EXHIBIT 10.5
CONFIDENTIAL
Execution Copy
SUBLICENSE AGREEMENT
By And Between
ATHERSYS, INC.
And
ANGIOTECH PHARMACEUTICALS, INC.
Effective as of May 5, 2006

 

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TABLE OF CONTENTS

                                      Page
 
                    ARTICLE I. DEFINITIONS     2  
 
                    ARTICLE II. LICENSE GRANT     5  
 
    2.1     License Grants By Athersys     6  
 
    2.2     Reservation Of Rights     6  
 
                    ARTICLE III. PAYMENTS     6  
 
    3.1     Payments     6  
 
    3.2     Reports     7  
 
    3.3     Manner Of Conversion     7  
 
    3.4     Records Retention And Audit Rights     7  
 
                    ARTICLE IV. PATENTS     7  
 
    4.1     Patent Filing, Prosecution and Commencement or Settlement of
Litigation     7  
 
    4.2     Patent Infringement     8  
 
                    ARTICLE V. ADDITIONAL COVENANTS     8  
 
    5.1     Compliance     8  
 
    5.2     Covenants Regarding The Manufacture Of Licensed Products     8  
 
    5.3     Use Of The University’s Name And Trademarks Or The Names Of
University Faculty, Staff Or Students     8  
 
                    ARTICLE VI. TERM AND TERMINATION     9  
 
    6.1     Term     9  
 
    6.2     Use of Technology Not Covered by University Patent     9  
 
    6.3     Termination     9  
 
                    ARTICLE VII. CONFIDENTIALITY     9  
 
                    ARTICLE VIII. REPRESENTATIONS; WARRANTIES; COVENANTS     10
 
 
    8.1     Authority     10  
 
    8.2     Additional Representations, Warranties and Covenants of Athersys    
10  
 
    8.3     No Conflicts     11  
 
    8.4     Disclaimers     11  
 
    8.5     Indemnification Of University By Angiotech     11  

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TABLE OF CONTENTS
(continued)

                                      Page
 
                    ARTICLE IX. DISPUTE RESOLUTION     11  
 
                    ARTICLE X. MISCELLANEOUS     11  
 
    10.1     Governing Law     11  
 
    10.2     Minnesota Government Data Practices Act And Trade Secret
Information     12  
 
    10.3     Assignment     12  
 
    10.4     Compliance With Laws     12  
 
    10.5     Further Assurances     13  
 
    10.6     Severability     13  
 
    10.7     Waivers And Amendments; Preservation Of Remedies     13  
 
    10.8     Headings     13  
 
    10.9     Counterparts     13  
 
    10.10     Successors     13  
 
    10.11     Notices     13  
 
    10.12     No Consequential Damages     14  
 
    10.13     Independent Contractor     14  
 
    10.14     Complete Agreement     15  
 
                    SCHEDULES         Schedule 1.15         Schedule 1.31      
  Schedule 2.1        
 
                    EXHIBITS         Exhibit A        

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SUBLICENSE AGREEMENT
     This Sublicense Agreement (this “Sublicense Agreement”) is made and entered
into as of May 5, 2006 (the “Effective Date”), by and between Athersys, Inc., a
corporation organized under the laws of Delaware and having a place of business
at 3201 Carnegie Avenue, Cleveland, Ohio 44115 (“Athersys”), and Angiotech
Pharmaceuticals, Inc., a corporation organized under the laws of British
Columbia and having a place of business at 1618 Station Street, Vancouver, BC
Canada, V6A 1B6 (“Angiotech”). In this Sublicense Agreement, Athersys and
Angiotech may each be referred to as a “Party” and collectively as the
“Parties.”
RECITALS
     WHEREAS, MCL LLC and the University (as defined below) entered into an
Exclusive License Agreement, dated May 17, 2002 (“University License
Agreement”), and an Ownership Agreement, dated May 17, 2002 (“Ownership
Agreement”);
     WHEREAS, effective as of November 4, 2003, MCL LLC was merged into
ReGenesys, LLC, a subsidiary of Athersys, and thereafter the Ownership
Agreement, the University License Agreement and certain technology, including
that which is the subject of the Ownership Agreement and the University License
Agreement, were assigned to Athersys, and as a result thereof, Athersys is the
exclusive licensee of the “University Patents” and “University Technology,” as
each is defined in the University License Agreement;
     WHEREAS, concurrently with the execution of this Sublicense Agreement,
Athersys and Angiotech are entering into that certain Strategic Alliance
Agreement (such agreement and the exhibits and schedules thereto, the “Strategic
Alliance Agreement”) concerning the alliance between Angiotech and Athersys to
research, develop, manufacture, market and commercialize certain stem cells and
stem cell therapies for certain indications;
     WHEREAS, concurrently with the execution of this Sublicense Agreement,
Athersys and Angiotech are entering into that certain License Agreement which
grants to Angiotech rights to certain technology and intellectual property owned
by Athersys (the “License Agreement”);
     WHEREAS, collectively, the Strategic Alliance Agreement, the License
Agreement and this Sublicense Agreement are referred to herein as the
“Transaction Agreements”; and
     WHEREAS, this Sublicense Agreement sets forth the terms and condition under
which Athersys is granting a sublicense to Angiotech to the technology and
intellectual property licensed to Athersys pursuant to the University License
Agreement, including the “University Patents” and “University Technology,” as
further described below.
AGREEMENT
     NOW, THEREFORE, in consideration of the covenants and obligations expressed
herein, and intending to be legally bound the Parties agree as follows:

 

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ARTICLE I.
DEFINITIONS
     1.1 “Affiliate” means, with respect to any Party, any corporation or other
business entity which directly or indirectly through one or more intermediaries
controls, is controlled by, or is under common control with such Party, but only
for so long as the relationship exists. A corporation or other entity shall be
regarded as in control of another corporation or entity (a) if it (or any of its
subsidiaries or parents) beneficially owns, holds or directly or indirectly
controls more than fifty percent (50%) of the voting capital stock (or such
lesser maximum percentage permitted by applicable law) or other ownership
interest of such other corporation or entity, or (b) if it possesses, directly
or indirectly, the power to direct or cause the direction of the management and
policies of such other corporation or entity, or (c) if it possesses, directly
or indirectly, the power to elect or appoint more than fifty percent (50%) of
the members of the governing body of such other corporation or entity.
     1.2 “Angiotech” has the meaning ascribed to it in the preamble to this
Sublicense Agreement.
     1.3 “Athersys” has the meaning ascribed to it in the preamble to this
Sublicense Agreement.
     1.4 “Cells” means the following cells identified, developed, and/or
intended for use for treatment and/or prophylaxis of a disease or condition in
humans: (a) MAPCs; (b) progeny or components of any MAPCs; (c) derivatives of
any of the foregoing (a) or (b); (d) genetically-modified MAPCs; and
(e) Athersys Stem Cells; and including, without limitation, cells or tissues
that are derived from any of the foregoing, as any of the foregoing cells might
be at the time of treatment (i) in their native, undifferentiated state, (ii) in
a partially or fully pre-differentiated state, (iii) primed for differentiation
(for example, through the introduction of a protein, peptide, gene,
polynucleotide, small molecule or other active pharmaceutical ingredient), or
(iv) in a modified form.
     1.5 “Cell Therapy” means the treatment and/or prophylaxis of a disease or
condition, by regional, local, systemic or other delivery, localization and/or
administration of Cells. The term “Cell Therapy” specifically excludes using
(a) any of the Cells as reagents; (b) any of the Cells for diagnostic
applications or assays; and (c) any of the Cells for drug and drug target
validation screening. The term “Cell Therapy” specifically includes
(x) delivery, localization and/or administration of a protein, peptide, gene,
polynucleotide, small molecule or other active pharmaceutical ingredient (or any
combination of the foregoing) at or near the time of delivery, localization
and/or administration of Cells; (y) delivery, localization and/or administration
of one or more fractions and/or subsets of Cells; and (z) delivery, localization
and/or administration of one or more other cell types at or near the time of
delivery, localization or administration of Cells.
     1.6 “Cell Therapy Product” means a therapeutic and/or prophylactic product
for humans that (a) includes a Cell developed under the Strategic Alliance
Agreement that is intended for use or used as Cell Therapy for at least one
Therapeutic Indication, and (b) has obtained Regulatory Approval in a given
country or jurisdiction in the Territory.

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     1.7 “Clinical Development Candidate” means (a) a Cell(s) that meets certain
criteria and has certain characteristics that are necessary and desirable for
the submission of an Investigational New Drug (“IND”) application for use of
such Cell(s) in Cell Therapy for at least one Therapeutic Indication (and,
therefore, make such Cell(s) suitable for a Clinical Development Program), as
determined by the JSC; or (b) a Cell(s) that is or has been the subject of an
IND for use of such Cell(s) in Cell Therapy for at least one Therapeutic
Indication. The term “Clinical Development Candidate” shall expressly exclude
Cell Therapy Products.
     1.8 “Clinical Development Plan” means, for each Clinical Development
Candidate, a detailed plan that sets forth the responsibilities of, and the
activities to be conducted by, each of the Parties in advancing each such
Clinical Development Candidate to regulatory approval for a Therapeutic
Indication (including a detailed budget corresponding to each such plan).
     1.9 “Clinical Development Program” means the clinical development
activities conducted by (or to be conducted by) each Party pursuant to a
Clinical Development Plan.
     1.10 “Company Technology” means the technology owned by Athersys through
the Ownership Agreement, namely, the “COMPANY Technology,” as defined in the
Ownership Agreement.
     1.11 “Effective Date” has the meaning ascribed to it in the preamble to
this Sublicense Agreement.
     1.12 “License Agreement” has the meaning ascribed to it in the Recitals to
this Sublicense Agreement.
     1.13 “Licensed Patent” means a Patent that claims as an invention one or
more aspects of the Technology.
     1.14 “Licensed Product” means any Technology which is within the scope of
one or more claims of a Licensed Patent and, but for the sublicense granted in
this Sublicense Agreement, would infringe, constitute contributory infringement,
or constitute inducement to infringe of one or more such claims when made by,
made for, used, sold, offered for sale, imported, exported, leased or otherwise
disposed of by Angiotech (or its permitted assignees, sublicensees, or
transferees).
     1.15 “MAPC” means any multipotent adult progenitor cell, including without
limitation those described in the Patent Rights listed on Schedule 1.15 or
described in any Patent Rights that claim priority to any such Patent Rights
listed on Schedule 1.15.
     1.16 “Ownership Agreement” has the meaning ascribed to it in the Recitals
to this Sublicense Agreement.
     1.17 “Party” and “Parties” each has the meaning ascribed to it in the
preamble to this Sublicense Agreement.
     1.18 “Patent” means any and all issued letters patents, including, but not
limited to, implementation, improvement, addition, utility model, or appearance
design patents and

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inventors certificates, as well as patents that may issue from any divisions,
reissues, continuation, renewals and extensions of any of the foregoing.
     1.19 “Patent Rights” means rights in (a) issued Patents and pending
provisional and non-provisional applications for Patents, including, without
limitation, any continuations, continuations-in-part or divisions directed to
inventions disclosed therein; (b) any re-examinations, reissues, renewals,
substitutions or extensions of any Patents; and (c) foreign counterparts or
equivalents of any of the foregoing.
     1.20 “Pre—Clinical Development Program” means the pre-clinical development
activities conducted by or for a Party in furtherance of advancing a Cell(s)
into one or more potential Clinical Development Candidates for a Therapeutic
Indication.
     1.21 “Prior Third Party Agreement” means those agreements between Athersys
and a Third Party set forth on Schedule 2.1, as such agreements exist as of the
Effective Date.
     1.22 “Strategic Alliance Agreement” has the meaning ascribed to it in the
Recitals to this Sublicense Agreement.
     1.23 “Sublicense Agreement Term” shall have the meaning set forth in
Section 6.1.
     1.24 “Sublicense Net Sales” shall mean the amount invoiced for sales and
other dispositions of Licensed Products sold during the term of this Sublicense
Agreement in any arm’s-length transactions to any unrelated third-party
transferee in any channels of distribution less the following deductions:
(a) all trade, quantity, cash or prompt payment discounts or rebates actually
allowed, (b) all credits and allowances actually granted due to rejections,
returns, defective Licensed Product, replacements, warranty, outdating, billing
errors, and retroactive price reductions, (c) customs duties and tariffs,
(d) excise, sale, use, turnover, inventory, value-added, foreign withholding,
and equivalent taxes or other government charges, but not net income or net
profit taxes, (e) outbound transportation, insurance charges separately billed
to buyer or prepaid, and advertising allowances, (f) special outbound packing
separately billed to buyer or prepaid, (g) any sales agents, or brokers
commissions paid to non-Affiliates, and (h) all charges in connection with
converting, transmitting, or remitting currency. Sales, credits, refunds, and
uncollectible accounts shall be accounted for when recognized by Angiotech
according to generally accepted accounting principles. Shipments between
Angiotech and its Affiliates will not be considered to be sold or otherwise
disposed of until they are sold to a third party customer of Angiotech or of its
Affiliates. If a Licensed Product is sold in combination with another component,
Sublicense Net Sales, for purposes of determining royalties on the combination,
will be calculated by multiplying Sublicense Net Sales of the combination by the
fraction A/(A+B), where A is the invoice price of the Licensed Product if sold
separately and B is the invoice price of any other component(s) in the
combination if sold separately. If the Licensed Product and the other
component(s) in the combination are not sold separately, Sublicense Net Sales,
for purposes of determining royalties on the combination, will be calculated by
multiplying Sublicense Net Sales of the combination by the fraction C/(C+D),
where C is the direct cost of manufacturing the Licensed Product and D is the
direct cost of manufacturing any other component(s) in the combination. Cost of
manufacturing will be determined in accordance with generally accepted
accounting principles. In the event any

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Licensed Product is leased or sold on an installment basis, Sublicense Net Sales
shall mean the revenue stream as and when recognized as revenue by Athersys in
accordance with generally accepted accounting principles. Sublicense Net Sales
shall not include any charitable gift by Angiotech of any Licensed Product or
the transfer of Licensed Product to an Affiliate or non-Affiliate for conducting
research or product development for Angiotech’s or Athersys’ benefit. Sublicense
Net Sales shall also exclude the transfer of Licensed Product to a research or
educational institution for research or educational purposes, provided such
transfer was made for no more than de minimus consideration.
     1.25 “Technology” means Company Technology and University Technology,
including but not limited to, multipotent postnatal derived progenitor cells,
precursors, progeny or components thereof, products and information obtained
from the foregoing, processes and products utilized in production or processing
of any of the foregoing, methods of utilizing any of the foregoing, and any
Trade Secret Information or know-how relating to the foregoing. The term
“Technology” shall also include any invention involving multipotent postnatal
derived progenitor cells (i) that is the result of research conducted by or
under the direction of Drs. Catherine Verfaillie, Leo Furcht or Morayama Reyes
while at the University or is the result of research conducted at the University
by a University faculty, staff or student using such cells provided by the
University pursuant to Section 3.3(a) of the University License Agreement;
(ii) that is owned by the University pursuant to its policies and agreements
with its employees; and (iii) that is disclosed to the University no later than
the seventh (7th) anniversary of the “Effective Date” of the University License
Agreement.
     1.26 “Territory” means the world.
     1.27 “Therapeutic Field” means, as the context requires, a field comprising
certain cardiovascular indications.
     1.28 “Trade Secret Information” means trade secret as defined under the
Minnesota Uniform Trade Secrets Act, Minn. Stat. Section 325C.011 et seq.
     1.29 “University” means the Regents of the University of Minnesota, a
constitutional, educational corporation existing under the laws of the State of
Minnesota, U.S.A.
     1.30 “University License Agreement” has the meaning ascribed to it in the
Recitals to this Sublicense Agreement.
     1.31 “University Patents” means a Patent Right that claims as an invention
one or more aspects of the University Technology. University Patents include,
but are not limited to, the Patent Rights listed on Schedule 1.31
     1.32 “University Technology” means the technology that is owned by the
University pursuant to the Ownership Agreement, namely, the “University
Technology,” as defined in the Ownership Agreement.
ARTICLE II.
LICENSE GRANT

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     2.1 License Grants By Athersys. Subject to the provisions of this
Sublicense Agreement, the applicable provisions of the Ownership Agreement and
the University License Agreement, and the Prior Third Party Agreements, Athersys
grants to Angiotech during the Sublicense Agreement Term:
          (a) a co-exclusive (meaning that only Athersys, Angiotech and their
Affiliates can act in each country of the Territory), worldwide, sublicense,
with the right to further sublicense (through multiple tiers of sublicensing),
under the University Patents and University Technology to research, develop, and
otherwise use and exploit (but excluding make and have made) Cells and Clinical
Development Candidates in the Therapeutic Field in the Territory as necessary or
useful to conduct any Clinical Development Program, Pre-Clinical Development
Program and/or New Pre-Clinical Development Program and/or its activities under
any Transaction Agreement;
          (b) an exclusive (even as to Athersys), worldwide, sublicense, with
the right to further sublicense (through multiple tiers of sublicensing), under
the University Patents and University Technology to promote, market, distribute,
advertise, sell, have sold, offer for sale, import and have imported Cell
Therapy Products in the Therapeutic Field in the Territory; and
          (c) in the event that Angiotech obtains rights to manufacture Cells,
Clinical Development Candidates and Cell Therapy Products pursuant to the terms
of the Strategic Alliance Agreement, a co-exclusive (meaning that only Athersys,
Angiotech and their Affiliates and permitted subcontractors can act in each
country of the Territory) worldwide, sublicense, with the right to sublicense
(through multiple tiers of sublicensing), under the University Patents and
University Technology to make and have made Cells, Clinical Development
Candidates and Cell Therapy Products in the Therapeutic Field in the Territory.
     2.2 Reservation Of Rights. Except as expressly set forth in Section 2.1,
Athersys reserves all right, title and interest in, to and under the University
Technology and University Patents and all other technologies and intellectual
property rights owned by or licensed to Athersys or any of its Affiliates (other
than the licenses granted to Angiotech pursuant to the License Agreement). No
right or license is granted under this Sublicense Agreement by Athersys or any
of its Affiliates to Angiotech or any of its Affiliates, whether expressly,
impliedly, by estoppel or otherwise, in, to or under the University Technology
or University Patents or any other material, technology or intellectual property
rights licensed to Athersys or any of its Affiliates, except as expressly set
forth in Section 2.1. The University reserves the rights set forth in
Section 3.2 and Section 3.3 of the University License Agreement.
ARTICLE III.
PAYMENTS
     3.1 Payments. All amounts to be paid by Angiotech for the rights granted by
Athersys pursuant to this Sublicense Agreement are included as part of the
consideration to be paid by Angiotech under the Strategic Alliance Agreement.
For the avoidance of doubt, Athersys’ obligations to University under ARTICLE 5
of the University License Agreement shall remain in full force and effect, and
Athersys, in its sole responsibility and at its sole expense, shall make any
required payments thereunder.

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     3.2 Reports. The University License Agreement requires reporting of sales,
leases or other dispositions of Licensed Products notwithstanding that no
separate payment is required by Angiotech to Athersys under this Sublicense
Agreement with respect thereto. Accordingly, within forty-five (45) days after
the last day of a calendar quarter during the Sublicense Agreement Term,
Angiotech shall deliver to Athersys a written report (a copy of the form of
which is attached to this Sublicense Agreement as Exhibit A), certified by
Angiotech’s chief financial officer as complete and correct, recounting the
number and Sublicense Net Sales amount (expressed in United States Dollars) of
all sales, leases or other dispositions of Licensed Products during such
calendar quarter. If the number and Sublicense Net Sales amount of such sales,
leases or other dispositions of Licensed Products in any calendar quarter is
zero, then Angiotech shall deliver a written report to Athersys stating such
information.
     3.3 Manner Of Conversion. All computations under this Sublicense Agreement
shall be in United States dollars. For purposes of determining the dollar value
of transactions conducted in non-United States dollar currencies, the exchange
rate for the currency in dollars shall be the rate set by Citibank, N.A., in New
York, New York on the last business day of the month in which the transaction
was entered into.
     3.4 Records Retention And Audit Rights.
          (a) Throughout the Sublicense Agreement Term, Angiotech, at its
expense, shall keep and maintain for a period of three (3) years complete and
accurate records of all sales, leases and other dispositions of Licensed
Products during the Sublicense Agreement Term.
          (b) On behalf of the University or Athersys, an independent certified
public accountant, at the University’s or Athersys’ expense, shall have the
right to inspect and audit, once each year, Angiotech’s records referred to in
Section 3.4(a) at Angiotech’s address set forth in the preamble of this
Sublicense Agreement during Angiotech’s normal business hours. If the
independent certified public accountant, in accordance with the results of such
inspection and audit, determines that Angiotech has underpaid amounts owed to
Athersys hereunder by at least five percent (5%) or Forty-Two Thousand Dollars
($42,000), whichever is smaller, in any annual reporting period, Angiotech shall
reimburse the University or Athersys, whichever performed the audit, for all of
the University’s or Athersys’ reasonable expenses paid or owed to the
accountants to inspect and audit such records, in addition to payment to
Athersys of all underpaid amounts.
ARTICLE IV.
PATENTS
     4.1 Patent Filing, Prosecution and Commencement or Settlement of
Litigation. To the extent permitted by the University License Agreement, and in
a manner consistent with the Strategic Alliance Agreement and the License
Agreement, Athersys shall consult with Angiotech regarding preparation, filing,
prosecution, maintenance, and commencement or settlement of patent infringement
litigation related to University Patents and actual and potential patent
applications on any of the Technology for which Athersys is responsible, and
shall provide copies to Angiotech all official correspondence with patent
authorities or courts related thereto. Athersys shall (a) give Angiotech a
reasonable opportunity to review and provide substantive

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input for material decisions relating to the filing, prosecution, maintenance
and patent infringement litigation commencement or settlement related to, and
(b) shall consult with Angiotech with respect to, each such University Patent
and each such actual and potential patent application, and shall supply
Angiotech with a copy of each such University Patent and patent application as
filed, together with notice of its filing date and serial number. For the
avoidance of doubt, Athersys may take ministerial and non-material procedural
actions regarding such University Patents and patent applications without
obtaining prior input from Angiotech. Athersys shall keep Angiotech informed of
the status of all such material patent filing, prosecution, maintenance and
patent infringement litigation commencement or settlement activities, shall
provide written reports to Angiotech at least semi-annually regarding the status
of all filings, analyses, strategies, decisions and proceedings involving such
University Patents and patent applications. Angiotech shall have the right to
request and promptly receive additional information regarding such University
Patents and patent applications from Athersys.
     4.2 Patent Infringement. To the extent permitted by the University License
Agreement, and in a manner consistent with the Strategic Alliance Agreement and
the License Agreement, Athersys shall grant to Angiotech the same or
substantially similar rights regarding enforcement of University Patents, or
defense of third-party claims alleging that the manufacture, production, use,
development, sale or distribution of products or any technology or intellectual
property licensed to Angiotech under this Sublicense Agreement infringes the
patent rights of such third party.
ARTICLE V.
ADDITIONAL COVENANTS
     5.1 Compliance. Each Party is solely responsible for compliance with, and
shall comply with, all applicable international, federal, state and local laws,
rules and regulations in connection with such Party’s use of the Technology,
including, without limitation, all environmental, import/export, security and
food and drug laws, rules and regulations.
     5.2 Covenants Regarding The Manufacture Of Licensed Products. To the extent
that Angiotech has a right to manufacture Licensed Products, the following shall
apply. Angiotech will employ commercially reasonable efforts commensurate with
the prevailing industry practices pertaining to the Technology and/or the
Licensed Products to minimize Licensed Products that are defective in design or
manufacture. Angiotech will manufacture, sell, or transfer Licensed Products
that comply with all applicable federal and state law, including all federal
export laws and regulations. Angiotech shall manufacture Licensed Products in
the United States of America if (a) the Licensed Product is to be sold in the
United States of America and (b) the Licensed Product embodies or is produced
through use of an invention which is subject to the rights of the federal
government of the United States of America, unless Angiotech is granted a waiver
of these restrictions by the United States of America.
     5.3 Use Of The University’s Name And Trademarks Or The Names Of University
Faculty, Staff Or Students. Unless required by law or an order of a court or
governmental agency, Angiotech shall not use the name or trademarks of the
University in promoting or advertising Angiotech or any product of Angiotech or
any Cell Therapy Product without the University’s prior written approval.
Angiotech may use the name of any of the University’s

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faculty, staff or student body members, upon obtaining such member’s written
approval. Notwithstanding this provision, Angiotech and its employees shall have
the right to make truthful, fair, good faith, non-promotional statements about
the Technology, including the identity of the University and any individuals
involved with the Technology.
ARTICLE VI.
TERM AND TERMINATION
     6.1 Term. This Sublicense Agreement shall commence on the Effective Date
and, unless sooner terminated under Section 6.3, shall expire at the end of the
life of the last to expire University Patent. The period from the Effective Date
through expiration or termination of this Sublicense Agreement is the
“Sublicense Agreement Term.”
     6.2 Use of Technology Not Covered by University Patent. During and after
the expiration or earlier termination of this Sublicense Agreement, Angiotech
shall continue to have the right to make, have made, use, sell, offer to sell,
import, export, lease, or otherwise dispose of any Technology that is not
covered by a claim of a Licensed Patent.
     6.3 Termination.
          (a) Automatic. This Sublicense Agreement shall automatically terminate
upon termination of the License Agreement (except as provided for in
Section 16.3 of the Strategic Alliance Agreement) or termination of the
University License Agreement. Termination of this Sublicense Agreement due to
termination of the University License Agreement does not by itself automatically
terminate the License Agreement.
          (b) Breach. The failure by a Party to substantially comply with any of
the material obligations contained in this Sublicense Agreement shall entitle
the other Party to give notice to have the default cured. If such default is not
cured within sixty (60) days after the receipt of such notice, or if by its
nature such default is not capable of cure within such sixty (60)-day period,
the notifying Party shall be entitled, without prejudice to any of its other
rights conferred on it by this Sublicense Agreement, and in addition to any
other remedies that may be available to it, to terminate this Sublicense
Agreement.
          (c) Effect Of Termination. Upon expiration or termination of this
Sublicense Agreement for any reason, the provisions of Article I, to the extent
definitions are embodied in the following listed Articles and Sections of this
Agreement; Articles VII and IX; and Sections 2.2, 3.2 — 3.3 (solely with respect
to Net Sales accrued before termination), 3.4, 6.2, this 6.3(c), 8.4, 8.5, 10.1,
10.2, and 10.5 — 10.14, as well as any obligations accrued, arising or owed
before the termination of this Sublicense Agreement shall survive any
termination of this Sublicense Agreement, as applicable.
ARTICLE VII.
CONFIDENTIALITY
     The terms of this Sublicense Agreement and the activities conducted and
information shared hereunder shall be considered “Confidential Information”
under the Strategic Alliance Agreement and subject to all of the terms and
conditions with respect thereto under the Strategic

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Alliance Agreement; provided, however, that any disclosure by either Party as
required under the University License Agreement shall be deemed a permitted
disclosure under Section 13.3 of the Strategic Alliance Agreement.
ARTICLE VIII.
REPRESENTATIONS; WARRANTIES; COVENANTS
     8.1 Authority. Each Party represents and warrants that, as of the Effective
Date, it has the full right, power and authority to enter into this Sublicense
Agreement and that this Sublicense Agreement has been duly executed by such
Party and constitutes a legal, valid and binding obligation of such Party,
enforceable in accordance with its terms.
     8.2 Additional Representations, Warranties and Covenants of Athersys.
Athersys represents, warrants and covenants that:
          (a) it has provided Angiotech with a complete, current and accurate
copy of the University License Agreement, including all amendments thereto, as
such agreement exists on the Effective Date;
          (b) except as expressly provided in the University License Agreement,
the Strategic Alliance Agreement or the License Agreement, Athersys has no
commitments or agreements with any Third Party which would materially,
individually or in the aggregate, interfere with or preclude the fulfillment of
its obligations under this Sublicense Agreement;
          (c) Athersys has carried out all requirements under the University
License Agreement that are necessary to enable it to validly grant sublicenses
to Angiotech pursuant to the terms of the University License Agreement, and that
there are no other requirements necessary to enable Athersys to validly grant
sublicenses to Angiotech under the University License Agreement;
          (d) Athersys has received no notice of default under the University
License Agreement, and Athersys is not in default and, to the best of Athersys’
knowledge after due inquiry, there are no circumstances existing on the
Effective Date which, with notice or the passage of time or both, could result
in a default under the University License Agreement;
          (e) to the best of Athersys’ knowledge, the University License
Agreement is a legal, valid and binding agreement, enforceable in accordance
with its terms except as enforceability may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors’ rights generally and by general equitable principles;
          (f) Athersys will use commercially reasonable efforts to negotiate and
execute a letter agreement with University that agrees and acknowledges that,
should the University License Agreement terminate through no fault of Angiotech,
Angiotech, providing that it is not in default under its sublicense from
Athersys, shall have the right to continue to research, develop, promote,
market, distribute, advertise, sell, have sold, offer for sale, import and have
imported and otherwise use and exploit Licensed Products, as a direct licensee
of University on

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substantially the same terms as the University License Agreement, to the extent
such rights are granted to Angiotech under this Sublicense Agreement;
          (g) Athersys will not take any action, or fail to take any required
action, either of which results in the termination of the University License
Agreement prior to the expiration of its natural term; and
          (h) within five (5) days of receipt, Athersys will provide Angiotech
with copies of all notices received from the University under Section 8.1.2 of
the University License Agreement, and Angiotech may, at its discretion, take any
actions necessary and useful to cure or prevent a breach of the University
License Agreement that would likely lead to termination under such Section.
     8.3 No Conflicts. Each Party represents and warrants that the execution,
delivery and performance of this Sublicense Agreement and the other Transaction
Agreements do not conflict with, or constitute a breach or default under, any of
its charter or organizational documents, any law, order, judgment or
governmental rule or regulation applicable to it, or any material agreement,
contract, commitment or instrument to which it is a party.
     8.4 Disclaimers. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS
SUBLICENSE AGREEMENT OR ANY TRANSACTION AGREEMENT, NEITHER PARTY MAKES ANY
REPRESENTATIONS NOR EXTENDS ANY WARRANTIES OR CONDITIONS OF ANY KIND, EITHER
EXPRESS OR IMPLIED, CONCERNING THE TECHNOLOGY, LICENSED PRODUCTS AND UNIVERSITY
PATENTS, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT.
     8.5 Indemnification Of University By Angiotech. Throughout the Sublicense
Agreement Term and thereafter, Angiotech shall indemnify, defend and hold the
University harmless from all suits, actions, claims, liabilities, demands,
damages, losses, or reasonable and necessary expenses (including reasonable
attorneys’ fees and investigative expenses), relating to or arising out of
Angiotech’s acts relating to the manufacture, use, lease, sale or other
disposition of Licensed Product by Angiotech, including, without limitation,
breach of contract, warranty, and products liability claims relating to Licensed
Product.
ARTICLE IX.
DISPUTE RESOLUTION
     The Parties shall resolve all disputes under this Sublicense Agreement in
accordance with the rules and procedures specified in the Strategic Alliance
Agreement.
ARTICLE X.
MISCELLANEOUS
     10.1 Governing Law. This Sublicense Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the principles of conflict of laws thereof.

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     10.2 Minnesota Government Data Practices Act And Trade Secret Information.
Angiotech acknowledges that the University is subject to the terms and
provisions of the Minnesota Government Data Practices Act, Minnesota Statutes,
§13.01 et seq. (the “Act”). Angiotech further acknowledges that the Act
requires, with certain exceptions, the University to permit the public to
inspect and copy any information which the University shall have collected,
created, received, maintained or disseminated. Angiotech further acknowledges
that in connection with the performance of its obligations to the University,
Athersys may deliver to the University certain Trade Secret Information (as
defined by the Act) that Angiotech deems proprietary and confidential and,
notwithstanding anything to the contrary in any agreement between Athersys and
Angiotech or their respective Affiliates, such delivery shall not be a breach of
any such agreement. In the event the University receives a request under the Act
for the inspection of information collected, created, received, maintained or
disseminated, including, but not limited to, any Trade Secret Information, the
University should promptly notify Athersys of such request and should refuse to
disclose such information. In no event shall the University be required to
commence any action to prohibit the inspection and copying of any such
information. However, the University should cooperate with Angiotech and
Athersys if Angiotech or Athersys commences or defends any action to prohibit
such inspection or copying. Angiotech shall reimburse the University for any of
the University’s reasonable and necessary expenses resulting from such
cooperation. Angiotech shall defend, indemnify and hold harmless the University
and each of its regents, officers, employees and agents from and against any
claim, suit, demand or expense (including reasonable attorneys’ fees and
investigation expenses) that arose out of or are related to Angiotech’s request
that the University refuse to divulge any such information. If the University
complies with the requirements of this Section 10.2, Angiotech for itself and
its employees and agents waives any claim or cause of action of whatever nature
against the University and each of its regents, officers, employees and agents
that arose out of or is related to a request to inspect or copy any such
information and the University shall not be liable to any person for any
expenses or damages, including, but not limited to, consequential, special or
incidental damages, or lost profits, in connection with the inspection or
copying of any such information.
     10.3 Assignment. Neither Party shall be permitted to assign or otherwise
transfer any of its rights or obligations under the Transaction Agreements
without the prior written consent of the other Party; provided, however, that,
subject to Section 16.2(e) of the Strategic Alliance Agreement, a Party may
assign or otherwise transfer all of its rights and obligations under the
Transaction Agreements without the prior written consent of the other Party
(a) in connection with a sale of all or substantially all of its business or
assets, whether by merger, sale of stock, sale of assets or otherwise or (b) to
an Affiliate of such Party. Notwithstanding the foregoing, in the event of any
such permitted assignment or other transfer, all rights and obligations under
the Transaction Agreements must be assigned or otherwise transferred together in
their entirety to such assignee or successor.
     10.4 Compliance With Laws. Each Party shall comply with all applicable
laws, rules and regulations in connection with its performance of its
obligations and exercise of its rights under the Transaction Agreements. Each
Party shall furnish to the other Party any information reasonably requested or
required by the requesting Party during the Sublicense Agreement Term to enable
the requesting Party to comply with the requirements of any United States or
foreign federal, state, and/or government agency.

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     10.5 Further Assurances. At any time, or from time to time, following the
date of the Transaction Agreements, each Party shall, at the request of the
other Party (a) deliver or cause to be delivered to the requesting Party any
records, data or other documents consistent with the provisions of the
Transaction Agreements, (b) duly execute and deliver, or cause to be duly
executed or delivered, all such consents, assignments, documents or further
instruments of transfer or license as required by the Transaction Agreements,
and (c) take or cause to be taken all such actions, in each case as the
requesting Party may reasonably deem necessary in order for the requesting Party
to obtain the full benefits of the Transaction Agreements and the transactions
contemplated hereby.
     10.6 Severability. In the event that any provision of the Transaction
Agreements is determined to be invalid or unenforceable by a court of competent
jurisdiction, the remainder of the Transaction Agreements shall remain in full
force and effect without said provision. In such event, the Parties shall in
good faith attempt to negotiate a substitute clause for any provision declared
invalid or unenforceable, which substitute clause shall most nearly approximate
the intent of the Parties in agreeing to such invalid provision, without itself
being invalid.
     10.7 Waivers And Amendments; Preservation Of Remedies. The Transaction
Agreements may be amended, modified, superseded, canceled, renewed or extended,
and the terms and conditions hereof may be waived, only by a written instrument
signed by the Parties or, in the case of a waiver, the Party waiving compliance.
No delay on the part of any Party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any Party of any right, power or privilege hereunder, nor any single or partial
exercise of any right, power or privilege hereunder, preclude any other or other
exercise thereof hereunder. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies which any Party may
otherwise have at law or in equity.
     10.8 Headings. The captions to the several Articles and Sections hereof are
not a part of the Transaction Agreements, but are included merely for
convenience of reference only and shall not affect its meaning or
interpretation.
     10.9 Counterparts. The Transaction Agreements may be executed by original
or facsimile signature in any number of counterparts, and each such counterpart
shall be deemed to be an original instrument, and all of which counterparts
together shall constitute one instrument.
     10.10 Successors. This Sublicense Agreement shall be binding upon and inure
to the benefit of the Parties and their respective successors and permitted
assigns.
     10.11 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally, by fax, sent by nationally recognized
overnight courier or mailed by registered or certified mail (return receipt
requested), postage prepaid, to the Parties at the addresses set forth below (or
at such other address for such party as shall be specified by like notice). All
such notices and other communications shall be deemed to have been given and
received (a) in the case of personal delivery, on the date of such delivery,
(b) in the case of delivery by facsimile transmission, on the date of such
delivery, (c) in the case of delivery by nationally recognized

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express courier, on the date of such delivery, and (d) in the case of mailing
within the United States, on the fifth (5th) business day following such
mailing.
If to Angiotech:
Angiotech Pharmaceuticals, Inc.
1618 Station Street
Vancouver, BC Canada V6A 1B6
Fax: 604-221-2330
Attn: Vice President Business Development
with a required copy to:
Angiotech Pharmaceuticals, Inc.
1618 Station Street
Vancouver, BC Canada V6A 1B6
Fax: 604-221-2330
Attn: General Counsel
If to Athersys:
Athersys, Inc.
3201 Carnegie Avenue
Cleveland, OH 44115-2634
Fax: (216) 361-9495
Attn: Chief Executive Officer
with a copy (which shall not constitute notice) to:
Jones Day
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Fax: (216) 579-0212
Attn: Thomas A. Briggs, Esq.
     10.12 No Consequential Damages. EXCEPT IN CONNECTION WITH A PARTY’S
OBLIGATIONS UNDER ARTICLE XV OF THE STRATEGIC ALLIANCE AGREEMENT, IN NO EVENT
SHALL A PARTY BE LIABLE TO THE OTHER PARTY FOR SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT
LIABILITY OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS OR
REVENUE.
     10.13 Independent Contractor. Neither Party shall be construed to be a
partner, joint venturer, franchisee, employee, principal, agent, representative
or participant of or with the other Party for any purpose whatsoever by virtue
of the Transaction Agreements. No Party has any

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right or authority to assume or to create any obligation or responsibility,
express or implied, on behalf of or in the name of the other Party in any manner
by virtue of the Transaction Agreements.
     10.14 Complete Agreement. This Sublicense Agreement, together with its
Schedules and Exhibits, and any Pre-Clinical Development Plans and Clinical
Development Plans approved by the Parties, the Strategic Alliance Agreement,
License Agreement, Note and Purchase Agreement, and the Mutual Confidential
Disclosure Agreement between the Parties dated July 20, 2005, along with any
other letters or agreements signed by both Parties and of even date herewith,
constitute the entire agreement, both written and oral, between the Parties with
respect to the subject matter hereof, and all prior agreements respecting the
subject matter hereof, either written or oral, expressed or implied, are merged
and canceled, and are null and void and of no effect.
{Signature page follows.}

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     IN WITNESS WHEREOF, the Parties have caused this Sublicense Agreement to be
executed by their duly authorized officers, effective as of the Effective Date.

                      ATHERSYS, INC.    
 
               
 
               
 
  By:                          
 
      Name:   Gil Van Bokkelen    
 
      Title:   President and Chief Executive Officer    
 
               
 
                    ANGIOTECH PHARMACEUTICALS, INC.    
 
               
 
               
 
  By:                          
 
      Name:        
 
      Title: