<PAGE>
EXHIBIT 99.2
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED
SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
LONG-TERM SUPPLY AGREEMENT
THIS LONG-TERM SUPPLY AGREEMENT (the "Supply Agreement") is
made
effective as of the 15th day of November, 2005 ("Effective Date"),
by and
between Mayo Foundation for Medical Education and Research, a
nonprofit
foundation having its principal place of business at Rochester,
Minnesota 55905
("Supplier"), and MicroIslet, Inc., a Nevada corporation, having
its principal
place of business at 6370 Nancy Ridge Drive, Suite 112, San Diego,
California
92121 ("Buyer").
RECITALS
A. Buyer researches, develops, and commercializes certain
technologies
in the field of xenotransplantation, specifically the use of
porcine islets for
the treatment of diabetes.
B. Supplier desires to sell to Buyer, and Buyer desires to
purchase
from Supplier, certain non-transgenic pigs in Supplier's barrier
facility
located at [***] Rochester, Minnesota (the "Facility") solely for
Buyer's use in
its diabetes research, including xenotransplantation in humans for
clinical
trials, such use to include provision of such pigs to third parties
under
contract with Buyer solely in connection with such research (the
"Permitted
Use"); and
C. Supplier desires to cover the costs of operating the
Facility.
NOW, THEREFORE, in consideration of the foregoing and the
covenants
contained herein, the parties agree as follows:
ARTICLE 1.
PURCHASE AND SUPPLY OF PIG; TERMS
---------------------------------
1.1 PIGS.
-----
Subject to Section 1.2, Supplier shall breed, grow and provide to
Buyer
without further cost (beyond fees and expenses due pursuant to
Sections 1.3, 1.4
and 2.2) the number of non-transgenic, "Designated Pathogen Free"
(as specified
in more detail in Exhibit A) pigs (or pancreases or islets, if
mutually agreed
upon) requested by Buyer from the Facility (collectively, "Pigs",
which
definition shall include any derivative or component thereof), not
to exceed
[***] pigs of approximately [***] lbs (or pancreases or islets, if
mutually
agreed upon) for each month of the term of this Supply Agreement
and make the
Pigs available to Buyer, on the terms in this Supply Agreement. For
all purposes
under this Supply Agreement, the term "month" shall mean the period
from the
15th day of one calendar month through the 14th day of the
following calendar
month. The first month under this agreement is the period November
15, 2005 to
December 15, 2005, the second month is the period December 15, 2005
to January
15, 2006 and so on. If mutually agreed upon in writing, the number
of [***] Pigs
per month could also consist of an appropriate number of pigs of
different
weight that utilize the same time and space requirements necessary
to produce
[***] pigs of [***]. Buyer shall use the Pigs solely for the
Permitted Use and
will be responsible for complying with all Laws applicable to and
relating to
Buyer's Permitted Use. As used in this Supply Agreement, the term
"Laws" means
all applicable U.S. laws, regulations, rules, ordinances and
requirements,
including without limitation the United States Food, Drug, and
Cosmetic Act, the
Occupational Safety and Health Act, the Fair Labor Standards Act
and all
regulations and orders issued thereunder, and all applicable
Federal Food and
Drug Administration ("FDA") and other applicable regulatory
authorities'
standards.
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<PAGE>
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED
SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
1.2 PRODUCTION
AMOUNTS.
-------------------
Buyer, on the date of this Supply Agreement, and on the 15th day
of
each month thereafter, shall provide Supplier a good-faith six
month rolling
forecast for the number of requested Pigs. During the term of this
Supply
Agreement and any extension thereof, orders may be made for a
one-month supply
of Pigs, on a monthly basis, not to exceed [***] Pigs per
month.
1.3 FEES AND
EXPENSES.
------------------
Regardless of the number of Pigs ordered during each month of
this
Supply Agreement, Buyer shall pay Supplier a monthly fee of [***]
for each month
of this Supply Agreement (the "Monthly Fee"). Supplier may, at any
time, and
from time-to-time, during the initial term, the First Option Term
and/or the
Second Option Term and upon at least 30 days prior written notice
to Buyer,
increase the Monthly Fee; PROVIDED, HOWEVER that each such
increase, if any,
must not exceed the CPI Fraction for the increase in question. The
increase in
Monthly Fee shall be calculated as follows: [***] multiplied by the
CPI
Fraction. "CPI Fraction" shall mean a fraction, the numerator of
which is the
most recent CPI as of the commencement of the month, or months as
the Supplier
shall determine from time-to-time and at any time during any month
during the
initial term or the First Option Term or the Second Option Term of
this Supply
Agreement and the denominator of which is the most recent CPI as of
the
Effective Date of this Supply Agreement. "CPI means the "Consumer
Price Index,
All Urban Consumers, U.S. City Average, All Items, Standard
Reference Base
1982-84 = 100." If the CPI is discontinued, comparable statistics
on the
purchasing power of the consumer dollar as published at the time of
said
discontinuation by a responsible financial periodical of recognized
authority
selected by Supplier, shall be used for making the above
computation. If the
Standard Reference Base used in computing the CPI is changed such
that the CPI
for the 1982-84 = 100 Standard Reference Base is no longer
published, the
figures used in making the foregoing adjustments shall accordingly
be changed so
that all increases in the CPI are taken into account
notwithstanding any change
in the Standard Reference Base.
In addition to the Monthly Fee provided for herein, Buyer shall
pay
Supplier's expenses of harvesting the pancreases, if the parties
agree that
Supplier shall harvest and supply pancreases, the preparation and
packaging of
the pancreases for shipping, the shipping and insurance costs and
all applicable
taxes and other governmental charges. Similarly, Buyer shall pay
Supplier's
expenses associated with the isolation and shipping of islets if
the parties
agree that Supplier shall harvest and supply islets. Supplier's
expenses shall
consist of Supplier's actual costs, plus overhead determined in
accordance with
Supplier's standard overhead policies. Buyer shall have the right
to audit such
expense amounts. Any additional testing other than that specified
in Appendix A
that is performed at the request of Buyer will be paid for by the
Buyer. The
Monthly Fee will be subject to reduction in an amount negotiated in
good faith
by the parties in the event that Supplier elects to sell pigs from
the Facility
to a purchaser other than Buyer; provided that no such reduction
shall occur
with respect to Supplier's provision or sale of up to [***]
transgenic pigs to
third parties from the Facility during any 12 month period for use
outside the
Field (as defined in Section 8.1). Notwithstanding the foregoing,
nothing herein
shall prevent Supplier from using any quantity of transgenic pigs
for its
internal research purposes outside the Field.
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<PAGE>
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED
SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
1.4 PAYMENT
TERMS.
--------------
The Monthly Fee shall be due on or before the 15th of each month,
with
the first payment due on the date of last signature on this Supply
Agreement.
Supplier shall submit invoices for the additional fees and expenses
due pursuant
to Section 1.3, and Buyer shall pay such invoices in full within 30
days after
the receipt of the applicable invoice.
ARTICLE 2.
SPECIFICATIONS;
QUALITY ASSURANCE; INSPECTIONS
----------------------------------------------
2.1
SPECIFICATIONS.
---------------
A. All Pigs supplied by Supplier shall:
(i) meet all requirements, standards and
specifications in Exhibit A as applies to Supplier (the
"Specifications");
(ii) be labeled as indicated by Supplier; and
(iii) be free and clear of all liens and encumbrances
or other defects in title (collectively, the "QA Standards").
B. Supplier shall maintain ongoing quality assurance and
testing procedures as set forth in Exhibit A. Supplier shall be
responsible for complying with all Laws applicable to and relating
to
the Pigs during the time such Pigs are in Supplier's custody
and
control. Supplier shall participate in any discussions with FDA
regarding the use of the Pigs for human clinical trials and provide
any
reasonably requested assistance and documentation with respect to
the
Pigs and such use.
C. Supplier will agree to modifications of the Specifications
as requested by the Buyer and as required to ensure compliance with
FDA
guidelines, regulations and applicable laws of the United
States.
2.2
SHIPPING.
---------
Supplier shall: (a) ship all Pigs to Buyer according to Buyer's
shipping instructions, FOB delivered freight collect, with title to
the Pigs and
risk of loss and damage passing to Buyer upon delivery of the Pigs
to the
carrier specified by Buyer; and (b) pack all Pigs suitably for
shipment
according to common carriers' requirements. It shall be Buyer's
duty to insure
the Pigs in transit. Buyer shall pay all applicable taxes and other
governmental
charges associated with the sale of the Pigs.
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<PAGE>
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED
SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
2.3 INSPECTION
OF PIGS.
-------------------
Buyer shall inspect each Pig within 2 days after its receipt
and
immediately advise Supplier if any such Pig does not conform to the
QA
Standards. If Supplier agrees that any such Pig does not conform to
the QA
Standards, the Buyer shall, at Supplier's expense and option,
either destroy or
have destroyed such Pig or return it to Supplier, and Supplier
shall replace it
with another Pig free of any charge or expense to Buyer, including
any costs or
expenses for redelivery.
2.4
DOCUMENTATION AND INSPECTIONS.
------------------------------
Subject to the provisions of Article 3 of this Supply Agreement,
and
further subject to Supplier's security, health and safety and other
policies and
procedures with respect to the Facility, Supplier shall make
available to Buyer,
as may be reasonably requested by Buyer, the Specifications and
related
documents directly related to the Pigs and Supplier's compliance
with QA
Standards, and any other provisions of this Agreement, including
Section 1.3
above. Subject to the provisions of Article 3 of this Supply
Agreement, Buyer
shall have the right with advance written notice and at times
agreed to by
Supplier, such agreement not to be unreasonably withheld, during
regular
business hours, to enter upon Facility and to (a) make inspections
reasonably
necessary to properly ascertain compliance with the QA Standards
and this Supply
Agreement, and (b) harvest or train Supplier personnel to harvest
Pig pancreases
or islets.
2.5 REQUIRED
NOTIFICATION.
----------------------
Supplier shall immediately give Buyer notice, by telecopy, with
confirming notice by U.S. mail, if Supplier becomes aware of any
defect or
condition which in any way does not conform to the Specifications
or quality of
any Pigs supplied by Supplier or which may render any such Pig
ineffective,
dangerous and/or in material violation of the QA Standards.
2.6
TRACING.
--------
Supplier shall: (a) trace and maintain records regarding the
source
and, if applicable, lot number of each Pig; and (b) maintain such
records for
not less than 3 years after the termination or expiration of this
Supply
Agreement.
ARTICLE 3.
CONFIDENTIALITY; RIGHTS TO INVENTIONS, ETC.
-------------------------------------------
3.1
CONFIDENTIAL INFORMATION.
-------------------------
A. "Confidential Information" shall mean all information
disclosed by or on behalf of one party or its Affiliated Entities
to
the other, including without limitation information relating to
the
matters which are the subject of this Supply Agreement, the terms
and
the nature of this Supply Agreement, and all other information
regarding a party's research, technology, know-how, ideas,
concepts,
and the like, including information developed in connection with
this
Supply Agreement. Confidential Information shall not include
information which: (i)
is at the time of disclosure, or thereafter
becomes, a part of the public domain through no wrongful act or
omission by the receiving party; (ii) is lawfully in the possession
of
receiving party prior to disclosure by or on behalf of the
disclosing
party as shown by written records; (iii) is lawfully disclosed
to
receiving party by a third party which did not acquire the same
under
an obligation of confidentiality from or through the disclosing
party;
or (iv) is independently developed by receiving party without use
of
Supplier Confidential Information as shown by written records.
Further,
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<PAGE>
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED
SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
if the Receiving Party is compelled by law to disclose
Confidential
Information of the Disclosing Party, it shall provide the
Disclosing
Party with prior notice of such compelled disclosure (to the
extent
legally permitted) and reasonable assistance, at Disclosing
Party's
cost, if the Disclosing Party wishes to contest the disclosure.
The
foregoing restrictions shall not prohibit either party from
summarizing
the terms of this Supply Agreement, or from filing this Supply
Agreement as an exhibit, in documents such party is required to
file
with any government agency, including the Securities and
Exchange
Commission; provided that such disclosure shall be only to the
extent
required to comply with Laws, and further provided that the
party
proposing to make such disclosure shall provide a copy of the
proposed
disclosure to the other party in advance of such disclosure, and
shall
consider the input of such other party concerning such
disclosure,
including any requests that portions of such material be the
subject of
a proper request for confidential treatment.
B. A party receiving Confidential Information shall, for a
period of 3 years after expiration or termination of this
Supply
Agreement, as may be extended hereunder: (y) limit dissemination
of
Confidential Information to only those employees having a "need
to
know"; and (z) advise each such employee who receives Supplier
Confidential Information that such information is confidential
and
require each such employee to comply with all obligations of
confidentiality and non-disclosure. Receiving party shall not:
(i)
disclose Confidential Information to any person or entity, other
than
to its employees on a "need to know" basis only; or (ii) use
such
information in its own research, development,
commercialization,
marketing or sale of products or services or for any other purpose.
A
party shall not, by virtue of either this Supply Agreement or
its
receipt of Pigs, obtain any title to, or any interest or license
in,
any of the other party's Confidential Information.
C. Nothing herein shall prevent Supplier from using
information received from Buyer internally for the purpose of
supporting Supplier's other supply or xenotransplantation
activities.
Buyer shall keep confidential and not use for any purpose any
information obtained that relates to the design and operation of
the
Supplier's barrier facility. These obligations for non-use and
non-disclosure will survive any termination or expiration of
this
Supply Agreement and will not be subject to the 3 year
limitation
above.
D. Except as may expressly be set forth herein, this Supply
Agreement does not grant any rights, by implication, estoppel
or
otherwise, by a party under any patents, know-how, copyrights
or
proprietary information of such party to the other. All such rights
are
expressly reserved. Nothing herein shall grant a right to the a
party's
logos, names, trade names, service names or trademarks.
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<PAGE>
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED
SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
E. Neither party will use publicly for publicity, promotion,
or the like, any employee name, logo, name, trade name, service
mark,
or trademark of the
other, without such party's prior, written, express
consent.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
------------------------------
4.1 OF
SUPPLIER RELATING TO PIGS.
-----------------------------
Supplier represents and warrants that (a) all Pigs that are
delivered
to Buyer hereunder shall conform in all respects to and be in
accordance with
the QA Standards and Supplier's quality assurance policies and
procedures as
defined in Appendix A; (b) that the Facility will be operated in
accordance with
all applicable laws, regulations and guidelines, and the Pigs will
be qualified
for human use; and (c) that the current maximum Pig production
capacity of the
Facility is approximately [***] Pigs per month.
The foregoing representations and warranties shall not survive
inspection of the applicable Pigs by Buyer pursuant to Section 2.3
and shall be
for the benefit of Buyer only and not for the benefit of any other
person or
entity.
SUPPLIER'S ENTIRE LIABILITY AND BUYER'S SOLE REMEDY FOR ANY
DEFECTIVE
PIGS SHALL BE THE REPLACEMENT OF SUCH PIG BY SUPPLIER.
4.2 LIMITED
WARRANTY.
-----------------
THE WARRANTY SET FORTH ABOVE IS IN LIEU OF ALL OTHER
WARRANTIES,
EXPRESS OR IMPLIED OR STATUTORY, WHICH ARE HEREBY DISCLAIMED AND
EXCLUDED BY
BUYER, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY
OR FITNESS
FOR A PARTICULAR PURPOSE OR USE AND ALL OBLIGATIONS OR LIABILITIES
ON THE PART
OF SUPPLIER FOR DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE
PIGS OR THEIR
USE BY BUYER OR THIRD PARTIES. IN NO EVENT SHALL SUPPLIER LIABILITY
UNDER ANY
THEORY OR CLAIM EXCEED THE LOWER OF THE AGGREGATE AMOUNT OF MONTHLY
FEES PAID BY
BUYER UNDER THIS SUPPLY AGREEMENT OR [***]. Buyer will undertake
all necessary
and appropriate actions permitted or required by Laws to ensure
that Buyer's
provision of Pigs to any third party does not increase the scope of
Supplier's
responsibility and warranty as set forth above and Buyer shall
defend, indemnify
and hold harmless Supplier from all claims by any third party
arising out of or
relating to the supply of Pigs to third parties, excluding any such
claims that
arise solely out of intentional or illegal activities by Mayo.
Supplier's limits
of responsibility as set forth above are valid and enforceable
against whomever
they are applicable.
4.3 OTHER
REPRESENTATIONS AND WARRANTIES.
-------------------------------------
Each of the parties hereby represents and warrants to the other
that:
(a) it has full power and authority required to enter into, execute
and deliver
this Supply Agreement, to carry out its obligations hereunder, and
to perform
the transactions contemplated hereby; (b) this Supply Agreement has
been duly
executed and delivered by, is the valid and binding obligation of
and is
enforceable against, such party in accordance with its terms; (c)
the execution
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<PAGE>
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED
SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
and delivery of and performance under this Supply Agreement by such
party does
not, and will not, conflict with or violate any other agreement or
obligations
with third parties or any restrictions of any kind or any Law to
which it is
bound or subject; and (d) it has the unrestricted right to disclose
any
information it submits to the other party, free of all claims of
third parties,
and that such disclosures do not breach or conflict with any
confidentiality
provisions of any agreement to which it is a party.
ARTICLE 5.
LIMITATIONS OF REMEDIES
-----------------------
5.1 DELAY.
------
SUPPLIER SHALL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY DELAY
IN
FURNISHING PIGS, OR ANY OTHER PERFORMANCE UNDER OR PURSUANT TO THIS
SUPPLY
AGREEMENT.
5.2 SOLE
REMEDIES.
--------------
THE SOLE AND EXCLUSIVE REMEDIES FOR BREACH BY SUPPLIER OF ANY AND
ALL
WARRANTIES AND THE SOLE REMEDIES FOR BUYER OF ANY KIND WITH RESPECT
TO THE PIGS
COVERED BY THIS SUPPLY AGREEMENT AND ALL OTHER PERFORMANCE BY
SUPPLIER UNDER OR
PURSUANT TO THIS SUPPLY AGREEMENT SHALL BE LIMITED TO THE REMEDIES
PROVIDED IN
SECTION 4 OF THIS SUPPLY AGREEMENT.
5.3
CONSEQUENTIAL DAMAGES.
----------------------
IN NO EVENT SHALL EITHER P
