at prices ranging from $2.25 to $2.50 per share.
We also
obtained a line of credit from American Express in August 2004, which allows for
borrowings up to $25,300; at September 30, 2008, we had drawn $23,045 against
this line. See Note 3 to the condensed consolidated financial
statements for additional information.
We also
secured a line of credit from Advanta in November 2006, which allows for
borrowings up to $35,000; at September 30, 2008, we had drawn $32,612 against
this line. See Note 3 to the condensed consolidated financial
statements for additional information.
In
consideration for making the additional credit available and for extending the
maturity date of outstanding loans, we agreed to issue the lenders a number of
common shares having an aggregate market value equal to six percent (6%) of the
lender’s loan commitment.
20
In
November 2008, Embryome Sciences entered into new loan agreements with certain
private lenders under which the lenders agreed to loan $275,000 to Embryome
Sciences. Interest on the loans shall accrue and be payable at the
rate of 9.8% per annum on the outstanding principal balance until the maturity
date, which is April 15, 2009. Embryome Sciences may prepay the
principal, in whole or in part, with accrued interest, at any
time. As consideration for arranging the loans, we will issue
warrants to purchase up to 277,919 common shares. The warrants will
be exercisable at a price of $2.00 per share, and will expire on October 31,
2010 if not exercised prior to that date.
We will
depend upon royalties from the sale of Hextend by Hospira and CJ as our
principal source of revenues for the near future. Those royalty
revenues will be supplemented by any revenues that we may receive from our stem
cell research products, and by license fees if we enter into new commercial
license agreements for our products.
The
amount and pace of research and development work that we can do or sponsor, and
our ability to commence and complete the clinical trials that are required in
order for us to obtain FDA and foreign regulatory approval of products, depend
upon the amount of money we have. Future research and clinical study
costs are not presently determinable due to many factors, including the inherent
uncertainty of these costs and the uncertainty as to timing, source, and amount
of capital that will become available for these projects. We have
already curtailed the pace of our plasma volume expander development efforts due
to the limited amount of funds available, and we may have to postpone further
laboratory and clinical studies, unless our cash resources increase through
growth in revenues, the completion of licensing agreements, additional equity
investment, borrowing, or third party sponsorship.
We have
no contractual obligations as of September 30, 2008, with the exception of two
facilities lease agreements. We currently have a fixed,
non-cancelable operating lease on our office and laboratory facilities in
Emeryville, California (the “Emeryville lease”). Under the Emeryville
lease, we are committed to make payments of $11,127 per month, increasing 3%
annually, plus our pro rata share of operating costs for the building and office
complex, through May 31, 2010. We plan to sublet our Emeryville
facility if we are able to find a suitable subtenant. In April 2008,
we entered into a sublease of approximately 11,000 square feet of office and
research laboratory spaced at 1301 Harbor Bay Parkway, in Alameda, California
(the “Alameda sublease”). We have now moved our headquarters to this
new facility. The Alameda sublease will expire on November 30,
2010. Base monthly rent will be $22,000 during 2008, $22,660 during
2009, and $23,340 during 2010. In addition to base rent, we will pay
a pro rata share of real property taxes and certain costs related to the
operation and maintenance of the building in which the subleased premises are
located.
Item 3. Quantitative and Qualitative
Disclosures About Market Risk.
We did not hold any market risk
sensitive instruments as of September 30, 2008, December 31, 2007, or September
30, 2007.
21
Item
4T. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
It is
management’s responsibility to establish and maintain adequate internal control
over all financial reporting pursuant to Rule 13a-15 under the Securities
Exchange Act of 1934 (the “Exchange Act”). Our management, including
our principal executive officer, our principal operations officer, and our
principal financial officer, have reviewed and evaluated the effectiveness of
our disclosure controls and procedures as of a date within ninety (90) days of
the filing date of this Form 10-Q quarterly report. Following this
review and evaluation,
management collectively determined that our disclosure controls and
procedures are effective to ensure that information required to be disclosed by
us in reports that we file or submit under the Exchange Act (i) is recorded,
processed, summarized and reported within the time periods specified in SEC
rules and forms, and (ii) is accumulated and communicated to management,
including our chief executive officer, our chief operations officer, and our
chief financial officer, as appropriate to allow timely decisions regarding
required disclosure.
Changes
in Internal Controls
There
were no changes in our internal control over financial reporting that occurred
during the period covered by this Quarterly Report on Form 10-Q that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
22
PART
II - OTHER INFORMATION
Item
2. Unregistered Sale of Equity Securities and Use of
Proceeds.
During
August 2008 we sold 100,000 common shares to a private
investor. These shares were issued in reliance upon an exemption from
registration under Section 4(2) of the Securities Act of 1933, as
amended.
During
October 2008, we issued 75,000 common shares to our financial advisor under the
terms of our Financial Advisor Agreement. These shares were issued in
reliance upon an exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended.
During
November 2008 we agreed to issue warrants to purchase 277,919 common shares in
connection with the arrangement of loans to Embryome Sciences by certain private
investors. These warrants will be issued in reliance upon an
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended.
During
November 2008, some of our lenders elected to acquire our common shares in
exchange for their promissory notes under the terms of our Credit
Agreement. We will issue 1,112,013 common shares to those lenders in
reliance upon an exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended. In addition we will issue 54,504
common shares to those lenders who agreed to extend the maturity date of their
loans under our Credit Agreement. Those shares will also be issued in
reliance upon an exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended.
Item
6. Exhibits
Exhibit
Numbers Description
3.1 Articles
of Incorporation.†
3.2 Amendment
of Articles of Incorporation.***
3.3 By-Laws,
As Amended.#
4.1 Specimen
of Common Share Certificate.+
|
4.2
|
Form
of Warrant Agreement between BioTime, Inc. and American Stock Transfer
& Trust Company++
|
|
|
4.3
|
Form
of Amendment to Warrant Agreement between BioTime, Inc. and American Stock
Transfer & Trust Company. +++
|
|
4.4
|
Form
of Warrant+++
|
10.1 Intellectual
Property Agreement between BioTime, Inc. and Hal Sternberg.+
10.2 Intellectual
Property Agreement between BioTime, Inc. and Harold Waitz.+
10.3 Intellectual
Property Agreement between BioTime, Inc. and Judith Segall.+
10.4 Intellectual
Property Agreement between BioTime, Inc. and Steven
Seinberg.*
23
10.5 Agreement
between CMSI and BioTime Officers Releasing Employment Agreements, Selling
Shares, and Transferring Non-Exclusive License.+
|
10.6
|
Agreement
for Trans Time, Inc. to Exchange CMSI Common Stock for BioTime, Inc.
Common Shares.+
|
10.7 2002
Stock Option Plan, as amended.##
|
10.8
|
Exclusive
License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a
request for confidential
treatment).###
|
|
10.9
|
Modification
of Exclusive License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a request for
confidential treatment).^
|
|
10.10
|
Exclusive
License Agreement between BioTime, Inc. and CJ
Corp.**
|
|
10.11
|
Hextend
and PentaLyte Collaboration Agreement between BioTime, Inc. and Summit
Pharmaceuticals International
Corporation.‡
|
|
10.12
|
Lease
dated as of May 4, 2005 between BioTime, Inc. and Hollis R& D
Associates ‡‡
|
|
10.13
|
Addendum
to Hextend and PentaLyte Collaboration Agreement Between BioTime Inc. And
Summit Pharmaceuticals International
Corporation‡‡‡
|
|
10.14
|
Amendment
to Exclusive License Agreement Between BioTime, Inc.
and Hospira, Inc.††
|
|
10.15
|
Hextend
and PentaLyte China License Agreement Between BioTime, Inc. and Summit
Pharmaceuticals International
Corporation.†††
|
|
10.16
|
Revolving
Credit Line Agreement between BioTime, Inc, Alfred D. Kingsley, Cyndel
& Co., Inc., and George Karfunkel, dated April 12,
2006.††††
|
|
10.17
|
Security
Agreement executed by BioTime, Inc., dated April 12,
2006.††††
|
|
10.18
|
Form
of Revolving Credit Note of BioTime, Inc. in the principal amount of
$166,666.67 dated April 12,
2006.††††
|
|
10.19
|
First
Amended and Restated Revolving Line of Credit Agreement, dated October 17,
2007. ####
|
|
10.20
|
Form
of Amended and Restated Revolving Credit Note.
####
|
|
10.21
|
Form
of Revolving Credit Note. ####
|
|
10.22
|
First
Amended and Restated Security Agreement, dated October 17, 2007.
####
|
|
10.23
|
Employment
Agreement, dated October 10, 2007, between BioTime, Inc. and Michael D.
West.++++
|
24
|
10.24
|
Commercial
License and Option Agreement between BioTime and Wisconsin
Alumni Research
Foundation.****
|
|
10.25
|
Second
Amended and Restated Revolving Line of Credit Agreement, dated February
15, 2008.‡‡‡‡
|
10.26
Form of Amended and Restated Revolving Credit Note.‡‡‡‡
10.27 Second
Amended and Restated Security Agreement, dated February 15,
2008.‡‡‡‡
10.28 Third
Amended and Restated Revolving Line of Credit Agreement, March 31,
2008.~
10.29 Third
Amended and Restated Security Agreement, dated March 31, 2008.~
10.30 Sublease
Agreement between BioTime, Inc. and Avigen, Inc.++++
|
10.31
|
License,
Product Production, and Distribution Agreement, dated June 19, 2008, among
Lifeline Cell Technology, LLC, BioTime, Inc., and Embryome Sciences, Inc.
^^
|
|
10.32
|
License
Agreement, dated July 10, 2008, between Embryome Sciences, Inc. and
Advanced Cell Technology, Inc. ^^
|
|
10.33
|
License
Agreement, dated August 15, between Embryome Sciences, Inc. and Advanced
Cell Technology, Inc. ^^^
|
|
10.34
|
Sublicense
Agreement, dated August 15, between Embryome Sciences, Inc. and Advanced
Cell Technology, Inc. ^^^
|
|
10.35
|
Fourth
Amendment of Revolving Line of Credit
Agreement.^^^
|
|
10.36
|
Fourth
Amendment of Security Agreement.^^^
|
31 Rule
13a-14(a)/15d-14(a) Certification^^^
|
32
|
Section
1350 Certification^^^
|
†Incorporated
by reference to BioTime’s Form 10-K for the fiscal year ended June 30,
1998.
+
Incorporated by reference to Registration Statement on Form S-1, File Number
33-44549 filed with the Securities and Exchange Commission on December 18, 1991,
and Amendment No. 1 and Amendment No. 2 thereto filed with the Securities and
Exchange Commission on February 6, 1992 and March 7, 1992,
respectively.
#
Incorporated by reference to Registration Statement on Form S-1, File Number
33-48717 and Post-Effective Amendment No. 1 thereto filed with the Securities
and Exchange Commission on June 22, 1992, and August 27, 1992,
respectively.
25
++
Incorporated by reference to Registration Statement on Form S-2, File Number
333-109442, filed with the Securities and Exchange Commission on October 3,
2003, and Amendment No.1 thereto filed with the Securities and Exchange
Commission on November 13, 2003.
+++Incorporated
by reference to Registration Statement on Form S-2, File Number 333-128083,
filed with the Securities and Exchange Commission on September 2,
2005.
##
Incorporated by reference to Registration Statement on Form S-8, File Number
333-101651 filed with the Securities and Exchange Commission on December 4, 2002
and Registration Statement on Form S-8, File Number 333-122844 filed with the
Securities and Exchange Commission on February 23, 2005.
###
Incorporated by reference to BioTime’s Form 8-K, filed April 24,
1997.
^
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
1999.
*
Incorporated by reference to BioTime’s Form 10-K for the year ended December 31,
2001.
**
Incorporated by reference to BioTime’s Form 10-K/A-1 for the year ended December
31, 2002.
‡
Incorporated by reference to BioTime’s Form 8-K, filed December 30,
2004
‡‡
Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form S-2 File Number 333-109442, filed with the Securities and
Exchange Commission on May 24, 2005
‡‡‡
Incorporated by reference to BioTime’s Form 8-K, filed December 20,
2005
††
Incorporated by reference to BioTime’s Form 8-K, filed January 13,
2006
†††
Incorporated by reference to BioTime’s Form 8-K, filed March 30,
2006
††††
Incorporated by reference to BioTime’s Form 10-K for the year ended December 31,
2005
***
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
2006.
****
Incorporated by reference to BioTime’s Form 8-K, filed January 9,
2008.
‡‡‡‡
Incorporated by reference to BioTime’s Form 8-K, filed March 10,
2008.
~
Incorporated by reference to BioTime’s Form 8-K filed April 4,
2008.
++++
Incorporated by reference to BioTime’s Form 10-KSB for the year ended December
31, 2007.
^^
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
2008.
^^^ Filed
herewith
26
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
BIOTIME,
INC.
|
|
|
Date: November
18, 2008
|
/s/
Michael D. West
|
|
Michael
D. West
|
|
|
Chief
Executive Officer
|
|
|
Date: November
18, 2008
|
/s/
Steven A. Seinberg
|
|
Steven
A. Seinberg
|
|
|
Chief
Financial
Officer
|
27
Exhibit
Numbers Description
3.1 Articles
of Incorporation.†
3.2 Amendment
of Articles of Incorporation.***
3.3 By-Laws,
As Amended.#
4.1 Specimen
of Common Share Certificate.+
|
4.2
|
Form
of Warrant Agreement between BioTime, Inc. and American Stock Transfer
& Trust Company++
|
|
|
4.3
|
Form
of Amendment to Warrant Agreement between BioTime, Inc. and American Stock
Transfer & Trust Company. +++
|
|
4.4
|
Form
of Warrant+++
|
10.1
Intellectual Property Agreement between BioTime, Inc. and Hal
Sternberg.+
10.2 Intellectual
Property Agreement between BioTime, Inc. and Harold Waitz.+
10.3 Intellectual
Property Agreement between BioTime, Inc. and Judith Segall.+
10.4 Intellectual
Property Agreement between BioTime, Inc. and Steven Seinberg.*
|
10.5
|
Agreement
between CMSI and BioTime Officers Releasing Employment Agreements, Selling
Shares, and Transferring Non-Exclusive
License.+
|
|
10.6
|
Agreement
for Trans Time, Inc. to Exchange CMSI Common Stock for BioTime, Inc.
Common Shares.+
|
10.7 2002
Stock Option Plan, as amended.##
|
10.8
|
Exclusive
License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a
request for confidential
treatment).###
|
|
10.9
|
Modification
of Exclusive License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a request for
confidential treatment).^
|
|
10.10
|
Exclusive
License Agreement between BioTime, Inc. and CJ
Corp.**
|
|
10.11
|
Hextend
and PentaLyte Collaboration Agreement between BioTime, Inc. and Summit
Pharmaceuticals International
Corporation.‡
|
28
|
10.12
|
Lease
dated as of May 4, 2005 between BioTime, Inc. and Hollis R& D
Associates ‡‡
|
|
10.13
|
Addendum
to Hextend and PentaLyte Collaboration Agreement Between BioTime Inc. And
Summit Pharmaceuticals International
Corporation‡‡‡
|
|
10.14
|
Amendment
to Exclusive License Agreement Between BioTime, Inc.
and Hospira, Inc.††
|
|
10.15
|
Hextend
and PentaLyte China License Agreement Between BioTime, Inc. and Summit
Pharmaceuticals International
Corporation.†††
|
|
10.16
|
Revolving
Credit Line Agreement between BioTime, Inc, Alfred D. Kingsley, Cyndel
& Co., Inc., and George Karfunkel, dated April 12,
2006.††††
|
|
10.17
|
Security
Agreement executed by BioTime, Inc., dated April 12,
2006.††††
|
|
10.18
|
Form
of Revolving Credit Note of BioTime, Inc. in the principal amount of
$166,666.67 dated April 12,
2006.††††
|
|
10.19
|
First
Amended and Restated Revolving Line of Credit Agreement, dated October 17,
2007. ####
|
|
10.20
|
Form
of Amended and Restated Revolving Credit Note.
####
|
|
10.21
|
Form
of Revolving Credit Note. ####
|
|
10.22
|
First
Amended and Restated Security Agreement, dated October 17, 2007.
####
|
|
10.23
|
Employment
Agreement, dated October 10, 2007, between BioTime, Inc. and Michael D.
West.++++
|
|
10.24
|
Commercial
License and Option Agreement between BioTime and Wisconsin Alumni Research
Foundation.****
|
|
10.25
|
Second
Amended and Restated Revolving Line of Credit Agreement, dated February
15, 2008.‡‡‡‡
|
10.26 Form
of Amended and Restated Revolving Credit Note.‡‡‡‡
10.27 Second
Amended and Restated Security Agreement, dated February 15,
2008.‡‡‡‡
10.28 Third
Amended and Restated Revolving Line of Credit Agreement, March 31,
2008.~
10.29 Third
Amended and Restated Security Agreement, dated March 31, 2008.~
10.30 Sublease
Agreement between BioTime, Inc. and Avigen, Inc.++++
29
|
10.31
|
License,
Product Production, and Distribution Agreement, dated June 19, 2008, among
Lifeline Cell Technology, LLC, BioTime, Inc., and Embryome Sciences, Inc.
^^
|
10.32 License
Agreement, dated July 10, 2008, between Embryome Sciences, Inc. and Advanced
Cell Technology, Inc. ^^
|
10.33
|
License
Agreement, dated August 15, between Embryome Sciences, Inc. and Advanced
Cell Technology, Inc. ^^^
|
|
10.34
|
Sublicense
Agreement, dated August 15, between Embryome Sciences, Inc. and Advanced
Cell Technology, Inc. ^^^
|
|
10.35
|
Fourth
Amendment of Revolving Line of Credit
Agreement.^^^
|
|
10.36
|
Fourth
Amendment of Security Agreement.^^^
|
31 Rule
13a-14(a)/15d-14(a) Certification^^^
|
32
|
Section
1350 Certification^^^
|
†Incorporated
by reference to BioTime’s Form 10-K for the fiscal year ended June 30,
1998.
+
Incorporated by reference to Registration Statement on Form S-1, File Number
33-44549 filed with the Securities and Exchange Commission on December 18, 1991,
and Amendment No. 1 and Amendment No. 2 thereto filed with the Securities and
Exchange Commission on February 6, 1992 and March 7, 1992,
respectively.
#
Incorporated by reference to Registration Statement on Form S-1, File Number
33-48717 and Post-Effective Amendment No. 1 thereto filed with the Securities
and Exchange Commission on June 22, 1992, and August 27, 1992,
respectively.
++
Incorporated by reference to Registration Statement on Form S-2, File Number
333-109442, filed with the Securities and Exchange Commission on October 3,
2003, and Amendment No.1 thereto filed with the Securities and Exchange
Commission on November 13, 2003.
+++Incorporated
by reference to Registration Statement on Form S-2, File Number 333-128083,
filed with the Securities and Exchange Commission on September 2,
2005.
##
Incorporated by reference to Registration Statement on Form S-8, File Number
333-101651 filed with the Securities and Exchange Commission on December 4, 2002
and Registration Statement on Form S-8, File Number 333-122844 filed with the
Securities and Exchange Commission on February 23, 2005.
###
Incorporated by reference to BioTime’s Form 8-K, filed April 24,
1997.
^
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
1999.
*
Incorporated by reference to BioTime’s Form 10-K for the year ended December 31,
2001.
**
Incorporated by reference to BioTime’s Form 10-K/A-1 for the year ended December
31, 2002.
‡
Incorporated by reference to BioTime’s Form 8-K, filed December 30,
2004
‡‡
Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form S-2 File Number 333-109442, filed with the Securities and
Exchange Commission on May 24, 2005
‡‡‡
Incorporated by reference to BioTime’s Form 8-K, filed December 20,
2005
††
Incorporated by reference to BioTime’s Form 8-K, filed January 13,
2006
30
†††
Incorporated by reference to BioTime’s Form 8-K, filed March 30,
2006
††††
Incorporated by reference to BioTime’s Form 10-K for the year ended December 31,
2005
***
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
2006.
****
Incorporated by reference to BioTime’s Form 8-K, filed January 9,
2008.
‡‡‡‡
Incorporated by reference to BioTime’s Form 8-K, filed March 10,
2008.
~
Incorporated by reference to BioTime’s Form 8-K filed April 4,
2008.
++++
Incorporated by reference to BioTime’s Form 10-KSB for the year ended December
31, 2007.
^^
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
2008.
^^^ Filed
herewith
31
Exhibit
10.33
EXCLUSIVE LICENSE
AGREEMENT
This Exclusive License Agreement
(“Agreement”) is made and entered into as of the 15th day of August, 2008 (the
“Effective Date”), by and between Advanced Cell Technology, Inc., a Delaware
corporation with offices located at 11100 Santa Monica Blvd, Suite 850, Los
Angeles, CA 90025 (“ACT”), Embryome Sciences, Inc., a California corporation
(“LICENSEE”), with offices located at 1301 Harbor Bay Parkway, Suite 100,
Alameda, California 94502. ACT and LICENSEE are sometimes hereinafter
referred to as the “Parties.”
WITNESSETH
WHEREAS, ACT owns the PATENT RIGHTS,
SUPPLEMENTAL PATENT RIGHTS, and KNOW-HOW; and
WHEREAS, LICENSEE desires to obtain an
exclusive license from ACT to use the PATENT RIGHTS and KNOW-HOW upon the terms
and conditions set forth in this Agreement; and
WHEREAS, ACT is willing to grant such a
license to LICENSEE upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the
premises and the mutual covenants contained herein, the Parties hereto agree as
follows:
ARTICLE 1 -
DEFINITIONS
For the purposes of this Agreement, the
following words and phrases shall have the following meanings:
1.1 “AFFILIATE”
means any corporation, limited liability company, limited partnership or other
entity in control of, controlled by, or under common control with
LICENSEE.
1.2 “COMBINATION
PRODUCT” means a product that contains a LICENSED PRODUCT component and at least
one other component that has independent research, diagnostic or therapeutic
utility, could reasonably be sold separately and has economic value of its
own.
1.3 “CONFIDENTIAL
INFORMATION” means confidential or proprietary information of ACT or LICENSEE
relating to the PATENT RIGHTS, KNOW-HOW, LICENSED PROCESSES, LICENSED SERVICES
or LICENSED PRODUCTS. CONFIDENTIAL INFORMATION may be in written,
graphic, oral or physical form and may include scientific knowledge, know-how,
processes, inventions, techniques, formulae, products, business operations,
customer requirements, designs, sketches, photographs, drawings, specifications,
reports, studies, findings, data, plans or other records, biological materials,
and/or software. CONFIDENTIAL INFORMATION shall not
include: (a) information which is, or later becomes, generally
available to the public through no fault of the recipient; (b) information which
is provided to the recipient by an independent third party having no obligation
to keep the information secret; (c) information which the recipient can
establish by written documentation was previously known to it; or (d)
information which the recipient can establish by written
documentation
was independently developed by it without reference to the CONFIDENTIAL
INFORMATION.
1.4 “EXCLUDED FIELD” means
(a) the research,
development, manufacture and selling to third parties of human and non-human
animal cells for commercial research use, including small molecule and other
drug testing and basic research and (b) the manufacture and selling of human
cells for therapeutic and diagnostic use in the treatment of human (i) diabetes,
(ii) liver diseases and (iii) retinal diseases and retinal degenerative
diseases; but EXCLUDED FIELD shall exclude applications involving the use of
cells in the treatment of tumors where the primary use of the cells is the
destruction or reduction of tumors and does not involve regeneration of tissue
or organ function.
1.5 “KIRIN
FIELD” means research, development, manufacture and sale of polyclonal
antibodies in non-human mammals, excluding (1) immunoglobulin in the blood of
Bos taurus or Bos indicus and (ii) production of biopharmaceutical agents in
milk, including but not limited to proteins, peptides and polypeptides for
pharmaceutical, nutraceutical or other use.
1.6 “KNOW-HOW”
means all compositions of matter, techniques and data and other know-how and
technical information including inventions (whether or not patentable),
improvements and developments, practices, methods, concepts, trade secrets,
documents, computer data, computer slide illustrations, computer code,
apparatus, test data, analytical and quality control data, formulation,
manufacturing, patent data or descriptions, development information, drawings,
specifications, designs, plans, proposals and technical data and manuals and all
other CONFIDENTIAL INFORMATION that is owned or controlled by ACT as of the
Effective Date, and that specifically relates to the subject matter described in
or claimed by the PATENT RIGHTS.
1.7 “LICENSED
PROCESS” means any process or method, the development, use, practice,
or sale of which (1) is covered in whole or in part by, or cannot be performed
without infringing, a VALID CLAIM of the PATENT RIGHTS in the country in which
such LICENSED PROCESS is practiced or sold, or (2) otherwise utilizes the
KNOW-HOW.
1.8 “LICENSED
PRODUCT” means any product, or part thereof or derived therefrom, the
development, manufacture, sale, lease, or use of which (1) is covered in whole
or in part by, or cannot be performed without infringing, a VALID CLAIM of the
PATENT RIGHTS in the country in which any such product or part thereof is
developed, made, used, sold or imported by LICENSEE or (2) otherwise utilizes
the KNOW-HOW. By way of illustration but not limitation, the Parties
agree that LICENSED PRODUCTS include cells made utilizing the KNOW-HOW or
methods covered by VALID CLAIMS described in the patent applications and patents
included in the PATENT RIGHTS.
1.9 “LICENSED
SERVICES” means any service, the development, use, performance, or sale of which
is covered in whole or in part by, or cannot be performed without infringing, a
VALID CLAIM of the PATENT RIGHTS in the country in which any such service is so
developed, used, performed, sold, offered for sale, imported or exported by
LICENSEE or otherwise utilizes the KNOW-HOW.
1.10 “NET
SALES” means the invoiced amount on sales by LICENSEE or its Affiliates of
LICENSED PRODUCTS, LICENSED SERVICES or LICENSED PROCESSES less (to the
extent
2
applicable
and appropriately documented) (i) sales, tariff and import duties, use and other
taxes directly imposed with reference to particular sales, (ii) discounts,
rebates, and similar credits and chargebacks actually allowed and taken
(regardless of whether taken or paid at the time of sale or paid or credited to
the buyer at a subsequent date), and (iii) amounts allowed or credited on
returns; provided, any such allowed deductions shall be listed on the invoice
for the applicable LICENSED PRODUCT, LICENSED PROCESS or LICENSED SERVICE or
otherwise documented in the ordinary course of business, and (b) any SUBLICENSE
REVENUE.
In the
case of Combination Products, Net Sales means the total invoice amount earned on
sales of Combination Products by LICENSEE or its Affiliates to any third person
or entity, less, to the extent applicable, the deductions set forth above,
multiplied by a proration factor that is determined as follows:
(i)
If all components of the Combination Product were sold separately during the
same or immediately preceding calendar quarter, the proration factor shall be
determined by the formula [A/(A+B)], where A is the average invoice amount
earned on the Licensed Product during such period when sold separately in
finished form, and B is the average invoice amount earned on all other active
components of the Combination Product during such period when sold separately in
finished form; or
(ii)
if all components of the Combination Product were not sold separately during the
same or immediately preceding calendar quarter, the proration factor shall be
determined by the formula [C/(C+D)], where C is the average fully absorbed cost
of the Licensed Product component during the prior quarter and D is the average
fully absorbed cost of all other active components of the Combination Product
during the prior quarter.
1.11 “PATENT
RIGHTS” means the patents and patent applications identified on Exhibit A attached
hereto, and any divisional, continuation or continuation-in-part of those
applications, but only to the extent the claims in said applications are
directed to subject matter specifically described in the patents and patent
applications identified on Exhibit A, as well as
any patents issued on these patent applications, and any reissues,
reexaminations, extensions and substitutions (or the equivalent) thereof and any
foreign counterparts to those patents and patent applications. The
parties agree that Exhibit A may be
revised from time to time after the EFFECTIVE DATE to reflect changes
thereto.
1.12
“SUBLICENSEE” means a sublicensee of the rights granted LICENSEE under this
Agreement, as further described in Article 2.
1.13 “SUBLICENSE
REVENUE” means consideration that LICENSEE receives for the sublicense of rights
that are granted LICENSEE under Article 2, including
without limitation license fees, milestone payments, up front fees, success
fees, and license maintenance fees, but not capital contributions, loans, or
payments for costs incurred in research and development.
1.14 “SUPPLEMENTAL
KNOW-HOW” means all compositions of matter, techniques and data and other
know-how and technical information including inventions (whether or not
patentable), improvements and developments, practices, methods, concepts, trade
secrets, documents, computer data, computer slide illustrations, computer code,
apparatus, test data, analytical and quality control data, formulation,
manufacturing, patent data or descriptions, development information, drawings,
specifications, designs, plans, proposals and technical data and manuals and all
other CONFIDENTIAL
3
INFORMATION
that is owned or controlled by ACT as of the Effective Date, and that
specifically relates to the subject matter described in or claimed by the
SUPPLEMENTAL PATENT RIGHTS.
1.1.5 “SUPPLEMENTAL
PATENT RIGHTS” means the patents and patent applications identified on Exhibit B attached
hereto, and any divisional, continuation or continuation-in-part of those
applications, but only to the extent the claims in said applications are
directed to subject matter specifically described in the patents and patent
applications identified on Exhibit B, as well as
any patents issued on these patent applications, and any reissues,
reexaminations, extensions and substitutions (or the equivalent) thereof and any
foreign counterparts to those patents and patent applications. The
parties agree that Exhibit B may be
revised from time to time after the EFFECTIVE DATE to reflect changes
thereto.
1.16 “VALID
CLAIM” means (a) a claim of any issued and unexpired United States or foreign
patent included in the PATENT RIGHTS which has not lapsed or become abandoned or
been declared invalid or unenforceable by a court of competent jurisdiction or
an administrative agency from which no appeal can be or has been taken within
the time allowed for such appeal and which has not been disclaimed or admitted
to be invalid or unenforceable through reissue, disclaimer or otherwise, or (b)
to the extent rights are granted by a governmental patent authority thereunder
(i.e., to the extent that the owner would be able to enforce a right to a patent
royalty thereunder under applicable patent law), a claim of a pending patent
application included in the PATENT RIGHTS.
For
purposes of this Agreement, except as otherwise expressly provided herein or
unless the context otherwise requires: (a) the use herein of the
plural shall include the single and vice versa and the use of the
masculine shall include the feminine; (b) unless otherwise set forth herein, the
use of the term “including” or “includes” means “including [includes] but [is]
not limited to”; and (c) the words “herein,” “hereof,” “hereunder” and other
words of similar import refer to this Agreement as a whole and not to any
particular provision. Additional terms may be defined throughout this
Agreement.
ARTICLE 2 – LICENSE
GRANT
2.1
Grant of
Rights.
(a) ACT hereby
grants to LICENSEE, and LICENSEE accepts, subject to the terms and conditions of
this Agreement, a royalty-bearing, worldwide, exclusive license,
with the right to sublicense, to use the PATENT RIGHTS and KNOW-HOW
to (i) research, develop, make, have made, use, sell, have sold, offer for sale,
have offered for sale, import, have imported, export and have exported LICENSED
PRODUCTS, (ii) research, develop, use, practice, sell, have sold, offer for
sale, have offered for sale, import, have imported, export and have exported
LICENSED PROCESSES, and (iii) develop, use, perform, sell, have sold, offer for
sale, have offered for sale, import, have imported, export and have exported
LICENSED SERVICES.
(b) ACT hereby
grants to LICENSEE, and LICENSEE accepts, subject to the terms and conditions of
this Agreement, a royalty-free, fully paid-up, worldwide, non-exclusive
license, to use the SUPPLEMENTAL PATENT RIGHTS and SUPPLEMENTAL
KNOW-HOW for the purposes
4
described
in paragraph (a) of this Section and/or the purposes described in the Kirin
Sublicense Agreement (as defined below), but only in conjunction with the use of
the PATENT RIGHTS and/or the patents and patent rights described in the Kirin
License Agreement.
(c) The license
granted under this Section 2.1 shall exclude LICENSED PRODUCTS, LICENSED
PROCESSES, and LICENSED SERVICES within the EXCLUDED FIELD so long as that
certain Exclusive License Agreement, dated May 14, 2004, as amended by a First
Amendment to Exclusive License Agreement, dated August 25, 2005; between ACT and
Lifeline Cell Technology, LLC (formerly PacGen Cellco, LLC) remains in effect
and Lifeline Cell Technology, LLC retains an exclusive license of PATENT RIGHTS
under that agreement within the EXCLUDED FIELD.
(d) Notwithstanding
the preceding provisions of this Section, the license granted to LICENSEE shall
be non-exclusive within the KIRIN FIELD so long as that certain Non-Exclusive
License Agreement, dated May 9, 2006, between ACT and Kirin Beer Kabushiki
Kaisha, Aurox, LLC, Hematech, LLC, and Kirin SD, Inc. remains in effect and the
licensees under that agreement retain a non-exclusive license of PATENT RIGHTS
under that agreement in the KIRIN FIELD.
2.2 Sublicense
Rights. LICENSEE shall have the right to grant sublicenses of
its rights under Section 2.1 without the consent or approval of ACT; provided
however, that LICENSEE agrees to provide ACT with (a) a draft copy of any
sublicense agreement to ACT at least thirty (30) days before execution to allow
ACT to comment on the terms of the sublicense if ACT chooses to comment; and (b)
a fully executed copy of all sublicense agreements within thirty (30) days after
execution; and provided, further, that SUPPLEMENTAL PATENT RIGHTS and
SUPPLEMENTAL KNOW-HOW may be sublicensed only to LICENSEE’S SUBSIDIARIES and
AFFILIATES in conjunction with a sublicense of the PATENT RIGHTS.
2.3 Knowledge
Transfer. Within ten (10) days of the Effective Date, ACT
shall provide, deliver, and transfer to LICENSEE all information and data
relating to the PATENT RIGHTS, SUPPLEMENTAL PATENT RIGHTS, KNOW-HOW and
SUPPLEMENTAL KNOW-HOW as may be reasonably necessary to allow LICENSEE to
exploit the licenses granted hereunder. Such transfer shall be made free and
clear of all liens, security interests, encumbrances, and claims of any kind by
any third party. ACT shall bear all costs of so delivering the
KNOW-HOW and SUPPLEMENTAL KNOW-HOW to LICENSEE. ACT shall not retain
any copies (in any format or media) of the KNOW-HOW.
ARTICLE 3 – SUBLICENSE OF
CERTAIN PATENTS AND PATENT APPLICATIONS
3.1 Concurrent
with the execution and delivery of this Agreement, ACT shall execute and deliver
to LICENSEE an Exclusive Sublicense Agreement (the “Kirin Sublicense
Agreement”), in form and substance acceptable to LICENSEE, granting to LICENSEE
a royalty-bearing , exclusive, worldwide sublicense to ACT’s rights to use
certain patents and related patent rights under that certain Exclusive License
Agreement, effective as of May 9, 2006, among ACT, Kirin Beer Kabushiki Kaisha,
Aurox, LLC, Hematech, LLC, and Kirin SD, Inc (the “Kirin License
Agreement”). LICENSEE’s obligations under this Agreement are
contingent upon ACT executing and delivering to LICENSEE the Kirin Sublicense
Agreement.
5
ARTICLE 4 –
COMMERCIALIZATION OBLIGATIONS
4.1 LICENSEE
intends to use, or to cause its Sublicensees to use, commercially reasonable and
diligent efforts to bring one or more LICENSED PRODUCTS, LICENSED PROCESSES and
LICENSED SERVICES to market through an active and diligent program for
exploitation of the PATENT RIGHTS and KNOW-HOW and to continue active, diligent
marketing efforts for one or more LICENSED PRODUCTS, LICENSED PROCESSES and
LICENSED SERVICES throughout the life of this Agreement. LICENSEE
makes no representation, guaranty, or warranty that it or its Sublicensees will
be successful in developing or bringing to market any LICENSED PRODUCT, LICENSED
PROCESS or LICENSED SERVICES.
ARTICLE 5 -
CONSIDERATION
5.1 Initial License
Fee. In partial consideration of the rights and licenses
granted to LICENSEE by ACT in this Agreement, LICENSEE shall pay to ACT on the
Effective Date a license fee equal to Two Hundred Thousand Dollars
(U.S.) ($200,000) (the “License Fee”). The License Fee is not
refundable and is not creditable against other payments due to ACT under this
Agreement. The License Fee shall be paid within two business days
after the Effective Date.
5.2 Royalties and other
Consideration.
(a) As
additional consideration of the license granted to LICENSEE from ACT in Article
2 of this Agreement, LICENSEE shall pay to ACT a royalty equal to (i) 5%
of the Net Sales received by LICENSEE and its AFFILIATES for all
LICENSED PRODUCTS, LICENSED PROCESS or LICENSED SERVICE sold, performed, or
leased by LICENSEE or any AFFILIATE, and (ii) 20% of all SUBLICENSE REVENUE
received by LICENSEE and its AFFILIATES. The obligation of LICENSEE
to pay royalties shall terminate (a) with respect to NET SALES and SUBLICENSE
REVENUE arising in any country concurrently with the expiration or termination
of the last applicable VALID CLAIM within the PATENT RIGHTS in such country in
which the LICENSED PRODUCT, LICENSED PROCESS or LICENSED SERVICE is, (as
applicable), performed, sold, leased, or manufactured, or in which the PATENT
RIGHTS are licensed, and (b) in any and all cases when royalty payments to ACT
by LICENSEE total Six Hundred Thousand Dollars (U.S.) ($600,000.00); provided,
however, that such $600,000 of royalties shall be reduced to $200,000 if
LICENSEE, at LICENSEE’S option, pays ACT $200,000 in cash within thirty (30)
days after the execution of this Agreement in addition to the License fee
payable under Section 5.1 (such that the License Fee, additional $200,000
payment, and potential future royalties will total $600,000).
(b) No
multiple royalties shall be payable on the basis that any LICENSED PRODUCT,
LICENSED PROCESS or LICENSED SERVICE, its manufacture, use, lease, sale or
performance are or shall be covered by (a) more than one patent or patent
application within the PATENT RIGHTS, or (b) any other patent or know how under
a license or sublicense from ACT. In the case of the use of patents
or know how licensed or sublicensed by ACT under other agreements, LICENSEE and
ACT’s other licensees or sublicensees shall have the right to credit against the
royalties owing to ACT, under this Agreement and under such other license or
sublicense agreements, any royalty payments received by ACT with respect to the
sale or lease of any product or performance of any service (regardless of
whether LICENSEE or another licensee or sublicensee of ACT patents or know how
pays the royalty), such that in no event shall the total of royalty payments
that are due to ACT in any royalty
6
period
under this Agreement and under such other license or sublicense agreements
exceed the highest applicable royalty rate among this Agreement and such
other license or sublicense agreements. By way of example only, if a
product is produced by LICENSEE (alone or with a third party) and that product
uses PATENT RIGHTS under this Agreement and patents licensed under a license or
sublicense agreement between ACT and LICENSEE (or between ACT and the third
party with whom LICENSEE is producing the product), (i) only one royalty would
be paid to ACT on sales of the product, (ii) the royalty rate would be the
higher of the royalty rate applicable under this Agreement or under ACT’s other
license or sublicense agreement with LICENSEE or the third party, and (iii) the
royalty payment (whether paid by LICENSEE or by the third party) will be
credited toward royalties payable under this Agreement and under the other ACT
license or sublicense agreement with LICENSEE or the third party for the sale of
the product.
5.3 Payment
Method. All payments due under this Agreement shall be paid to
ACT in Los Angeles, California, U.S.A., and shall be made in United
States currency without deduction for taxes, assessments, exchanges, collection
or other charges of any kind. Conversion of foreign currency to U.S. dollars
shall be made at the conversion rate reported in The Wall Street Journal on the
last working day of the calendar quarter to which the payment
relates.
5.4 Late
Fee. LICENSEE shall pay ACT interest on any overdue amounts at
the rate of one percent (1%) per month (twelve percent (12%) per annum), from
the date when such payment should have been made.
5.5 Credit and Right of
Setoff. LICENSEE shall receive a credit toward, and shall have
a right of setoff against, the payment of royalties due under this Agreement, on
a dollar for dollar basis, for any and all payments made by LICENSEE under the
Exclusive Sublicense Agreement to cure or avoid any default by ACT under the
Kirin License Agreement.
ARTICLE 6 - REPORTS AND
RECORDS
6.1 LICENSEE
shall maintain complete and accurate records of LICENSED PRODUCTS, LICENSED
SERVICES and LICENSED PROCESSES that are sold, performed, or, leased by LICENSEE
or its AFFILIATES under this Agreement, and all SUBLICENSE REVENUE
received by LICENSEE and its AFFILIATES. LICENSEE shall keep, and
shall cause its AFFILIATES and SUBLICENSEES to keep, full, true and accurate
books of account containing all particulars that may be necessary for the
purpose of showing the amounts payable to ACT hereunder and LICENSEE’s
compliance with the terms and conditions of this Agreement. Said
books of account shall be kept at LICENSEE’s principal place of business or at
such other location as may be agreed upon by the parties. Said books
and the supporting data shall be open upon reasonable advance notice (and no
more frequently than once per calendar year) for three (3) years following the
end of the calendar year to which they pertain, to the inspection of ACT or its
agents for the purpose of verifying LICENSEE’s royalty statement or compliance
in other respects with this Agreement. If any such audit determines
that the reported payments to ACT were less than ninety percent (95%) of the
actual amount due to ACT for the period in question, LICENSEE shall bear the
cost of such audit (without limiting ACT’s other remedies with respect
thereto).
6.2 After
the first commercial sale of a LICENSED PRODUCT, LICENSED SERVICE
or
7
LICENSED
PROCESS by LICENSEE any AFFILIATE, or any SUBLICENSEE, or LICENSEE’S
receipt of any SUBLICENSE REVENUE, LICENSEE, within forty-five (45) days after
March 31, June 30, September 30 and December 31, of each year, shall deliver to
ACT a true and accurate report of all NET SALES and SUBLICENSE REVENUE during
the preceding three-month period under this Agreement as shall be pertinent to a
royalty accounting hereunder. Each such report shall include at least
the following:
|
|
(a)
|
number(s)
and type(s) of LICENSED PRODUCTS, LICENSED PROCESSES and LICENSED SERVICES
sold, leased, or performed by LICENSEE and/or its
AFFILIATES;
|
|
|
(b)
|
total
billings and payments received for LICENSED PRODUCTS, LICENSED PROCESSES
and LICENSED SERVICES performed, sold, or leased by LICENSEE and its
AFFILIATES, and/or SUBLICENSE REVENUE received from
its SUBLICENSEES; and
|
|
|
(c)
|
deductions
applicable as provided in Section
1.10;
|
6.3 With
each such report submitted, LICENSEE shall pay to ACT the royalties and other
payments due and payable under this Agreement. If no royalties or
other payments shall be due, LICENSEE shall so report.
6.4 LICENSEE’s
reporting obligations hereunder shall terminate when LICENSEE’S obligation to
pay royalties to ACT terminates.
ARTICLE 7 - PATENT RIGHTS
AND SUPPLEMENTAL PATENT RIGHS
7.1 Responsibility for the
PATENT RIGHTS. Subject to the terms of this Agreement,
LICENSEE shall be primarily responsible after the Effective Date for the
preparation, filing, prosecution and maintenance of the PATENT RIGHTS listed on
Exhibit A. The
costs of such filing, prosecution and maintenance (including without limitation
the payment of all government fees in any given country required to maintain the
PATENT RIGHTS) after the Effective Date shall be borne by
LICENSEE. LICENSEE agrees to use reasonable commercial efforts to
prosecute U.S. patents covering the inventions disclosed in the patent
applications included in the PATENT RIGHTS. LICENSEE shall not be
obligated to reimburse ACT for any costs or expenses incurred by ACT prior to
the Effective Date with respect to the preparation, filing, and prosecution of
any patent applications.
7.2 ACT’s
Participation. ACT’s patent counsel shall be given a
reasonable opportunity to comment, at ACT’s expense, on all proposed patent
filings and responses to patent office actions or other patent office
communications that may affect the PATENT RIGHTS, and LICENSEE will not
unreasonably refuse to accept any suggestions of ACT’s patent
counsel; provided, however, that
LICENSEE will have the final decision on the incorporation of any comments of
ACT’s patent counsel.
7.3 Abandonment. LICENSEE
will not allow any patent or patent application within the PATENT RIGHTS to
become expired or abandoned, or fail to diligently pursue patent protection for
any invention within the PATENT RIGHTS, without giving (a) written notice to ACT
at least thirty (30)
8
business
days prior to the next due date for any required communication, response to
office action, filing, or payment, failure to meet which would result in
expiration or abandonment, including but not limited to provisional abandonment,
of the patent or patent application, and (b) ACT the right to assume
responsibility for such patent or patent application. If ACT so
elects, (i) LICENSEE will execute such documents and otherwise perform such acts
and make all filings as may be reasonably required to permit ACT or its
designees to prosecute and maintain such patent or application in such
jurisdiction(s) and transact all matters connected therewith (including, as
necessary, appointing ACT’s patent counsel as associate attorneys of record, and
changing address of the patent attorney of record with the appropriate patent
authorities), (ii) ACT will thereafter assume control thereof and all expenses
(arising thereafter) for such prosecution and maintenance by ACT, and (iii)
LICENSEE’s rights and the licenses granted to LICENSEE with respect to all such
patents and patent applications shall automatically terminate upon ACT’s
assumption of control thereof.
7.4 Enforcement of the PATENT
RIGHTS. The Parties agree to notify each other in writing of
any actual or threatened infringement by a third party of the PATENT RIGHTS or
of any third-party claim of invalidity or unenforceability of the PATENT RIGHTS,
or of any interference or other proceeding affecting the PATENT
RIGHTS. LICENSEE shall have the first right to prosecute and defend
such claims under its sole control and at its sole expense. If
LICENSEE does proceed with such prosecution or defense, ACT shall provide
reasonable assistance to LICENSEE at LICENSEE’s request, provided LICENSEE pays
ACT for the reasonable out-of-pockets costs incurred by ACT in providing such
assistance. Any recovery obtained in an action under this Section 7.4
shall be distributed as follows, in this order: (i) LICENSEE shall be reimbursed
for any expenses incurred in the action; and (ii) LICENSEE shall receive the
remaining recovery, less a reasonable approximation of the royalties that
LICENSEE would have paid to ACT if LICENSEE had received the amount awarded as
ordinary damages as Net Sales of LICENSED PRODUCTS sold by LICENSEE.
7.5 ACT Rights to
Enforce. In the event that LICENSEE fails to initiate an
infringement action within a reasonable time (but no more than one hundred
eighty (180) days) after LICENSEE becomes aware of the basis for such action
(e.g., the actual or threatened infringement) or fails to answer a declaratory
judgment action or interference proceeding within a reasonable time (but no more
than ninety (90) days) after LICENSEE receives or becomes aware of such
infringement or action or proceeding, ACT shall have the right, after notifying
LICENSEE in writing, to prosecute such infringement or answer such declaratory
judgment action or interference proceeding, under its sole control and at its
sole expense. If ACT does proceed with such prosecution or defense,
LICENSEE shall provide reasonable assistance to ACT at ACT’s request, provided
ACT pays LICENSEE for its reasonable out-of-pockets costs incurred in such
assistance. Any recovery obtained in an action under this Section 7.5
shall be distributed as follows, in this order: (i) ACT shall be reimbursed for
any expenses it incurred in the action; (ii) as to ordinary damages, LICENSEE
shall receive an amount equal to lost profits or a reasonable royalty on the
infringing sales (whichever measure the court applied), less a reasonable
approximation of the royalties that LICENSEE would have paid to ACT if LICENSEE
had received such amount as Net Sales of LICENSED PRODUCTS sold by LICENSEE; and
(iii) as to any additional damages, 100% to ACT, unless LICENSEE joins ACT in
the prosecution at its own expense at which point the parties will share equally
in any award.
7.6. Cooperation. ACT
and LICENSEE agree to reasonably cooperate in connection with the preparation,
filing, prosecution, and maintenance of the PATENT
RIGHTS. Cooperation includes,
9
without
limitation, (a) promptly executing all papers and instruments or requiring
employees of ACT or LICENSEE to execute papers and instruments as reasonably
appropriate to enable LICENSEE to file, prosecute, and maintain PATENT RIGHTS in
any country; and (b) promptly informing LICENSEE of matters that may affect
preparation, filing, prosecution, or maintenance of PATENT RIGHTS (such as
becoming aware of an additional inventor who is not listed as an inventor in a
patent application). Additionally, in the event either party
exercises its rights hereunder to proceed with any prosecution of infringement
or defense of the PATENT RIGHTS, such party shall consult with the other party
regarding the course of such proceedings and shall not enter into any
settlement, consent judgment, or other voluntary final disposition of any
infringement action that admits the invalidity or unenforceability of any PATENT
RIGHTS or that would adversely affect the rights of the other party without the
prior written consent of the other party, which consent may not be unreasonably
withheld, conditioned or delayed. Without limiting the generality of
the provisions of this Section 7.6, concurrently with the execution and delivery
of this Agreement ACT shall execute, acknowledge, and deliver to LICENSEE the
documents attached to this Agreement as Exhibit C.
7.7 New Patents, Inventions, and
Discoveries. LICENSEE shall have the right to file and
prosecute new patent applications (and to obtain new patents) covering LICENSED
PRODUCTS, LICENSED PROCESSES, AND LICENSED SERVICES, and any other subject
matter, with respect to any KNOW-HOW and any other technology, invention, or
discovery made by LICENSEE or any of its Affiliates or Sublicensees using PATENT
RIGHTS , SUPPLEMENTAL PATENT RIGHTS (as permitted by this Agreement), KNOW-HOW,
and SUPPLEMENTAL KNOW-HOW. ACT shall acquire no rights with respect
to such new patents, inventions, discoveries, or technology not included within
the PATENT RIGHTS, SUPPLEMENTAL PATENT RIGHTS, KNOW–HOW and SUPPLEMENTAL
KNOW-HOW licensed to LICENSEE by ACT.
7.8 Responsibility for
the
SUPPLEMENTAL
PATENT RIGHTS. Subject to the terms of this Agreement, ACT
shall be primarily responsible after the Effective Date for the preparation,
filing, prosecution and maintenance of the SUPPLEMENTAL PATENT RIGHTS listed on
Exhibit B. The
costs of such filing, prosecution and maintenance (including without limitation
the payment of all government fees in any given country required to maintain the
SUPPLEMENTAL PATENT RIGHTS) after the Effective Date shall be borne by
ACT. ACT agrees to use reasonable commercial efforts to prosecute
U.S. patents covering the inventions disclosed in the patent applications
included in the SUPPLEMENTAL PATENT RIGHTS. LICENSEE shall not be
obligated to reimburse ACT for any costs or expenses incurred by ACT prior to
the Effective Date with respect to the preparation, filing, and prosecution of
any patent applications.
7.9 Abandonment of SUPPLEMENTAL PATENT
RIGHTS. ACT will not allow any patent or patent application
within the SUPPLEMENTAL PATENT RIGHTS to become expired or abandoned, or fail to
diligently pursue patent protection for any invention within the SUPPLEMENTAL
PATENT RIGHTS, without giving (a) written notice to LICENSEE at least thirty
(30) business days prior to the next due date for any required communication,
response to office action, filing, or payment, failure to meet which would
result in expiration or abandonment, including but not limited to provisional
abandonment, of the patent or patent application, and (b) LICENSEE the right to
assume responsibility for such patent or patent application. If
LICENSEE so elects, (i) ACT will execute such documents and otherwise perform
such acts and make all filings as may be reasonably required to permit LICENSEE
or its designees to prosecute and maintain such patent or application in such
jurisdiction(s) and transact all
10
matters
connected therewith (including, as necessary, appointing LICENSEE’s patent
counsel as associate attorneys of record, and changing address of the patent
attorney of record with the appropriate patent authorities), (ii) LICENSEE will
thereafter assume control thereof and all expenses (arising thereafter) for such
prosecution and maintenance by LICENSEE, and (iii) the licenses granted to
LICENSEE with respect to all such patents and patent applications shall
automatically become exclusive licenses (except as provided in paragraphs (c)
and (d) of Section 2.1) with the right to sublicense without the limitation
under Section 2.2, for all uses upon LICENSEE’s assumption of control
thereof. In order to facilitate LICENSEE exercising its rights under
this Section 7.9, ACT shall, promptly upon LICENSEE’s request, execute,
acknowledge, and deliver to LICENSEE the a power of attorney in the form of
Exhibit C covering the SUPPLEMENTAL PATENT RIGHTS.
7.10 Enforcement of the
SUPPLEMENTAL
PATENT
RIGHTS.
(a) The Parties
agree to notify each other in writing of any actual or threatened infringement
by a third party of the SUPPLEMENTAL PATENT RIGHTS or of any third-party claim
of invalidity or unenforceability of the SUPPLEMENTAL PATENT RIGHTS, or of any
interference or other proceeding affecting the SUPPLEMENTAL PATENT
RIGHTS. ACT shall prosecute and defend such claims under its sole
control and at its sole discretion and expense. If LICENSEE shall
provide reasonable assistance to ACT at ACT’s request, provided ACT pays
LICENSEE for the reasonable out-of-pockets costs incurred by LICENSEE in
providing such assistance. Any recovery obtained in an action under this Section
7.10 shall be distributed as follows, in this order: (i) LICENSEE shall be
reimbursed for any expenses it incurred in the action; and (ii) ACT shall
receive the remaining recovery.
(b) In the
event that ACT fails to initiate an infringement action described in paragraph
(a) of this Section 7.10 within a reasonable time (but no more than one hundred
eighty (180) days) after ACT becomes aware of the basis for such action (e.g.,
the actual or threatened infringement) or fails to answer a declaratory judgment
action or interference proceeding within a reasonable time (but no more than
ninety (90) days) after ACT receives or becomes aware of such infringement or
action or proceeding, LICENSEE shall have the right, but not the obligation,
after notifying ACT in writing, to prosecute such infringement or answer such
declaratory judgment action or interference proceeding, under its sole control
and at its sole expense. If LICENSEE does proceed with such
prosecution or defense, ACT shall provide reasonable assistance to LICENSEE at
LICENSEE’s request, provided LICENSEE pays ACT for its reasonable out-of-pockets
costs incurred in such assistance. Any recovery obtained in an action
under this Section 7.5 shall be distributed as follows, in this order: (i) ACT
shall be reimbursed for any expenses it incurred in the action; and (ii)
LICENSEE shall receive the remaining recovery.
ARTICLE 8 –
INDEMNIFICATION,
LIMITATION OF LIABILITY AND
INSURANCE
8.1 LICENSEE
shall at all times during the term of this Agreement and thereafter, indemnify,
defend and hold harmless ACT and its affiliates, successors, assigns, agents,
officers, directors, shareholders and employees (each, an “Indemnified Party”),
at LICENSEE’s sole cost and expense, against all liabilities of any kind
whatsoever, including legal expenses and reasonable attorneys’ fees, arising out
of the death of or injury to any person or persons or out of any damage to
property resulting from the production, manufacture, sale, use, lease,
performance, consumption or advertisement
11
of the
LICENSED PRODUCTS, LICENSED PROCESSES or LICENSED SERVICES or arising from any
obligation, act or omission, or from a breach of any representation or warranty
of LICENSEE hereunder, excepting only claims that result from (a) the willful
misconduct or gross negligence of ACT, (b) any material breach by ACT of its
representations and warranties under this Agreement, and (c) claims alleging
that the use of any of the PATENT RIGHTS, SUPPLEMENTAL PATENT
RIGHTS, KNOW-HOW, or SUPPLEMENTAL KNOW-HOW infringe upon any
patent, trade secret, or moral right of any third party. The
indemnification obligations set forth herein are subject to the following
conditions: (i) the Indemnified Party shall notify LICENSEE in writing promptly
upon learning of any claim or suit for which indemnification is sought; (ii)
LICENSEE shall have control of the defense or settlement, provided that the
Indemnified Party shall have the right (but not the obligation) to participate
in such defense or settlement with counsel at its selection and at its sole
expense; and (iii) the Indemnified Party shall reasonably cooperate with the
defense, at LICENSEE’s expense.
8.2 EXCEPT
AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, ACT, ITS DIRECTORS,
OFFICERS, AGENTS, SHAREHOLDERS, EMPLOYEES, AND AFFILIATES MAKE NO
REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING, AND THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE. NOTHING IN THIS
AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN BY ACT
THAT THE PRACTICE BY LICENSEE OF THE LICENSE GRANTED HEREUNDER SHALL NOT
INFRINGE THE PATENT RIGHTS OF ANY THIRD PARTY. IN NO EVENT SHALL ACT,
ITS DIRECTORS, OFFICERS, AGENTS, SHAREHOLDERS, EMPLOYEES AND AFFILIATES BE
LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC
DAMAGE OR INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER ACT SHALL
BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE
POSSIBILITY OF SUCH DAMAGES.
8.3 LICENSEE
agrees to maintain insurance or self-insurance that is reasonably adequate to
fulfill any potential obligation to the indemnified parties. LICENSEE
shall continue to maintain such insurance or self-insurance during the term of
this Agreement and after the expiration or termination of this Agreement for a
period of five (5) years.
ARTICLE 9 –
TERMINATION
9.1 This
Agreement shall be effective on the Effective Date and shall extend twenty (20)
years or until the expiration of the last to expire of the PATENT RIGHTS and the
SUPPLEMENTAL PATENT RIGHTS, whichever is later, unless sooner terminated as
provided in this Article 9.
9.2 ACT
may terminate this Agreement and the rights, privileges and license granted
hereunder by written notice upon a breach or default of this Agreement by
LICENSEE, as follows:
|
|
(i)
|
non-payment
of any amounts due which is not cured within thirty (30) days of receipt
of written notice of such non-payment wherein said notice is delivered by
registered mail; or
|
12
|
|
(ii)
|
breach
of any obligation which is not cured within thirty (30) days of a written
request to remedy such breach wherein said request is delivered by
registered mail, or if the breach cannot be cured within said thirty (30)
day period, failure of LICENSEE within said thirty (30) day period to
proceed with reasonable promptness thereafter to cure the
breach.
|
Such
termination shall become automatically effective unless LICENSEE shall have
cured any such material breach or default prior to the expiration of the
applicable cure period.
9.3 LICENSEE
shall have the right to terminate this Agreement at any time on three (3)
months’ prior notice to ACT, and upon payment of all amounts due ACT through the
effective date of the termination.
9.4 Upon
termination of this Agreement for any reason, nothing herein shall be construed
to release either party from any obligation that matured prior to the effective
date of such termination; and Sections 6.1, Article 8, Article 10, and Article
12, and any other Sections or provisions which by their nature are intended to
survive termination, shall survive any such termination.
|
|
ARTICLE 10 -
CONFIDENTIALITY
|
10.1 During
the course of this Agreement, ACT and LICENSEE may provide each other with
CONFIDENTIAL INFORMATION. CONFIDENTIAL INFORMATION may be disclosed
in oral, visual or written form, and includes such information that is
designated in writing as such by the discloser at the time of disclosure, orally
disclosed information that is designated in writing as confidential within 30
days after such oral disclosure, or information which, under all of the given
circumstances ought reasonably be treated as CONFIDENTIAL INFORMATION of the
disclosing party. ACT and LICENSEE each intend to maintain the confidential or
trade secret status of their CONFIDENTIAL INFORMATION. Each shall
exercise reasonable care to protect the CONFIDENTIAL INFORMATION of the other
from disclosure to third parties; no such disclosure shall be made without the
other’s written permission. Upon termination or expiration of this
Agreement, ACT and/or LICENSEE shall comply with the other’s written request to
return all CONFIDENTIAL INFORMATION that is in written or tangible
form. Except as expressly provided herein, neither ACT nor LICENSEE
is granted any license to use the other’s CONFIDENTIAL
INFORMATION. The obligations of ACT and LICENSEE under this Article
10 shall survive any expiration or termination of this Agreement.
10.2
The parties agree that the specific terms (but not the overall existence) of
this Agreement shall be considered CONFIDENTIAL INFORMATION; provided, however,
that the parties may disclose the terms of this Agreement to investors or
potential investors, potential business partners, potential Sublicensees and
assignees, potential co-developers, manufacturers, marketers, or distributors of
any LICENSED PRODUCT, LICENSED PROCESS, or LICENSED SERVICE, and in any
prospectus, offering, memorandum, or other document or filing required by
applicable securities laws or other applicable law or regulation. The
parties may also disclose CONFIDENTIAL INFORMATION that is required to be
disclosed to comply with applicable law or court order, provided that the
recipient gives reasonable prior written notice of the required disclosure to
the discloser and reasonably cooperates with the
discloser’s efforts to prevent such disclosure.
13
ARTICLE 11 - PAYMENTS,
NOTICES, AND OTHER COMMUNICATIONS
Any payment, notice or other
communication required to be given to any party will be deemed to have been
properly given and to be effective (a) on the date of delivery if delivered by
hand, recognized national next business day delivery service, confirmed
facsimile transmission, or confirmed electronic mail, or five (5) days after
mailing by registered or certified mail, postage prepaid, return receipt
requested, to the respective addresses given below, or to another address as it
shall designate by written notice given to the other party in the manner
provided in this Section.
| In the case of ACT: | Advanced Cell Technology, Inc. |
| 11100 Santa Monica Blvd, Suite 850 | |
| Los Angeles, CA 90025 | |
| Attention: William M. Caldwell, IV |
| With a copy to: | Pierce Atwood LLP |
| One Monument Square | |
| Portland, ME 0401 | |
| Attention: William L. Worden, Esq. |
| In the case of LICENSEE | Embryome Sciences, Inc. |
|
|
1301
Harbor Bay Parkway, Suite 100
|
|
|
Alameda,
California 94502
|
|
|
Attention: Michael
D. West
|
|
With a copy to:
|
Richard
S. Soroko, Esq.
|
|
|
Lippenberger,
Thompson, Welch, Soroko & Gilbert
LLP
|
|
|
201
Tamal Vista Blvd.
|
|
|
Corte
Madera, California 94925
|
ARTICLE 12 - REPRESENTATIONS
AND WARRANTIES
12.1 LICENSEE
represents and warrants that it has full corporate power and authority to enter
into this Agreement, that this Agreement constitutes the binding legal
obligation of LICENSEE, enforceable in accordance with its terms, and that the
execution and performance of this Agreement by LICENSEE will not violate,
contravene or conflict with any other agreement to which LICENSEE is a party or
by which it is bound or with any law, rule or regulation applicable to LICENSEE,
and that any permits, consents or approvals necessary or appropriate for
LICENSEE to enter into this Agreement have been obtained.
12.2 LICENSEE
is an entity duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.
14
12.3 ACT
represents and warrants that (a) it owns the PATENT RIGHTS, SUPPLEMENTAL PATENT
RIGHTS, KNOW-HOW, and SUPPLEMENTAL KNOW-HOW, (b) it has the full legal right and
power to grant the licenses granted hereunder, (c) that this Agreement
constitutes the binding legal obligation of ACT, enforceable in accordance with
its terms, (d) the execution, delivery, and performance of this Agreement by ACT
will not violate, contravene or conflict with any other agreement to which ACT
is a party or by which it is bound or with any law, rule or regulation
applicable to ACT, and (e) any permits, consents or approvals necessary or
appropriate for ACT to enter into this Agreement have been
obtained.
12.4 ACT
represents and warrants that, to the best of its knowledge, the use of the
PATENT RIGHTS, SUPPLEMENTAL PATENT RIGHTS, KNOW-HOW and SUPPLEMENTAL
KNOW-HOW by LICENSEE or any Sublicensee for any purposes contemplated or
permitted by this Agreement, will not infringe in any way any claim under any
patent held by any third party.
12.5 ACT
represents and warrant that the use of the PATENT RIGHTS, SUPPLEMENTAL PATENT
RIGHTS, KNOW-HOW, and SUPPLEMENTAL KNOW-HOW by LICENSEE or any
Sublicensee for any purposes contemplated or permitted by this Agreement, will
not infringe in any way any claim under any patent held by ACT or under any
patent that may issue from any ACT patent application now pending, or under any
patent that ACT may in the future obtain, or any other intellectual property
rights of ACT.
12.6 ACT
further represents, warrants and agrees, that it shall not make any claim or
demand, or commence any lawsuit or other proceeding, alleging that use of the
PATENT RIGHTS, SUPPLEMENTAL PATENT RIGHTS, KNOW-HOW, and SUPPLEMENTAL
KNOW-HOW by LICENSEE or any of LICENSEE’S AFFILIATES or any Sublicensees, or by
any third party participating with or providing services for LICENSEE or any of
LICENSEE’S AFFILIATES or Sublicensees, for any purpose contemplated or permitted
by this Agreement infringes in any way any claim under any patent held by ACT or
under any patent that may issue from any ACT patent application now pending, or
under any patent that ACT may in the future obtain, or any other intellectual
property rights of ACT. The provisions of this Section 12.6 shall
pertain as well to all subsidiaries of ACT and all patents and patent
applications of ACT subsidiaries. ACT and its subsidiaries shall
cause the provisions of this Section 12.6, as they pertain to refraining from
asserting claims and demands or commencing lawsuits and proceedings, to be
including in all licenses and assignments of ACT’s patents and patent
applications.
12.7 ACT
represents and warrants that all of the patent applications of ACT and its
subsidiaries pertaining to the processes or technology described or related to
processes and technology identified on Exhibit A are listed
on Exhibit A, and that
all of the patent applications of ACT and its subsidiaries pertaining to
the processes or technology described or related to processes and technology
identified on Exhibit
B are listed on Exhibit
B.
12.8
This Article 12 shall survive expiration or termination of this
Agreement.
ARTICLE 13 - MISCELLANEOUS
PROVISIONS
13.1 Nothing
herein shall be deemed to constitute either party as the agent or representative
of the other
party.
15
13.2 To
the extent commercially feasible, and consistent with prevailing business
practices, all products manufactured or sold under this Agreement will be marked
with the number of each issued patent that applies to such product.
13.3 This
Agreement shall be construed, governed, interpreted and applied in accordance
with the laws of California, without regard to principles of conflicts of law
thereof, except that questions affecting the construction and effect of any
patent shall be determined by the law of the country in which the patent was
granted.
13.4 The
parties hereto acknowledge that this Agreement (including the Exhibits hereto)
sets forth the entire Agreement and understanding of the parties hereto as to
the subject matter hereof, and shall not be subject to any change or
modification except by the execution of a written instrument subscribed to by
the parties hereto.
13.5 The
provisions of this Agreement are severable, and in the event that any provisions
of this Agreement shall be determined to be invalid or unenforceable under any
controlling body of the law, such invalidity or unenforceability shall not in
any way affect the validity or enforceability of the remaining provisions
hereof.
13.6 The
failure of either party to assert a right hereunder or to insist upon compliance
with any term or condition of this Agreement shall not constitute a waiver of
that right or excuse a similar subsequent failure to perform any such term or
condition by the other party.
13.7 Licenses of Intellectual
Property; Bankruptcy Code. The parties agree that the licenses
granted to LICENSEE to use PATENT RIGHTS, SUPPLEMENTAL PATENT
RIGHTS, KNOW-HOW and SUPPLEMENTAL KNOW-HOW constitute licenses of
“intellectual property” as defined in the United States Bankruptcy Code (the
“Bankruptcy Code”) and as used in Section 365(n) of the Bankruptcy
Code. The Parties agree that the KNOW-HOW includes trade
secrets. The parties also agree that the payments of royalties on Net
Sales and SUBLICENSE REVENUE required to be paid by LICENSEE to ACT under this
Agreement constitute “royalties” under Section 365(n) of the Bankruptcy
Code.
[The next
page is the signature page]
16
IN WITNESS WHEREOF, the parties have
duly executed this Agreement as of the Effective Date set forth
above.
ADVANCED
CELL TECHNOLOGY, INC.
By:
/s/
William M. Caldwell,
IV
Printed
Name: William M. Caldwell, IV
Title: Chairman
& CEO
By: /s/
William M. Caldwell,
IV
Printed
Name: William M. Caldwell, IV
Title: Secretary
EMBRYOME
SCIENCES, INC.
By: /s/
Michael D.
West
Printed
Name: Michael D. West
Title:
Chief Executive Officer
By: /s/
Judith
Segall
Printed
Name: Judith Segall
Title:
Secretary
17
EXHIBIT
A
PATENT
RIGHTS
|
Application
|
Title
|
|
US
Application # 11/025,893
|
Method
of differentiation of morula or inner cell mass cells and method of making
lineage-defective embryonic stem cells
|
|
PCT/US2005/000103
Published a WO 2005/068610 A1 US #s 11/028,345, 11/211,174, 11/478,780
|
Novel
culture systems for ex vivo development
|
18
EXHIBIT
B
SUPPLEMENTAL PATENT
RIGHTS
|
Application
|
Title
|
|
PCT/US2000/018063,
Serial No: 09/736,268
National
Phase filing of PCT/US2000/018063, Serial No: 10/831,599
CON
of 09/736,268
Filed
on April 23, 2004
|
Cytoplasmic
transfer to de-differentiate recipient cells
|
|
WO
01/018236 US #s 10/790,640 and 11/079,930.
|
Telomere
Restoration And Extension Of Cell Life-Span In Animals Cloned From
Senescent Somatic Cells
|
|
PCT/US2006/030632
|
Improved
methods of reprogramming animal somatic cells
|
|
PCT
Application PCT/US2006/040985 (Published as WO 2007/047894)
|
Nearly
totipotent or pluripotent mammalian cells homozygous or hemizygous for one
or more histocompatibility antigens
|
|
PCT/US02/26945 (Published
as WO 03/018760) US# 10/227282
|
Screening
assays for identifying differentiation-inducing agents and production of
differentiated cells for cell therapy
|
|
20040018178,
Serial No: 11/228,549
CON
of 20040018178
|
Stem
cell-derived endothelial cells modified to disrupt tumor
angiogenesis
|
19
EXHIIBIT
C
POWERS OF ATTORNEY AND OTHER
AUTHTORIZATIONS RELATING TO PATENT RIGHTS
20
Exhibit
10.34
EXCLUSIVE SUBLICENSE
AGREEMENT
This Exclusive Sublicense Agreement
(“Agreement”) is made and entered into as of the 15th day of August, 2008 (the
“Effective Date”), by and between Advanced Cell Technology, Inc., a Delaware
corporation with offices located at 11100 Santa Monica Blvd, Suite 850, Los
Angeles, CA 90025 (“ACT”), Embryome Sciences, Inc., a California corporation
(“ES”), with offices located at 1301 Harbor Bay Parkway, Suite 100, Alameda,
California 94502. ACT and ES are sometimes hereinafter referred to as
the “Parties”.
WITNESSETH
WHEREAS, ACT is the licensee of certain
PATENT RIGHTS under an Exclusive License Agreement, effective as of May 9, 2006,
among ACT, Kirin Beer Kabushiki Kaisha, Aurox, LLC, Hematech, LLC, and Kirin SD,
Inc.; and
WHEREAS, ES desires to obtain an
exclusive sublicense from ACT to use the PATENT RIGHTS and a license to use
KNOW-HOW upon the terms and conditions set forth in this Agreement;
and
WHEREAS, ACT is willing to grant such a
license to ES upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the
premises and the mutual covenants contained herein, the Parties hereto agree as
follows:
ARTICLE 1 -
DEFINITIONS
For the purposes of this Agreement, the
definitions found in Article 1 of the Kirin License Agreement are incorporated
into this Agreement by reference, except as otherwise provide
below. In addition, the following words and phrases shall have the
following meanings:
1.1 “AFFILIATE”
means any corporation, limited liability company, limited partnership or other
entity in control of, controlled by, or under common control with
ES. Any use the word AFFILIATE in this Agreement shall have the
meaning set forth in this paragraph, rather than the mean ascribed to such term
in the Kirin License Agreement.
1.2 “CONFIDENTIAL
INFORMATION” means confidential or proprietary information of ACT or ES relating
to the PATENT RIGHTS, KNOW-HOW, LICENSED PROCESSES, LICENSED SERVICES or
LICENSED PRODUCTS. CONFIDENTIAL INFORMATION may be in written,
graphic, oral or physical form and may include scientific knowledge, know-how,
processes, inventions, techniques, formulae, products, business operations,
customer requirements, designs, sketches, photographs, drawings, specifications,
reports, studies, findings, data, plans or other records, biological materials,
and/or software. CONFIDENTIAL INFORMATION shall not
include: (a) information which is, or later becomes, generally
available to the public through no fault of the recipient; (b) information which
is provided to the recipient by an independent third party having no obligation
to keep the information secret; (c) information which the recipient can
establish by written documentation was previously known to it; or (d)
information which the recipient can establish by written
documentation
was
independently developed by it without reference to the CONFIDENTIAL
INFORMATION.
1.3 “KIRIN
LICENSE AGREEMENT” means that certain Exclusive License Agreement, effective as
of May 9, 2006, among ACT, Kirin Beer Kabushiki Kaisha, Aurox, LLC, Hematech,
LLC, and Kirin SD, Inc., as the same may from time to time be amended or
modified.
1.4 “KNOW-HOW”
means all compositions of matter, techniques and data and other know-how and
technical information including inventions (whether or not patentable),
improvements and developments, practices, methods, concepts, trade secrets,
documents, computer data, computer slide illustrations, computer code,
apparatus, test data, analytical and quality control data, formulation,
manufacturing, patent data or descriptions, development information, drawings,
specifications, designs, plans, proposals and technical data and manuals and all
other CONFIDENTIAL INFORMATION that is owned or controlled by ACT as of the
Effective Date, and that specifically relates to the subject matter described in
or claimed by the PATENT RIGHTS.
1.5 “SUBLICENSEE”
means a sublicensee of the rights granted ES under this Agreement, as further
described in Article 2.
For
purposes of this Agreement, except as otherwise expressly provided herein or
unless the context otherwise requires: (a) the use herein of the
plural shall include the single and vice versa and the use of the
masculine shall include the feminine; (b) unless otherwise set forth herein, the
use of the term “including” or “includes” means “including [includes] but [is]
not limited to”; and (c) the words “herein,” “hereof,” “hereunder” and other
words of similar import refer to this Agreement as a whole and not to any
particular provision. Additional terms may be defined throughout this
Agreement.
ARTICLE 2 – LICENSE
GRANT
2.1 Grant of
Rights. ACT hereby grants to ES, and ES accepts, subject to
the terms and conditions of this Agreement, a royalty-bearing (to the extent
provided herein), worldwide, exclusive sublicense, with the right to
further sublicense, to use the PATENT RIGHTS, and a worldwide, exclusive
license, with the right to further sublicense, to use the and
KNOW-HOW, to (a) research, develop, make, have made, use, sell, offer for sale,
import, export, reproduce, distribute, perform, and display and otherwise
dispose of LICENSED PRODUCTS, and (b) to develop and perform LICENSED
SERVICES, in the Territory in the Exclusive ACT Field.
2.2 Sublicense
Rights. ES shall have the right to grant sublicenses of its
rights under Section 2.1 without the consent or approval of ACT. ES
agrees to provide ACT with a fully executed copy of all sublicense agreements
within thirty (30) days after execution.
2.3 Knowledge
Transfer. Within ten (10) days of the Effective Date, ACT
shall provide, deliver, and transfer to ES all information and data relating to
the PATENT RIGHTS and KNOW-HOW as may be reasonably necessary to allow ES to
exploit the licenses granted hereunder. Such transfer shall be made free and
clear of all liens, security interests, encumbrances, and claims of any kind by
any third party. ACT shall bear all costs of so delivering the KNOW
HOW to ES. ACT shall not retain any copies (in any format or media)
of the KNOW HOW.
2
2.4 Performance of Obligations
under Kirin License Agreement. ACT agrees to fully perform
when and as due all of its obligations, including but not limited to the payment
of all royalties, Sublicense Revenue, and other amounts due, under the Kirin
License Agreement. ACT will not terminate the Kirin License Agreement
or cause the Kirin License Agreement to be terminated, and will not enter into
any amendment or modification of, or waiver of rights under, the Kirin License
Agreement, without the prior written consent of ES, which consent may be given
or withheld in ES’s sole discretion. ACT shall deliver to ES, within
five (5) days after receiving the same, any and all notices or communications
from the Licensor under the Kirin License Agreement. ES shall have
the right, but not the obligation, to cure any and all breaches or defaults by
ACT, or to perform any obligation of ACT required to avoid or prevent a breach
or default by ACT, under the Kirin License Agreement, including but not limited
to the payment of any royalties or Sublicense Revenue due under the Kirin
License Agreement. ACT shall reimburse ES on demand, with interest at
the rate of 12% per annum, for all costs and expenses incurred by ES to cure any
breach or default, or to perform any obligation of ACT required to avoid or
prevent a breach or default by ACT, under the Kirin License
Agreement.
ARTICLE 3 –
COMMERCIALIZATION OBLIGATIONS
3.1 ES
intends to use, or to cause its Sublicensees to use, commercially reasonable and
diligent efforts to bring one or more ROYALTY-BEARING LICENSED PRODUCTS and
ROYALTY BEARING LICENSED SERVICES to market through an active and diligent
program for exploitation of the PATENT RIGHTS and KNOW-HOW and to continue
active, diligent marketing efforts for one or more ROYALTY-BEARING LICENSED
PRODUCTS and ROYALTY-BEARING LICENSED SERVICES throughout the life of this
Agreement. ES makes no representation, guaranty, or warranty that it
or its Sublicensees will be successful in developing or bringing to market any
ROYALTY-BEARING LICENSED PRODUCT or ROYALTY-BEARING LICENSED
SERVICES.
ARTICLE 4 -
CONSIDERATION
4.1 Initial Sublicense
Fee. In partial consideration of the rights and licenses
granted to ES by ACT in this Agreement, ES shall pay to ACT on the Effective
Date a sublicense fee equal to Fifty Thousand Dollars (U.S.) ($50,000) (the
“Sublicense Fee”). The Sublicense Fee is not refundable and is not
creditable against other payments due to ACT under this
Agreement. The Sublicense Fee shall
be allocated
and paid in the following manner: (a) ES shall pay $37,500 to
the Licensor under the Kirin License Agreement (the “Licensor”) to
satisfy ACT’s minimum royalty payment obligation for the year ended December 31,
2007 under Section 3.3 of the Kirin License Agreement; (b) ES shall pay to the
Licensor the amount due under Section 3.7 of the Kirin License Agreement with
respect to the payment made under clause (a) of this sentence to satisfy ACT’s
obligation to pay a late fee; (c) ES shall pay $10,000 to
the Licensor to satisfy ACT’s obligation under Section 3.4 of the Kirin License
Agreement to pay the Licensor 20% of all “Sublicense Income;” and (d) the
amount, if any, by which $50,000 exceeds the amounts paid under clauses (a)
through(c) of this sentence shall be paid to ACT.
4.2 Additional
Provisional Sublicense Fee. ES shall pay
to ACT or to the Licensor the amount, if any, by which royalties on Net Sales
paid to the Licensor under the Kirin License Agreement are less than
$50,000. Such amount shall be paid to ACT or to the Licensor on the
later of (a) the date required under Section 3.3 of the Kirin License Agreement,
or (b) five (5) business days after ES receives
3
written
notice from ACT showing the total amount of royalties on Net Sales paid to the
Licensor for the applicable year. ES shall determine in its sole
discretion whether to pay such amount to ACT or directly to Licensor to satisfy
ACT’s obligation under Section 3.3 of the Kirin License Agreement.
4.3 Royalties and Other
Consideration.
(a) As
additional consideration of the license granted to ES from ACT in Article 2 of
this Agreement, ES shall pay to ACT a royalty equal to (i) 3.5% of the Net Sales
received by ES and its AFFILIATES for all ROYALTY-BEARING LICENSED PRODUCTS or
ROYALTY-BEARING LICENSED SERVICE sold, performed, or leased by ES or any
AFFILIATE, and (ii) 20% of all Sublicense Revenue (as defined in the Kirin
License Agreement) received by ES and its AFFILIATES, provided that in o even
shall ACT receive, on a country-by-country basis, less than 3.5% of the
aggregate Net Sales of the Licensed Product or Licensed Service in a particular
country where ES has sublicensed to a third party rights with respect to the
Licensed Product or Licensed Service. The obligation of ES to pay
royalties shall terminate with respect to NET SALES and Sublicense Revenue
arising in any country concurrently with the expiration or termination of the
last applicable VALID CLAIM within the PATENT RIGHTS in such country in which
the ROYALTY-BEARING LICENSED PRODUCT or ROYALTY-BEARING LICENSED SERVICE is
sold, or May 9, 2016 if no such patents have issued by such date, whichever is
longer.
(b) ES
shall receive a credit toward the payment of royalties due under this Section
4.3 in an amount equal to the payments, if any, made by ES under Section
4.2. Such credit shall be cumulative and shall carry over to each
subsequent year if the amount of royalties payable to ACT under this Section 4.2
is less than the amount paid by ES under Section 4.2.
(c) In
the event that Licensee or any of its AFFILIATES or SUBLICENSEES is required to
make, and actually does make, royalty payments to one or more third parties for
a license to an issued patent or patents,(“Third Party Payments”) in order to
make, have made, use, import, sell or offer for sale ROYALTY-BEARING LICENSED
PRODUCTS or to perform ROYALTY-BEARING LICENSED SERVICES, in the absence of
which such ROYALTY-BEARING LICENSED PRODUCT or ROYALTY-BEARING LICENSED SERVICE
could not legally be used or sold or performed in such country, and the
resulting aggregate royalty owed by ES or any of its AFFILIATES or SUBLICENSEES
is 15% or greater, then, ES may reduce the royalties due ACT pursuant to Section
4.2(a) above for such ROYALTY-BEARING LICENSED PRODUCT or ROYALTY-BEARING
LICENSED SERVICE on the same proportionate basis as all other third party
royalties are reduced in the same royalty period. However, the
royalty payments due ACT under Section 4.2(a) may never be reduced by more than
fifty percent (50%) in any royalty period.
(d) No
multiple royalties shall be payable on the basis that any LICENSED PRODUCT,
LICENSED PROCESS or LICENSED SERVICE, its manufacture, use, lease, sale or
performance are or shall be covered by (i) more than one patent or patent
application within the PATENT RIGHTS, or (ii) any other patent or know how under
a license or sublicense from ACT. In the case of the use of patents
or know how licensed or sublicensed by ACT under other agreements, ES and ACT’s
other licensees or sublicensees shall have the right to credit against the
royalties owing to ACT, under this Agreement and under such other license or
sublicense agreements, any royalty payments received by ACT with respect to the
sale or lease of any product or performance of any service (regardless of
whether
4
ES or
another licensee or sublicensee of ACT patents or know how pays the royalty),
such that in no event shall the total of royalty payments that are due to ACT in
any royalty period under this Agreement and under such other license or
sublicense agreements exceed the highest applicable royalty rate among this
Agreement and such other license or sublicense agreements. By way of
example only, if a product is produced by ES (alone or with a third party) and
that product uses PATENT RIGHTS under this Agreement and patents licensed under
a license or sublicense agreement between ACT and ES (or between ACT and the
third party with whom ES is producing the product), (i) only one royalty would
be paid to ACT on sales of the product, (ii) the royalty rate would be the
higher of the royalty rate applicable under this Agreement or under ACT’s other
license or sublicense agreement with ES or the third party, and (iii) the
royalty payment (whether paid by ES or by the third party) will be credited
toward royalties payable under this Agreement and under the other ACT license or
sublicense agreement with ES or the third party for the sale of the
product.
4.4 Payment
Method. All payments due under this Agreement shall be paid
either to ACT in Los Angeles, California, U.S.A. or to the Licensor in Sioux
Falls, South Dakota, U.S.A, a provided in Section 3.6 of the Kirin License
Agreement, and shall be made in United States currency without deduction for
taxes, assessments, exchanges, collection or other charges of any kind.
Conversion of foreign currency to U.S. dollars shall be made at the
conversion rate reported in The Wall Street Journal on the last working day of
the calendar quarter to which the payment relates.
4.5 Late
Fee. ES shall pay ACT or the Licensor interest on any overdue
amounts at the rate of one percent (1%) per month (twelve percent (12%) per
annum), from the date when such payment should have been made.
ARTICLE 5 - REPORTS AND
RECORDS
5.1 ES
shall maintain complete and accurate records of LICENSED PRODUCTS, LICENSED
SERVICES and LICENSED PROCESSES that are sold, performed, or, leased by ES or
its AFFILIATES under this Agreement, and all Sublicense Revenue
received by ES and its AFFILIATES. ES shall keep, and shall cause its
AFFILIATES and SUBLICENSEES to keep, full, true and accurate books of account
containing all particulars that may be necessary for the purpose of showing the
amounts payable to ACT hereunder and ES’s compliance with the terms and
conditions of this Agreement. Said books of account shall be kept at
ES’s principal place of business or at such other location as may be agreed upon
by the parties. Said books and the supporting data shall be open upon
reasonable advance notice (and no more frequently than once per calendar year)
for three (3) years following the end of the calendar year to which they
pertain, to the inspection of ACT or its agents for the purpose of verifying
ES’s royalty statement or compliance in other respects with this
Agreement. If any such audit determines that the reported payments to
ACT were less than ninety percent (95%) of the actual amount due to ACT for the
period in question, ES shall bear the cost of such audit (without limiting ACT’s
other remedies with respect thereto).
5.2 After
the first commercial sale of a LICENSED PRODUCT or LICENSED SERVICE by ES any
AFFILIATE, or any SUBLICENSEE, or ES’s receipt of any Sublicense Revenue, ES,
within forty-five (45) days after March 31, June 30, September 30 and December
31, of each year, shall deliver to ACT a true and accurate report of all NET
SALES and License Revenue during the preceding three-month period under this
Agreement as shall be pertinent to a royalty accounting
hereunder. Each
5
such
report shall include at least the following:
|
|
(a)
|
number(s)
of ROYALTY-BEARING LICENSED PRODUCTS, manufactured by ES, its AFFILIATES,
or SUBLICENSEES, or by any third party on ES’s
behalf;
|
|
|
(b)
|
number(s)
of ROYALTY-BEARING LICENSED PRODUCTS sold by ES, its AFFILIATES, and
SUBLICENSEES;
|
|
|
(c)
|
total
receipts for ROYALTY-BEARING LICENSED PRODUCTS sold by ES, its AFFILIATES,
SUBLICENSEES;
|
|
|
(d)
|
total
receipts for ROYALTY-BEARING LICENSED SERVICES sold by ES, its AFFILIATES,
SUBLICENSEES; and
|
|
|
(e)
|
deductions
applicable as provided in Section 1.9 of the Kirin License
Agreement.
|
5.3 With
each such report submitted, ES shall pay to ACT the royalties and other payments
due and payable under this Agreement. If no royalties or other
payments shall be due, ES shall so report.
5.4 ES’s
reporting obligations hereunder shall terminate when ES’S obligation to pay
royalties to ACT terminates.
ARTICLE 6 - PATENT
RIGHTS
6.1 Prosecution of Patents and
Claims. ACT agrees confer with ES with respect to (a) the
claims made in the patent applications included within the PATENT RIGHTS, and
(b) the extent to which and manner in which Licensor is prosecuting such patents
and claims, and (c) any additional, broader, or different claims under the
patent applications or other PATENT RIGHTS that reasonably could be prosecuted
for the benefit of ACT and ES. ACT will cooperate with ES in seeking
the cooperation and agreement of Licensor to prosecute such patents and claims
under patent applications or other PATENT RIGHTS as ES may reasonably
request. ACT agrees that ES may assert the rights of ACT under
Article 5 of the Kirin License Agreement, on behalf of ACT and ES, if ES does
not agree with or is not satisfied with the content of any patent application or
any other matter pertaining to the prosecution of any patent application or
claim within any patent application or other PATENT RIGHTS.
6.2 Abandonment of
PATENT
RIGHTS. In the event that ACT receives a notice from the
Licensor under Section 5.2 of the Kirin License Agreement, ACT shall promptly,
but in no even later than five (5) days after receiving such notice, deliver a
copy of such notice to ES. ACT and ES shall confer regarding what
action, if any, to take to preserve any PATENT RIGHTS that might otherwise be
abandoned by Licensor. ES shall have the right, but not the
obligation, to take any and all actions that ACT is entitled to take under
Section 5.2 of the Kirin License Agreement. ACT and ES agree to
reasonably cooperate in connection with the preparation, filing, prosecution,
and maintenance of the PATENT RIGHTS under this Section. Cooperation
includes, without limitation, (a) promptly executing all papers and instruments
or requiring employees of ACT or ES to execute papers and instruments as
reasonably appropriate to enable ES to file, prosecute, and maintain PATENT
RIGHTS in any country;
6
and (b)
promptly informing ES of matters that may affect preparation, filing,
prosecution, or maintenance of PATENT RIGHTS (such as becoming aware of an
additional inventor who is not listed as an inventor in a patent
application).
6.3 Infringement of PATENT
RIGHTS. The Parties agree to notify each other in writing of
any actual or threatened infringement by a third party of the PATENT RIGHTS or
of any third-party claim of invalidity or unenforceability of the PATENT RIGHTS,
or of any interference or other proceeding affecting the PATENT
RIGHTS.
6.4 New Patents, Inventions, and
Discoveries. ES shall have the right to file and prosecute new
patent applications (and to obtain new patents) covering LICENSED PRODUCTS and
LICENSED SERVICES, and any other subject matter, with respect to any technology,
invention, or discovery made by ES or any of its AFFILIATES or SUBLICENSEES
using PATENT RIGHTS or KNOW-HOW. ACT shall acquire no rights with
respect to such new patents, inventions, discoveries, or technology not included
within the PATENT RIGHTS sublicensed, or the KNOW-HOW licensed, to ES by
ACT.
ARTICLE 7 –
INDEMNIFICATION,
LIMITATION OF LIABILITY AND
INSURANCE
7.1 ES
shall at all times during the term of this Agreement and thereafter, indemnify,
defend and hold harmless ACT and its affiliates, successors, assigns, agents,
officers, directors, shareholders and employees (each, an “Indemnified Party”),
at ES’s sole cost and expense, against all liabilities of any kind whatsoever,
including legal expenses and reasonable attorneys’ fees, arising out of the
death of or injury to any person or persons or out of any damage to property
resulting from the production, manufacture, sale, use, lease, performance,
consumption or advertisement of the LICENSED PRODUCTS or LICENSED SERVICES or
arising from any obligation, act or omission, or from a breach of any
representation or warranty of ES hereunder, excepting only claims that result
from (a) the willful misconduct or gross negligence of ACT, (b) any material
breach by ACT of its representations and warranties under this Agreement, and
(c) claims alleging that the use of any of the PATENT RIGHTS infringe upon any
patent, trade secret, or moral right of any third party. The
indemnification obligations set forth herein are subject to the following
conditions: (i) the Indemnified Party shall notify ES in writing promptly upon
learning of any claim or suit for which indemnification is sought; (ii) ES shall
have control of the defense or settlement, provided that the
Indemnified Party shall have the right (but not the obligation) to participate
in such defense or settlement with counsel at its selection and at its sole
expense; and (iii) the Indemnified Party shall reasonably cooperate with the
defense, at ES’s expense.
7.2 ACT
shall at all times during the term of this Agreement and thereafter, indemnify,
defend and hold harmless ES and its AFFILIATES, successors, assigns, agents,
officers, directors, shareholders and employees, at ACT’s sole cost and expense,
against all liabilities of any kind whatsoever, including legal expenses and
reasonable attorneys’ fees, arising out of or resulting from (a) any breach or
default by ACT under the Kirin License Agreement, or (b) any breach of any
warranty or representation of ACT under this Agreement.
7.3 EXCEPT
AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, ACT, ITS DIRECTORS,
OFFICERS, AGENTS, SHAREHOLDERS, EMPLOYEES, AND AFFILIATES MAKE NO
REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER
7
EXPRESS
OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING,
AND THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE. NOTHING
IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN
BY ACT THAT THE PRACTICE BY ES OF THE LICENSE GRANTED HEREUNDER SHALL NOT
INFRINGE THE PATENT RIGHTS OF ANY THIRD PARTY. IN NO EVENT SHALL ACT,
ITS DIRECTORS, OFFICERS, AGENTS, SHAREHOLDERS, EMPLOYEES AND AFFILIATES BE
LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC
DAMAGE OR INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER ACT SHALL
BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE
POSSIBILITY OF SUCH DAMAGES.
7.4 ES
agrees to maintain insurance or self-insurance that is reasonably adequate to
fulfill any potential obligation to the indemnified parties. ES shall
continue to maintain such insurance or self-insurance during the term of this
Agreement and after the expiration or termination of this Agreement for a period
of five (5) years.
ARTICLE 8 –
TERMINATION
8.1 This
Agreement shall be effective on the Effective Date and shall extend until the
expiration of the last to expire of the PATENT RIGHTS, or until May 9, 2016 if
not patents are issued, unless sooner terminated as provided in this Article
8.
8.2 ACT
may terminate this Agreement and the rights, privileges and license granted
hereunder by written notice upon a breach or default of this Agreement by ES, as
follows:
|
|
(i)
|
non-payment
of any amounts due which is not cured within thirty (30) days of receipt
of written notice of such non-payment wherein said notice is delivered by
registered mail; or
|
|
|
(ii)
|
breach
of any obligation which is not cured within thirty (30) days of a written
request to remedy such breach wherein said request is delivered by
registered mail, or if the breach cannot be cured within said thirty (30)
day period, failure of ES within said thirty (30) day period to proceed
with reasonable promptness thereafter to cure the
breach.
|
Such
termination shall become automatically effective unless ES shall have cured any
such material breach or default prior to the expiration of the applicable cure
period.
8.3 ES
shall have the right to terminate this Agreement at any time on three (3)
months’ prior notice to ACT, and upon payment of all amounts due ACT through the
effective date of the termination.
8.4 Upon
termination of this Agreement for any reason, nothing herein shall be construed
to release either party from any obligation that matured prior to the effective
date of such termination; and Sections 5.1, Article 7, Article 9, and Article
11, and any other Sections or provisions which by their nature are intended to
survive termination, shall survive any such termination.
8
|
|
ARTICLE 9 -
CONFIDENTIALITY
|
9.1 During
the course of this Agreement, ACT and ES may provide each other with
CONFIDENTIAL INFORMATION. CONFIDENTIAL INFORMATION may be disclosed
in oral, visual or written form, and includes such information that is
designated in writing as such by the discloser at the time of disclosure, orally
disclosed information that is designated in writing as confidential within 30
days after such oral disclosure, or information which, under all of the given
circumstances ought reasonably be treated as CONFIDENTIAL INFORMATION of the
disclosing party. ACT and ES each intend to maintain the confidential or trade
secret status of their CONFIDENTIAL INFORMATION. Each shall exercise
reasonable care to protect the CONFIDENTIAL INFORMATION of the other from
disclosure to third parties; no such disclosure shall be made without the
other’s written permission. Upon termination or expiration of this
Agreement, ACT and/or ES shall comply with the other’s written request to return
all CONFIDENTIAL INFORMATION that is in written or tangible
form. Except as expressly provided herein, neither ACT nor ES is
granted any license to use the other’s CONFIDENTIAL INFORMATION. The
obligations of ACT and ES under this Article 9 shall survive any expiration or
termination of this Agreement. Notwithstanding the preceding
provisions of this Section 9.1, until such time as this Agreement is
terminated: (a) KNOW HOW and the content of any patent application
relating to or included in PATENT RIGHTS shall be deemed to be the LICENSEE’s
CONFIDENTIAL INFORMATION rather than ACT’s CONFIDENTIAL INFORMATION; (b)
LICENSEE shall have the right to disclose KNOW HOW and the content of patent
applications related to or included in PATENT RIGHTS to third parties without
restriction under this Agreement; and (c) LICENSEE shall not have any obligation
to ACT to treat KNOW HOW or the content of any patent application related to or
included in PATENT RIGHTS as ACT’s CONFIDENTIAL INFORMATION.
9.2 The
parties agree that the specific terms (but not the overall existence) of this
Agreement shall be considered CONFIDENTIAL INFORMATION; provided, however, that
the parties may disclose the terms of this Agreement to investors or potential
investors, potential business partners, potential SUBLICENSEES and assignees,
potential co-developers, manufacturers, marketers, or distributors of any
LICENSED PRODUCT or LICENSED SERVICE, and in any prospectus, offering,
memorandum, or other document or filing required by applicable securities laws
or other applicable law or regulation. The parties may also disclose
CONFIDENTIAL INFORMATION that is required to be disclosed to comply with
applicable law or court order, provided that the recipient gives reasonable
prior written notice of the required disclosure to the discloser and reasonably
cooperates with the discloser’s efforts to prevent such disclosure.
ARTICLE 10 - PAYMENTS,
NOTICES, AND OTHER COMMUNICATIONS
Any payment, notice or other
communication required to be given to any party will be deemed to have been
properly given and to be effective (a) on the date of delivery if delivered by
hand, recognized national next business day delivery service, confirmed
facsimile transmission, or confirmed electronic mail, or five (5) days after
mailing by registered or certified mail, postage prepaid, return receipt
requested, to the respective addresses given below, or to another address as it
shall designate by written notice given to the other party in the manner
provided in this Section.
9
| In the case of ACT: | Advanced Cell Technology, Inc. |
| 11100 Santa Monica Blvd, Suite 850 | |
| Los Angeles, CA 90025 | |
| Attention: William M. Caldwell, IV |
| With a copy to: | Pierce Atwood LLP |
| One Monument Square | |
| Portland, ME 0401 | |
| Attention: William L. Worden, Esq. |
| In the case of ES | Embryome Sciences, Inc. |
|
|
1301
Harbor Bay Parkway, Suite 100
|
|
|
Alameda,
California 94502
|
|
|
Attention: Michael
D. West
|
|
With a copy to:
|
Richard
S. Soroko, Esq.
|
|
|
Lippenberger,
Thompson, Welch, Soroko & Gilbert
LLP
|
|
|
201
Tamal Vista Blvd.
|
|
|
Corte
Madera, California 94925
|
ARTICLE 11 - REPRESENTATIONS
AND WARRANTIES
11.1 ES
represents and warrants that it has full corporate power and authority to enter
into this Agreement, that this Agreement constitutes the binding legal
obligation of ES, enforceable in accordance with its terms, and that the
execution and performance of this Agreement by ES will not violate, contravene
or conflict with any other agreement to which ES is a party or by which it is
bound or with any law, rule or regulation applicable to ES, and that any
permits, consents or approvals necessary or appropriate for ES to enter into
this Agreement have been obtained.
11.2
ES is an entity duly incorporated or otherwise organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.
11.3 ACT
represents and warrants that (a) the Kirin License Agreement is in full force
and effect, (b) it has the full legal right and power to enter into this
Agreement and to grant the sublicenses granted hereunder, (c) that this
Agreement constitutes the binding legal obligation of ACT, enforceable in
accordance with its terms, (c) the execution, delivery, and performance of this
Agreement by ACT will not violate, contravene or conflict with the Kirin License
Agreement or with any other agreement to which ACT is a party or by which it is
bound or with any law, rule or regulation applicable to ACT, (d) ACT owns the
KNOW-HOW, and (e) any permits, consents or approvals necessary or appropriate
for ACT to enter into this Agreement have been obtained.
11.4 ACT
represents and warrants that, to the best of its knowledge, the use of the
PATENT RIGHTS and KNOW-HOW by ES or any AFFILIATE or SUBLICENSEE of ES for any
purposes contemplated or permitted by this Agreement, will not infringe in any
way any claim under any patent held by any third party.
10
11.5 ACT
represents and warrant that the use of the PATENT RIGHTS and KNOW-HOW by ES or
any AFFILAITE or SUBLICENSEE of ES for any purposes contemplated or permitted by
this Agreement, will not infringe in any way any claim under any patent held by
ACT or under any patent that may issue from any ACT patent application now
pending, or under any patent that ACT may in the future obtain, or any other
intellectual property rights of ACT.
11.6 ACT
further represents, warrants and agrees, that it shall not make any claim or
demand, or commence any lawsuit or other proceeding, alleging that use of the
PATENT RIGHTS and KNOW-HOW by ES or any AFFILIATE or SUBLICENSEE of ES for any
purpose contemplated or permitted by this Agreement infringes in any way any
claim under any patent held by ACT or under any patent that may issue from any
ACT patent application now pending, or under any patent that ACT may in the
future obtain, or any other intellectual property rights of ACT. The
provisions of this Section 11.6 shall pertain as well to all subsidiaries of ACT
and all patents and patent applications of ACT subsidiaries. ACT and
its subsidiaries shall cause the provisions of this Section 11.6, as they
pertain to refraining from asserting claims and demands or commencing lawsuits
and proceedings, to be including in all licenses and assignments of ACT’s
patents and patent applications.
11.7 This
Article 11 shall survive expiration or termination of this
Agreement.
ARTICLE 12 - MISCELLANEOUS
PROVISIONS
12.1 Nothing
herein shall be deemed to constitute either party as the agent or representative
of the other party.
12.2 To
the extent commercially feasible, and consistent with prevailing business
practices, all products manufactured or sold under this Agreement will be marked
with the number of each issued patent that applies to such product.
12.3 This
Agreement shall be construed, governed, interpreted and applied in accordance
with the laws of California, without regard to principles of conflicts of law
thereof, except that questions affecting the construction and effect of any
patent shall be determined by the law of the country in which the patent was
granted.
12.4 The
parties hereto acknowledge that this Agreement (including the Exhibits hereto)
sets forth the entire Agreement and understanding of the parties hereto as to
the subject matter hereof, and shall not be subject to any change or
modification except by the execution of a written instrument subscribed to by
the parties hereto.
12.5 The
provisions of this Agreement are severable, and in the event that any provisions
of this Agreement shall be determined to be invalid or unenforceable under any
controlling body of the law, such invalidity or unenforceability shall not in
any way affect the validity or enforceability of the remaining provisions
hereof.
12.6 The
failure of either party to assert a right hereunder or to insist upon compliance
with
11
any term
or condition of this Agreement shall not constitute a waiver of that right or
excuse a similar subsequent failure to perform any such term or condition by the
other party.
12.7
Licenses of
Intellectual Property; Bankruptcy Code. The parties agree that
the sublicenses granted to ES to use PATENT RIGHTS constitute licenses of
“intellectual property” as defined in the United States Bankruptcy Code (the
“Bankruptcy Code”) and as used in Section 365(n) of the Bankruptcy
Code. The Parties agree that the KNOW-HOW includes trade
secrets. The parties also agree that the payments of royalties on Net
Sales and Sublicense Revenue required to be paid by ES to ACT under this
Agreement constitute “royalties” under Section 365(n) of the Bankruptcy
Code.
[The next
page is the signature page]
12
IN WITNESS WHEREOF, the parties have
duly executed this Agreement as of the Effective Date set forth
above.
ADVANCED
CELL TECHNOLOGY, INC.
By:
/s/
William M. Caldwell,
IV
Printed
Name: William M. Caldwell, IV
Title: Chairman
& CEO
By: /s/
William M. Caldwell,
IV
Printed
Name: William M. Caldwell, IV
Title: Secretary
EMBRYOME
SCIENCES, INC.
By: /s/
Michael D.
West
Printed
Name: Michael D. West
Title:
Chief Executive Officer
By: /s/
Judith
Segall
Printed
Name: Judith Segall
Title:
Secretary
13
Exhibit
10.35
FOURTH
AMENDMENT OF REVOLVING LINE OF CREDIT AGREEMENT
This
Fourth Amendment of Revolving Line of Credit Agreement is made and entered into
as of November 14, 2008, by and among each of the persons who have executed this
Agreement as a Lender (each a “Lender,” and collectively “Lenders”), and
BioTime, Inc., a California corporation (“Borrower”), and amends that certain
Third Amended and Restated Credit Agreement dated March 31, 2008. The
Third Amended and Restated Credit Agreement, dated March 31, 2008, as amended by
this Fourth Amendment of Revolving Credit Agreement is referred to as the
“Credit Agreement”.
The
Credit Agreement is amended as follows:
1. Definitions:
(a) “Fourth Amendment” means this
Fourth Amendment of Revolving Line of Credit Agreement.
(b) “Credit Facility” means the
right of Borrower to borrow up to $3,500,000 from Lenders under the terms and
conditions of this Credit Agreement and the Note.
(c) “Maturity Date” means (i)
April 15, 2009 with respect to any Note issued for an additional Loan commitment
under this Fourth Amendment, (ii) April 15, 2009 with respect to any Note issued
under the Third Amended and Restated Credit Agreement or an earlier amendment of
the Credit Agreement, if the Lender has signed an Amendment of Revolving Credit
Note extending the Maturity Date, or (iii) November 15, 2008 with respect to any
Note issued under the Third Amended and Restated Credit Agreement or an earlier
amendment of the Credit Agreement as to which clause (ii) does not
apply.
(d) “Note” means (a) each
promissory note evidencing a portion of the Loan previously advanced by certain
Lenders, and (b) each Revolving Credit Note in the form attached as EXHIBIT A-1
evidencing the new Loan amounts to be advanced by certain Lenders.
(e) “Security Agreement” means
that certain Third Amended and Restated Security Agreement, dated March 31,
2008, as amended by a Fourth Amendment of Security Agreement among Borrower and
Lenders pursuant to which Borrower is granting Lenders a first priority
perfected security interest in certain specified collateral to secure Borrower’s
obligations under this Agreement and the Note.
2. Maximum Loan
Amount. The Maximum Loan Amount shall be Three Million Five
Hundred Thousand Dollars ($3,500,000).
3. Draw Period. The
Draw Period shall end on April 15, 2009.
4. Extension of Maturity
Date. Any Lender holding a Note due November 15, 2008 may
extend the Maturity Date of that Note to April 15, 2009 by executing and
delivering to Borrower an Amendment of Revolving Credit Note in the form of
Exhibit B.
5. Earmarked Funds; Mandatory
Prepayment. The definition of Earmarked Funds and all
references to Earmarked Funds, including the mandatory prepayment of principal
pursuant to Section 3.2.1 of the Credit Agreement, shall not apply.
6. Shares. Borrower
shall issue and deliver to certain Lenders a number of Shares having an
aggregate market value equal to six percent (6%) of the Lender’s Loan commitment
having an April 15, 2009 Maturity Date (including any new or additional Loan
commitment, and the principal amount of any Loan as to which the Lender extended
the Maturity Date by executing an Amendment of Revolving Credit
Note). Shares will be issued only to those Lenders who (a) agree to
make all or a portion of the additional $1,000,000 of the Credit Facility
available under this Fourth Amendment, or (b) agree to extend the Maturity Date
of their Note to April 15, 2009 by executing an Amendment of Revolving Credit
Note. No fractional Shares shall be issued. For the
purpose of determining the number of Shares to be issued to a Lender entitled to
receive Shares, the market value shall be deemed to be the closing price of the
Shares on the OTCBB on the last day on which a closing price of the Shares was
reported prior to the date on which the Lender executed and delivered this
Fourth Amendment.
7. Disclosure
Documents. Borrower has delivered to Lenders following reports
filed by Borrower under Securities Exchange Act of 1934, as amended (the
“Exchange Act”): (a) a copy of Borrower’s annual report on Form
10-KSB for the fiscal year ended December 31, 2007, and quarterly report on Form
10-Q for the fiscal quarter and six months ended June 30, 2008, and all Current
Reports on Form 8-K filed by Borrower since August 15, 2008 (the “Current
Disclosure Documents”). The financial statements contained in the
Current Disclosure Documents were prepared in accordance with generally accepted
accounting principles, consistently applied, and accurately reflect the
financial condition and results of operations of Borrower at and as of the dates
reported. All financial information and other information contained
in the Current Disclosure Documents was true and correct in all material
respects when such reports were filed under the Exchange Act.
8. Exchange of Debt For
Equity. Notes that had a November 15, 2008 Maturity Date may
be exchanged, in whole or in part, including both unpaid principal and accrued
interest, for (a) BioTime Exchange Shares at a price of $1.00 per share until
November 15, 2008, or (b) BioTime Exchange Shares at a price of $1.25 per share
after November 15, 2008 and until April 15, 2009 if the Lender has executed an
Amendment of Revolving Credit Note, or (c) ESI Exchange Shares at a price of
$2.00 per share until November 15, 2008, or (d) ESI Exchange Shares at a price
of $2.25 per share after November 15, 2008 and until April 15, 2009 if the
Lender has executed an Amendment of Revolving Credit Note. Notes
having a Maturity Date of April 15, 2009 that were issued for a new Loan
commitment under this Fourth Amendment, may be exchanged, in whole or in part,
including both unpaid principal and accrued interest, for (x) BioTime Exchange
Shares at a price of $1.50 per share until April 15, 2009, or (y) ESI
Exchange
2
Shares at
a price of $2.50 per share until April 15, 2009. All other provisions
of Section 17 of the Credit Agreement shall apply.
9. Other Provisions of Credit Agreement
Apply. Except as modified or amended by this Fourth Amendment,
all provisions of the Third Amended and Restated Revolving Line of Credit
Agreement shall remain in full force and effect. Any Lender who has
not previously executed the Third Amended and Restated Revolving Line of Credit
Agreement shall, by executing this Fourth Amendment, (a) acknowledge receipt of
the Third Amended and Restated Revolving Line of Credit Agreement, (b) agree to
be bound by all terms and conditions of the Third Amended and Restated Revolving
Line of Credit Agreement, as amended by this Fourth Amendment, and (c) shall be
deemed to have made the representations and warranties set forth in Section 20
of the Third Amended and Restated Revolving Line of Credit Agreement, except
that references to the Disclosure Documents shall instead mean the Current
Disclosure Documents.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
BORROWER:
BIOTIME,
INC.
By
/s/ Michael D.
West
Title
CEO
By
/s/ Judith
Segall
Title
Vice President &
Secretary
3
LENDERS:
/s/
Alfred D.
Kingsley
Alfred
D. Kingsley
GREENWAY
PARTNERS, L.P.
By: Greenhouse
Partners, L.P.,
General Partner
By /s/
Alfred D.
Kingsley
Alfred D. Kingsley, General
Partner
Broadwood
Partners, L.P.
By: Broadwood
Capital, Inc.,
General Partner of Broadwood Partners,
L.P.
By: /s/ Neal C.
Bradsher
Neal C. Bradsher,
President
Goren
Brothers, LP
By:
/s/ Alex
Goren
Title: General
Partner
/s/
Joseph
Nemeth
Joseph Nemeth
/s/
Justin
Bayern
Justin Bayern
5
SCHEDULE
I
Loan
Commitment—April 15, 2009 Maturity Date
|
Name and Address Of Lender
|
Amount of Loan
Commitment
|
||
|
Alfred
D. Kingsley
|
$250,000
|
||
|
150
East 57 th
Street, Suite 24E
|
|||
|
New
York, NY 10022
|
|||
|
FAX: (212)
207-3901
|
|||
|
Greenway
Partners, LP
|
$300,000
|
||
|
c/o
Alfred D. Kingsley
|
|||
|
150
East 57 th
Street, Suite 24E
|
|||
|
New
York, NY 10022
|
|||
|
FAX: (212)
207-3901
|
|||
|
Broadwood
Partners, L.P.
|
$550,000
|
||
|
724
Fifth Avenue
|
|||
|
9
th
Floor
|
|||
|
New
York, NY 10019
|
|||
|
FAX: (212)
508-5756
|
|||
|
Goren
Brothers, LP
|
$200,000
|
||
|
150
E. 52nd Street, 29th Fl.
|
|||
|
New
York, NY 10022
|
|||
|
FAX:
(212) 759-0572
|
|||
|
Joseph
Nemeth
|
$100,000
|
||
|
29829
Telegraph Road, Suite 111
|
|||
|
Southfield,
MI 48034
|
|||
|
FAX:
(248) 357-1626
|
|||
|
Justin
Bayern
|
$50,000
|
||
|
26
West Broadway, Apt 1004
|
|||
|
Long
Beach, NY 11561
|
|||
6
EXHIBIT
A-1
7
REVOLVING CREDIT
NOTE
$___________ __________,
2008
FOR VALUE
RECEIVED, the undersigned, BioTime, Inc., a California corporation (Borrower")
hereby promises to pay to the order of ___________("Lender") the principal sum
of _____________ DOLLARS ($_______________) or such lesser amount as may from
time to time be outstanding as the Loan pursuant to that certain Fourth
Amendment of Revolving Line of Credit Agreement, dated ________________, ___,
2008, between Borrower and Lender, together with interest on the unpaid balance
of the Loan at the rate or rates hereinafter set forth. This
Revolving Credit Note is one of the Notes described in the Fourth Amendment of
Revolving Line of Credit Agreement. As used in this Note the term
“Credit Agreement” means the Third Amended and Restated Revolving Line of Credit
Agreement, dated March 31, 2008, as amended by the Fourth Amendment of Revolving
Line of Credit Agreement. All capitalized terms not otherwise defined
in this Note shall have the meanings defined in the Credit
Agreement.
1. Terms
of Payment.
(a) Interest
Rate. Interest shall accrue and be payable at the rate of 12%
per annum on the outstanding principal balance of the Loan. Interest
shall accrue from the date of each disbursement of principal pursuant to a
Draw. Accrued interest shall be paid with principal. Interest will be
charged on that part of outstanding principal of the Loan which has not been
paid and shall be calculated on the basis of a 360-day year and a 30-day
month.
(b) Payments of
Principal. The outstanding principal balance of the Loan,
together with accrued interest, shall be paid in full on the Maturity
Date.
(c) Optional Prepayment of
Principal. Borrower may prepay principal, with accrued
interest, at any time and the amount of principal so prepaid shall be available
for further Draws by Borrower during the Draw Period.
(d) Default Interest
Rate. In the event that any payment of principal or interest
is not paid within five (5) days from on the date on which the same is due and
payable, such payment shall continue as an obligation of the Borrower, and
interest thereon from the due date of such payment and interest on the entire
unpaid balance of the Loan shall accrue until paid in full at the lesser of (i)
fifteen percent (15%) per annum, or (ii) the highest interest rate permitted
under applicable law (the "Default Rate"). From and after the
Maturity Date or upon acceleration of the Note, the entire unpaid principal
balance of the Loan with all unpaid interest accrued thereon, and any and all
other fees and charges then due at such maturity, shall bear interest at the
Default Rate.
8
(e) Date of Payment. If
the date on which a payment of principal or interest on the Loan is due is a day
other than a Business Day, then payment of such principal or interest need not
be made on such date but may be made on the next succeeding Business
Day.
(f) Application of
Payments. All payments shall be applied first to costs of
collection, next to late charges or other sums owing Lender, next to accrued
interest, and then to principal, or in such other order or proportion as Lender,
in its sole discretion, may determine.
(g) Currency. All
payments shall be made in United States Dollars.
2. Events of
Default. The following shall constitute Events of Default: (a)
the default of Borrower in the payment of any interest or principal due under
this Note or the Credit Agreement or any other Note arising under the Credit
Agreement; (b) the failure of Borrower to perform or observe any other term or
provision of this Note, or any other Note arising under the Credit Agreement, or
any term, provision, covenant, or agreement in the Credit Agreement or any other
Loan Document; (c) any act, omission, or other event that constitutes an "Event
of Default" under the Credit Agreement; (d) any representation or warranty of
Borrower contained in the Credit Agreement or in any other Loan Document, or in
any certificate delivered by Borrower pursuant to the Credit Agreement or any
other Loan Document, is false or incorrect in any material respect when made or
given; (e) Borrower becoming the subject of any order for relief in a proceeding
under any Debtor Relief Law (as defined below); (f) Borrower making an
assignment for the benefit of creditors; other than repayment of the Loan, in
whole or in part, to Lenders; (g) Borrower applying for or consenting to the
appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator, or similar officer for it or for all or any part of its property
or assets; (h) the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator, or similar officer for Borrower, or for all or any
part of the property or assets of Borrower, without the application or consent
of Borrower, if such appointment continues undischarged or unstayed for sixty
(60) calendar days; (i) Borrower instituting or consenting to any proceeding
under any Debtor Relief Law with respect to Borrower or all or any part of its
property or assets, or the institution of any similar case or proceeding without
the consent of Borrower, if such case or proceeding continues undismissed or
unstayed for sixty (60) calendar days; (j) the dissolution or liquidation of
Borrower, or the winding-up of the business or affairs of Borrower; (k) the
taking of any action by Borrower to initiate any of the actions described in
clauses (e) through (j) of this paragraph; (l) the issuance or levy of any
judgment, writ, warrant of attachment or execution or similar process against
all or any material part of the property or assets of Borrower if such process
is not released, vacated or fully bonded within sixty (60) calendar days after
its issue or levy; or (m) any breach or default by Borrower under any loan
agreement, promissory note, or other instrument evidencing indebtedness payable
to a third party. As used in this Note, the term "Debtor Relief Law" means the
Bankruptcy Code of the United States of America, as amended, or any other
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, or similar debtor relief law affecting
the rights of creditors generally.
3. Remedies On
Default. Upon the occurrence of an Event of Default, at
Lender's option, all unpaid principal and accrued interest, and all other
amounts payable under this Note shall become immediately due and payable without
presentment, demand, notice of non
9
payment,
protest, or notice of non-payment. Lender also shall have all other
rights, powers, and remedies available under the Credit Agreement and any other
Loan Document, or accorded by law or at equity. All rights, powers,
and remedies of Lender may be exercised at any time by Lender and from time to
time after the occurrence of an Event of Default. All rights, powers,
and remedies of Lender in connection with this Note and any other Loan Document
are cumulative and not exclusive and shall be in addition to any other rights,
powers, or remedies provided by law or equity.
4. Miscellaneous.
(a) Borrower
and all guarantors and endorsers of this Note severally waive (i) presentment,
demand, protest, notice of dishonor, and all other notices; (ii) any release or
discharge arising from any extension of time, discharge of a prior party,
release of any or all of the security for this Note, and (iii) any other cause
of release or discharge other than actual payment in full of all indebtedness
evidenced by or arising under this Note.
(b) No
delay or omission of Lender to exercise any right, whether before or after an
Event of Default, shall impair any such right or shall be construed to be a
waiver of any right or default, and the acceptance of any past-due amount at any
time by the Lender shall not be deemed to be a waiver of the right to require
prompt payment when due of any other amounts then or thereafter due and
payable. The Lender shall not be deemed, by any act or omission, to
have waived any of Lender's rights or remedies under this Note unless such
waiver is in writing and signed by Lender and then only to the extent
specifically set forth in such writing. A waiver with reference to
one event shall not be construed as continuing or as a bar to or waiver of any
right or remedy as to a subsequent event.
(c) Lender
may accept, indorse, present for payment, and negotiate checks marked "payment
in full" or with words of similar effect without waiving Lender's right to
collect from Borrower the full amount owed by Borrower.
(d) Time is of the essence under this
Note. Upon any Event of Default, the Lender may exercise all
rights and remedies provided for in this Note and by law, including, but not
limited to, the right to immediate payment in full of this Note.
(e) The
rights and remedies of the Lender as provided in this Note, in the Credit
Agreement, and in the Security Agreement and in law or equity, shall be
cumulative and concurrent, and may be pursued singularly, successively, or
together at the sole discretion of the Lender, and may be exercised as often as
occasion therefor shall occur; and the failure to exercise any such right or
remedy shall in no event be construed as a waiver or a release of any such right
or remedy.
(f) It
is expressly agreed that if this Note is referred to an attorney or if suit is
brought to collect this Note or any amount due under this Note, or to enforce or
protect any rights conferred upon Lender by this Note then Borrower promises and
agrees to pay on demand all costs, including without limitation, reasonable
attorneys' fees, incurred by Lender in the enforcement of Lender's rights and
remedies under this Note, and such other agreements.
10
(g) The
terms, covenants, and conditions contained in this Note shall be binding upon
the heirs, executors, administrators, successors, and assigns of Borrower, and
each of them, and shall inure to the benefit of the heirs, executors,
administrators, successors and assigns of Lender.
(h) This
Note shall be construed under and governed by the laws of the State of
California without regard to conflicts of law.
(i) No
provision of this Note shall be construed or so operate as to require the
Borrower to pay interest at a greater rate than the maximum allowed by
applicable state or federal law. Should any interest or other charges
paid or payable by the Borrower in connection with this Note or the Loan result
in the computation or earning of interest in excess of the maximum allowed by
applicable state or federal law, then any and all such excess shall be and the
same is hereby waived by Lender, and any and all such excess paid shall be
credited automatically against and in reduction of the outstanding principal
balance due of the Loan, and the portion of said excess which exceeds such
principal balance shall be paid by Lender to the Borrower.
BORROWER: BIOTIME,
INC.
By
_____________________________________________
Title
___________________________________________
By
_____________________________________________
Title
____________________________________________
11
EXHIBIT
B
12
AMENDMENT OF REVOLVING
CREDIT NOTE
$___________ __________,
2008
Reference
is made to that certain Revolving Credit Note dated ______, 2008, in the
principal sum of _____________ DOLLARS ($_______________) made by BioTime, Inc.,
as “Borrower,” and payable the order of the undersigned as “Lender” (the
“Note”). The Maturity Date of the Note is hereby extended to April
15, 2009. The Note, as so amended, shall be governed by that certain
Fourth Amendment of Revolving Line of Credit Agreement, dated September ___,
2008, between Borrower and Lender.
LENDER:
_________________________________________
(Please Print Name of
Lender)
By: ______________________________________
(Signature)
Title: _____________________________________
(Please Show Title If
Applicable)
BORROWER:
BIOTIME,
INC.
By
_____________________________________________
Title
___________________________________________
By
_____________________________________________
Title
____________________________________________
13
Exhibit
10.36
FOURTH AMENDMENT OF SECURITY
AGREEMENT
This
Fourth Amendment of Security Agreement (“Fourth Amendment”) is made as of
November 14, 2008 by BioTime, Inc., as the “Debtor,” in favor and for the
benefit of each “Secured Party,” and amends that certain Third Amended and
Restated Security Agreement, March 31, 2008.
1. “Security
Agreement” means the Third Amended and Restated Security Agreement, March 31,
2008, as amended by this Fourth Amendment.
2. “Credit
Agreement” means that certain Third Amended and Restated Revolving Line of
Credit Agreement, dated March 31, 2008, as amended by the Fourth Amendment of
Revolving Line of Credit Agreement.
3. “Secured
Party” means, individually and collectively, each person who has executed the
Credit Agreement as a Lender.
4. “Note”
has the meaning ascribed in the Credit Agreement.
5. Except
as amended or modified by this Fourth Amendment, all provisions of the Third
Amended and Restated Security Agreement remain in effect.
DEBTOR
BIOTIME,
INC.
By: /s/ Michael D.
West
Chief
Executive Officer
By: /s/
Judith Segall
Secretary
Exhibit
31
CERTIFICATIONS
I,
Michael D. West, certify that:
1. I
have reviewed this quarterly report on Form 10-Q of BioTime, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The
registrant’s other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which the periodic reports are being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed
in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting.
5. The
registrant's other certifying officers and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and
report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal control over financial
reporting.
|
Date: November 18,
2008
|
|
|
/s/ Michael D. West
|
|
|
Michael
D. West
|
|
|
Chief
Executive Officer
|
Exhibit
31
CERTIFICATIONS
I, Steven
A. Seinberg, certify that:
1. I
have reviewed this quarterly report on Form 10-Q of BioTime, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The
registrant’s other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which the periodic reports are being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed
in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting.
5. The
registrant's other certifying officers and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and
report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal control over financial
reporting.
|
Date: November
18, 2008
|
|
|
/s/ Steven A. Seinberg
|
|
|
Steven
A. Seinberg
|
|
|
Chief
Financial Officer
|
Exhibit
32
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report on Form 10-Q of BioTime, Inc. (the
“Company”) for the quarter ended September 30, 2008 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), we,
Michael D. West, Chief Executive Officer, and Steven A. Seinberg, Chief
Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
1. The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and
2. The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
Date: November
18, 2008
|
/s/ Michael D. West
|
|
|
Michael
D. West
|
|
|
Chief
Executive Officer
|
|
|
/s/ Steven A. Seinberg
|
|
|
Steven
A. Seinberg
|
|
|
Chief
Financial Officer
|