EXHIBIT 10.2
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE REDACTED PORTIONS OF THIS
EXHIBIT, AND SUCH CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
CELL LINE COLLABORATION AND LICENSE AGREEMENT
     This Cell Line Collaboration and License Agreement (the “Agreement”) is
made and entered into as of July 1, 2002 (the “Effective Date”), by and between
Athersys, Inc., a Delaware corporation having its principal offices at 3201
Carnegie Avenue, Cleveland, Ohio 44115 (“Athersys”), and Bristol-Myers Squibb
Company, a Delaware corporation having offices at Route 206 and Province Line
Road, Princeton, New Jersey 08543 (“BMS”). Athersys and BMS may be referred to
herein individually as a “Party” and collectively as the “Parties.”
Recitals
     A. Athersys has developed and owns technology and intellectual property
rights relating to methods for activating gene or protein expression in cells,
referred to by Athersys as the Random Activation of Gene Expression or RAGE
technology, which includes the RAGE-VT technology useful for creating cell lines
that express particular desired proteins.
     B. BMS desires to engage Athersys to create certain such cell lines, using
the RAGE-VT technology, each of which expresses a specific cell surface or
cellular protein of interest to BMS, and to obtain license rights to use such
cell lines for internal research, development and commercialization of
pharmaceutical products.
     C. Athersys is willing to create and provide BMS with the desired cell
lines pursuant to the terms of this Agreement.
     D. Concurrently with entering into this Agreement, Athersys and BMS are
amending that certain Research Collaboration and License Agreement between the
Parties dated December 8, 2000 (the “Original Agreement”), regarding a pilot
program relating to Athersys creating certain cell lines for BMS expressing
particular desired proteins using the RAGE-VT technology. For the avoidance of
doubt, the Parties’ respective rights and obligations with respect to such cell
lines shall continue to be governed by the Original Agreement (as may be amended
from time to time) and not this Agreement.
     Now, Therefore, in consideration of the foregoing and the covenants and
promises contained in this Agreement, the Parties agree as follows:

1.   Definitions

     As used herein, the following capitalized terms shall have the following
meanings (with terms defined in the singular having the same meanings when used
in the plural):
     1.1 “Accepted Cell Line” shall have the meaning assigned to such term in
Section 2.3(a).

 

--------------------------------------------------------------------------------

 

     1.2 “Affiliate” shall mean, with respect to a Party, any corporation or
other entity that, directly or indirectly, controls, is controlled by or is
under the common control with such Party. For the purpose of this definition,
“control” shall mean (a) the direct or indirect ownership of fifty percent (50%)
or more of the outstanding shares or other voting rights of the subject entity
to elect directors, or (b) if such amount of ownership of a foreign entity is
not permitted by law, ownership of the maximum amount of such entity as
permitted by law, or (c) the actual ability to control and direct the management
of the subject entity.
     1.3 “Athersys Know-How” shall mean the Information that is Controlled by
Athersys during the term of this Agreement and relates directly to Collaboration
Cell Lines or their method of manufacture or use in the Field or for
Counterscreening, as applicable, but excluding Athersys Patents.
     1.4 “Athersys Patents” shall mean all Patents that are Controlled by
Athersys during the term of the Agreement and contain a Valid Claim covering a
Collaboration Cell Line or its method of manufacture or use in the Field or for
Counterscreening, as applicable.
     1.5 “Athersys Technology” shall mean the Athersys Know-How and Athersys
Patents collectively.
     1.6 “Candidate Compound” shall mean:
          (a) any compound that has activity, with respect to the target protein
expressed by the applicable Accepted Cell Line, which activity is initially
discovered or detected by using an Accepted Cell Line or materials or assays
derived from an Accepted Cell Line, where such activity is potentially useful
for therapeutic or prophylactic use, or
          (b) any compound that is an analog, homolog, isomer or other chemical
derivative of a compound that meets the criteria in subsection (a) above (the
“Parent Compound”), provided that such compound (i) was made by or on behalf of
BMS or its Affiliate or sublicensee based on information relating to the Parent
Compound, and (ii) has activity that is potentially useful for therapeutic or
prophylactic use and is similar or related to the activity of such Parent
Compound (with the understanding that such activity may be superior to the
activity of the Parent Compound, in any appropriate criteria).
     1.7 “Collaboration Cell Line” shall have the meaning assigned to such term
in Section 2.1(b).
     1.8 “Confidential Information” shall mean (a) any proprietary or
confidential information or material of a Party in tangible form disclosed
hereunder that is (i) marked as “Confidential” at the time it is delivered to
the receiving Party, or (ii) designated as confidential or proprietary in a
written memorandum provided to the receiving Party by the disclosing Party
within thirty (30) days of such disclosure, or (b) any proprietary or
confidential information of a Party disclosed orally hereunder that is
identified as confidential or proprietary when disclosed and designated as
confidential or proprietary in a written memorandum provided to the receiving
Party by the disclosing Party within thirty (30) days of such oral disclosure by
the disclosing Party. Further, it is agreed that if Athersys discloses to BMS
that it is working on a particular protein or gene target, such information
shall be treated by BMS as the Confidential Information

 

--------------------------------------------------------------------------------

 

of Athersys. Still further, it is agreed that Athersys shall treat the fact that
BMS has nominated a specific target under Section 2.1 and the fact that Athersys
has provided BMS with a corresponding Collaboration Cell Line under Section 2.2
as Confidential Information of BMS.
     1.9 “Controlled” shall mean, with respect to any material, Information or
intellectual property right, that a Party owns or has a license to such
material, Information or intellectual property right and has the ability to
grant to the other Party the licenses or sublicenses thereto as provided for
herein without violating the terms of any agreement with any Third Party.
     1.10 “Counterscreening” shall mean testing a BMS compound, which has known
activity against one target, for activity against another target that is
expressed in an Accepted Cell Line, for the purpose of determining the relative
selectivity and potency of the BMS compound for the first target.
     1.11 “Counterscreening Cell Line” shall mean an Accepted Cell Line that was
selected by BMS to be used in Counterscreening as provided in Section 2.5.
     1.12 “Counterscreening License” shall have the meaning assigned to it in
Section 3.3.
     1.13 “Field” shall mean use of the Accepted Cell Lines by BMS solely for
BMS’s internal discovery, research, development and/or commercialization of
Products. For the avoidance of doubt, subject to Section 3.5(b), the Field shall
include BMS’s use of the Accepted Cell Lines in connection with any bona fide
collaboration between BMS and an academic and/or corporate collaborator,
provided that any compounds initially discovered or detected pursuant to such
collaboration by using an Accepted Cell Line or materials or assays derived from
an Accepted Cell Line shall be deemed to be Candidate Compounds. The Field
expressly excludes the use of Accepted Cell Lines by BMS for Counterscreening.
     1.14 “HTS” shall mean high throughput screening using BMS’ test deck of
compounds in primary screening of the Accepted Cell Line. HTS shall be deemed
“completed” when BMS has screened the test deck, confirmed positive responses,
and completed standard data analysis.
     1.15 “Improvement” shall mean any improvement, modification or enhancement
to the Athersys Know-How or the inventions claimed in the Athersys Patents
(and/or the practice thereof), and any Information and intellectual property
rights relating thereto, that the possessing Party has the right to disclose to
the other Party without violating contractual obligations to a Third Party. For
the avoidance of doubt, the following shall be owned by BMS and shall not
comprise Improvements: (i) Information comprising the results of any assays or
other screening or testing generated by BMS through use of the Accepted Cells
Lines under the terms of this Agreement, and any Information developed based on
evaluating or using such results (which shall exclude, for clarity, any such
Information that relates to the manufacture of such Accepted Cell Lines via the
RAGE-VT method or use of same); (ii) any methodology, process or tool, whether
previously existing or created during the Term (without use of an Accepted Cell
Line), that is proprietary to BMS and that BMS uses to generate the Information
referred to in clause (i); and (iii) any invention based on, or improvement,
modification, or enhancement of, the

 

--------------------------------------------------------------------------------

 

proprietary know-how of BMS that is created in connection with the subject
matter of this Agreement and the use or practice of which does not involve the
use of any Athersys Technology.
     1.16 “Information” shall mean information, results and/or data of any type
whatsoever, in any tangible or intangible form, including without limitation
databases, inventions, practices, methods, techniques, specifications,
formulations, formulae, knowledge, know-how, skill, experience, test data
including pharmacological, biological, chemical, biochemical, toxicological and
clinical test data, analytical and quality control data, stability data, studies
and procedures, and patent and other legal information or descriptions.
     1.17 “License” shall have the meaning assigned to it in Section 3.2.
     1.18 “Net Sales” shall mean the amount invoiced or otherwise billed by BMS
or its Affiliate or licensee for sales or other commercial disposition of a
Product to a Third Party purchaser, less the following to the extent included in
such billing or otherwise actually allowed or incurred with respect to such
sales: (i) discounts, including cash, trade and quantity discounts, price
reduction programs, retroactive price adjustments with respect to sales of a
product, charge-back payments and rebates granted to managed health care
organizations or to federal, state and local governments (or their respective
agencies, purchasers and reimbursers) or to trade customers, including but not
limited to, wholesalers and chain and pharmacy buying groups; (ii) credits or
allowances actually granted upon rejections or returns of Products, including
for recalls or damaged goods; (iii) freight, postage, shipping and insurance
charges actually allowed or paid for delivery of Products, to the extent billed;
(iv) customs duties, tariffs, surcharges and other governmental charges incurred
in connection with the exportation or importation of a Product; (v) bad debts
relating to sales of Products that are actually written off by BMS in accordance
with generally accepted accounting principles, consistently applied, during the
applicable royalty calculation period, and (vi) taxes, duties or other
governmental charges levied on, absorbed or otherwise imposed on sale of
Products, including without limitation value-added taxes, or other governmental
charges otherwise measured by the billing amount, when included in billing, as
adjusted for rebates and refunds, but specifically excluding taxes based on net
income of the seller; provided that all of the foregoing deductions are
calculated in accordance with generally accepted accounting principles
consistently applied throughout the party’s organization.
Notwithstanding the foregoing, if any Product is sold under a bundled or
capitated arrangement with other BMS products, then, solely for the purpose of
calculating Net Sales for royalty purposes hereunder, any discount on such
Product sold under such an arrangement shall be no greater, on a percentage
basis based on the gross selling price prior to discount, than the largest
percentage discount applied on the other pharmaceutical products sold within
such bundled arrangement for the applicable accounting period. In case of any
dispute as to the applicable discount numbers under the preceding sentence, the
determination of same shall be calculated and certified by BMS’ independent
public accountants, whose decision shall be binding.
A sale of a Product is deemed to occur upon the earliest of invoicing or
transfer of title in the Product to the Third Party purchaser. In the event that
BMS, after reasonable efforts, cannot calculate accurately the Net Sales of a
sublicensee in a particular country, the Parties will meet and negotiate in good
faith an appropriate means for calculating “Net Sales” in such a situation.

 

--------------------------------------------------------------------------------

 

For sake of clarity and avoidance of doubt, sales by BMS, its Affiliates or
sublicensees of a Product to a Third Party distributor of such Product in a
given country shall be considered sales to a Third Party customer, but sales
and/or transfers of a Product between or among BMS, its Affiliates or
sublicensees shall not be considered sales to a Third Party customer, so long as
such recipient subsequently resells the Product. Any Products used (but not sold
for consideration) for promotional or advertising purposes or used for clinical
or other research purposes shall not be considered in determining Net Sales
hereunder.
In the event a Product is sold as an end-user product consisting of a
combination of active functional elements or as a combined product and/or
service, Net Sales, for purposes of determining royalty payments on such
Product, shall be calculated by multiplying the Net Sales of the end-user
product and/or service by the fraction A over A+B, in which A is the gross
selling price of the Product portion of the end-user product and/or service when
such Product is sold separately during the applicable accounting period in which
the sales of the end-user product were made, and B is the gross selling price of
the other active elements and/or service, as the case may be, of the end-user
product and/or service sold separately during the accounting period in question.
All gross selling prices of the elements of such end-user product and/or service
shall be calculated as the average gross selling price of the said elements
during the applicable accounting period for which the Net Sales are being
calculated. In the event that, in any country or countries, no separate sale of
either such above-designated Product or such above designated elements of the
end-user product and/or service are made during the accounting period in which
the sale was made or if gross retail selling price for an active functional
element, component or service, as the case may be, cannot be determined for an
accounting period, Net Sales allocable to the Product in each such country shall
be determined by mutual agreement reached in good faith by the Parties prior to
the end of the accounting period in question based on an equitable method of
determining same that takes into account, on a country by country basis,
variations in potency, the relative contribution of each active agent, component
or service, as the case may be, in the combination, and relative value to the
end user of each active agent, component or service, as the case may be.
Notwithstanding the foregoing, it is agreed that drug delivery vehicles,
adjuvants, and excipients shall not be deemed to be “active ingredients” or
“active functional elements,” the presence of which in a Product would be deemed
to create a combination product subject to the terms of the preceding paragraph.
     1.19 “Patents” shall mean all issued United States and foreign patents
(including all reissues, extensions, renewals, substitutions, re-examinations,
supplementary protection certificates and the like, and patents of addition) and
pending United States and foreign patent applications (including, without
limitation, all provisional and nonprovisional applications and all
continuations, continuations-in-part and divisions thereof).
     1.20 “Product” shall mean any product containing a Candidate Compound,
including any formulation, dosage form, packaged form or delivery means thereof.
     1.21 “RAGE Technology” shall mean any and all intellectual property,
whether or not patentable, that is owned or licensed by Athersys and relates to
Athersys’ techniques for

 

--------------------------------------------------------------------------------

 

activating gene expression, which are referred to by Athersys collectively as
Random Activation of Gene Expression or RAGE technology.
     1.22 “Term” shall have the meaning assigned to it in Section 11.1.
     1.23 “Third Party” means any entity other than Athersys, BMS or an
Affiliate of either of them.
     1.24 “Valid Claim” shall mean either (i) a claim of issued and unexpired
letters patent which has not been held permanently revoked, unenforceable or
invalid by a decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed for appeal and
that is not admitted to be invalid or unenforceable through reissue, disclaimer
or otherwise, or (ii) a claim of a pending patent application that has not been
pending for more than seven (7) years and that has not been abandoned or finally
rejected without the possibility of appeal or refiling.

2.   Collaboration Program

     2.1 Review of Proposed Cell Lines by Athersys.
          (a) Subject to the limits set forth in Section 2.2, Athersys shall
create new Accepted Cell Lines based on RAGE-VT cell lines that BMS proposes, as
set forth in Exhibit A, and Athersys has accepted as provided below. BMS shall
use reasonable, good faith efforts to assure that the aggregate level of
technical difficulties and legal risks associated with the cell lines that BMS
nominates is balanced and provides Athersys a reasonable opportunity to perform
hereunder. Athersys shall have the right to review and approve, as provided in
Exhibit A, the target protein to be expressed in each RAGE-VT cell line that BMS
proposes be made under this Agreement. Athersys shall complete such review
within forty-five (45) days after the date Athersys receives information from
BMS regarding a proposed target to be expressed in a RAGE-VT cell line, or upon
any other schedule to which the Parties may mutually agree in writing. Athersys
shall use reasonable, good faith efforts to assure that the aggregate level of
technical difficulties and legal risks associated with the cell lines that
Athersys accepts is balanced and provides a reasonable opportunity for the
generation of Accepted Cell Lines hereunder.
          (b) While Athersys is completing such review, the Parties shall
promptly negotiate specific Acceptance Criteria for such cell line based upon
the Acceptance Criteria as generically set forth in Exhibit A. Upon agreement by
the Parties on the specific Acceptance Criteria for a particular proposed
RAGE-VT cell line, such Acceptance Criteria shall be included in Exhibit A, and,
subject to review and subsequent approval of the target protein by Athersys
under this Section 2.1, Athersys shall promptly thereafter commence work under
Section 2.2 to create a RAGE-VT cell line based thereon, and any such cell line
shall be a “Collaboration Cell Line.”
          (c) If Athersys rejects any of the proposed RAGE-VT cell lines in
accordance with the parameters set forth in Exhibit A, Athersys shall promptly
notify BMS, and BMS shall have the right to amend Exhibit A in order to
designate a replacement RAGE-VT cell line (for each one of the RAGE-VT cell
lines originally proposed and rejected by Athersys) within sixty

 

--------------------------------------------------------------------------------

 

(60) days after receiving notice of the rejection; provided, however, that
Athersys shall again have the right to review and approve any such proposed
replacement cell line, as above.
          (d) BMS shall propose RAGE-VT cell lines hereunder from time to time
in quantities reasonably believed (taking into account, among other things,
Athersys’ right under this Section 2.1, to reject cell lines that BMS proposes)
to be sufficient for Athersys to generate, and for BMS to accept (subject to
satisfaction of the acceptance criteria agreed upon by the Parties), a minimum
of fifteen (15) Collaboration Cell Lines over a three (3) year period (subject
to Section 2.9), beginning on the Effective Date, with five (5) in year one,
five (5) in year two and five (5) in year three; provided, however, that in the
event Athersys rejects a RAGE-VT cell line nominated by BMS, BMS shall always
have a full sixty (60) day period within which to nominate a replacement cell
line, regardless of the deadline for meeting any applicable minimum under this
Section 2.1.
     2.2 Supply of Collaboration Cell Lines; Status Reports. Athersys shall use
reasonable efforts to deliver to BMS each Collaboration Cell Line that Athersys
approves under Section 2.1 within six (6) months after such approval. Athersys
shall provide BMS with summary reports, which shall be written, of the status
and progress of Athersys’s efforts to provide Collaboration Cell Lines every
eight (8) weeks. Such reports shall be sent to the attention of the BMS Project
Coordinator. Athersys shall not be obligated to supply to BMS more than a total
of eight (8) Collaboration Cell Lines per year over the Term.
     2.3 Review of Collaboration Cell Lines by BMS.
          (a) BMS shall have the right, for a period of forty-five (45) days
after receiving a particular Collaboration Cell Line, to review such
Collaboration Cell Line for the purpose of evaluating whether or not the
production of protein meets the specific Acceptance Criteria for the particular
Collaboration Cell Line as agreed by the Parties (pursuant to Section 2.1) and
set forth in Exhibit A. Unless BMS provides written notice to Athersys that such
Collaboration Cell Line does not meet such specific Acceptance Criteria within
such period, such Collaboration Cell Line shall be accepted by BMS and shall be
an “Accepted Cell Line” for all purposes hereunder. Even if any Collaboration
Cell Line fails to produce the amount of protein meeting the specific Acceptance
Criteria set forth in Exhibit A, BMS shall nonetheless have the right, but not
the obligation, to accept such Collaboration Cell Line as an Accepted Cell Line,
by written notice to Athersys within such forty-five (45) day period. If BMS
does not accept a Collaboration Cell Line, BMS and Athersys shall discuss the
reason(s) such Collaboration Cell Line was not accepted, and if BMS and Athersys
agree that modifying the approach to creating a Collaboration Cell Line is
feasible and desirable, Athersys shall make such modification and present such
modified Collaboration Cell Line to BMS for evaluation and acceptance (if
applicable) as provided herein.
          (b) Athersys shall provide the BMS Project Coordinator with at least
two (2) weeks’ advance notice of Athersys’ intent to deliver a Collaboration
Cell Line to BMS for review under Section 2.3(a), so that BMS may attempt to
allocate internal resources appropriately. In the event Athersys fails to give
such notice with respect to any given Collaboration Cell Line, the BMS review
period therefor shall be extended to sixty (60) days.

 

--------------------------------------------------------------------------------

 

     2.4 Infringement by Accepted Cell Lines. If at any time during the term of
the License or Counterscreening License applicable to a particular Accepted Cell
Line, such Accepted Cell Line becomes, or in Athersys’ opinion is likely to
become, the subject of a Third Party patent infringement claim based on BMS’
practice of such License or Counterscreening License, then Athersys shall use
commercially reasonable efforts, at its sole expense, either (i) to procure for
BMS the right to continue using such Accepted Cell Line, or (ii) to replace or
modify such Accepted Cell Line so that it becomes noninfringing while still
having substantially the same functionality and efficacy as prior to such
replacement or modification. In the event Athersys is not successful in its
efforts under clause (i) and/or (ii) of the preceding sentence within three
(3) months after any such claim arises, Athersys shall, at BMS’s request, meet
to discuss in good faith other possible solutions to the claim.
     2.5 Selection of Counterscreening Cell Lines. As to a particular cell line
that BMS requests to be made under Section 2.1, BMS may specify in writing, at
the time the request for such cell line is made, that such cell line will be a
Counterscreening Cell Line when accepted under Section 2.3, and such cell line
then would be used solely for Counterscreening pursuant to the Counterscreening
License. BMS may so specify no more than fifty percent (50%) of the
Collaboration Cell Lines requested in a particular year be used for
Counterscreening.
     2.6 Project Coordinators. Each Party shall designate an individual (a
“Project Coordinator”) to coordinate, on such Party’s behalf, the day-to-day
interaction of and communication between the Parties under this Agreement. Each
Project Coordinator shall possess the education, training and experience
necessary to make him or her reasonably technically qualified to serve as a
Project Coordinator. Each Party shall be free to replace its Project Coordinator
with new a appointee who has authority to act on behalf of such Party, upon
notice to the other Party.
     2.7 BMS Diligence. BMS agrees that, for each Accepted Cell Line (but
excluding all Counterscreening Cell Lines), BMS shall initiate and use
reasonably diligent efforts to complete an HTS program for such Accepted Cell
Line as soon as practicable after the date such cell line is designated or
deemed an Accepted Cell Line. Notwithstanding the preceding sentence, an
Accepted Cell Line shall be deemed to have completed HTS twelve (12) months
after acceptance unless the Cell Line fails to perform as prescribed in
Exhibit A. BMS shall provide Athersys with reasonable reports regarding its
progress in conducting such HTS screening.
     2.8 BMS Termination of Cell Lines.
          (a) Prior to Cell Line Acceptance. With respect to Collaboration Cell
Lines for which acceptance has not yet occurred, upon thirty (30) days notice to
Athersys, BMS may terminate Athersys’ development of one Collaboration Cell Line
per year during the period prior to which the Collaboration Cell Line is
eligible to be deemed an Accepted Cell Line pursuant to Section 2.3(a). If a
Collaboration Cell Line is so terminated, then BMS shall be obligated to pay
Athersys fifty percent (50%) of the payment due for achievement of the milestone
subsequent to the last previously achieved milestone, under Section 4.1(a) or
4.1(c), as the case may be, for such Collaboration Cell Line.

 

--------------------------------------------------------------------------------

 

          (b) Following HTS Completion. With respect to any Accepted Cell Line
(other than Counterscreening Cell Lines) for which HTS completion has occurred
and BMS has paid the corresponding milestone payment under Section 4.1(a), upon
thirty (30) days notice to Athersys, BMS may, for reasonable business,
scientific and/or technical reasons (which shall be disclosed to Athersys, on a
confidential basis), terminate its License with respect to such Accepted Cell
Line, which termination shall be effective after payment of the next license fee
due under Section 4.1(b). On the due date of such payment the license to such
Accepted Cell Line granted under Section 3.2 shall automatically terminate, and
after payment of such license fee BMS shall have no further payment obligations
to Athersys with respect to such Accepted Cell Line subject to the following
covenant. With respect to any such Accepted Cell Line for which BMS has
terminated its license rights pursuant to this Section 2.8(b), BMS covenants
that BMS and its Affiliates and licensees shall not use, develop or
commercialize any materials, results, data or information (including, without
limitation, any compound or composition, or any derivative, homolog or isomer
thereof) that was originally created or originally identified through BMS’ prior
use of such Accepted Cell Line; provided, however, that the foregoing covenant
shall not preclude BMS and its Affiliates from continuing to conduct discovery,
research, development and commercialization activities with respect to the
target protein expressed by such Accepted Cell Line so long as BMS and its
Affiliates abide by such covenant in so doing.
     2.9 BMS Termination of Collaboration Program. BMS shall have the right to
terminate the collaboration program contemplated by this Section 2 at the end of
the second year of the collaboration program, by giving Athersys written notice
of such termination at least ninety (90) days prior to the second anniversary of
the commencement of the collaboration program. BMS acknowledges that Athersys
will incur certain wind-down and FTE re-allocation costs and expenses in the
event of any such early termination and, therefore, agrees to pay Athersys the
sum of $125,000 to help offset such costs. Such payment shall be made within
thirty (30) days after delivery of BMS’ termination notice pursuant to this
Section 2.9.

3.   Licenses.

     3.1 Evaluation License. Subject to the terms of this Agreement, as to each
Collaboration Cell Line provided to BMS by Athersys hereunder, Athersys grants
to BMS a royalty-free, non-exclusive, worldwide license, without the right to
sublicense, under the Athersys Technology solely to conduct internal research
evaluation of such Collaboration Cell Line as provided in Section 2.3 of this
Agreement during the forty-five (45) day period after BMS first receives such
Collaboration Cell Line.
     3.2 Research and Development License. Subject to the terms of this
Agreement, and effective upon BMS’s acceptance of a particular Accepted Cell
Line (other than a Counterscreening Cell Line), Athersys grants to BMS a
royalty-bearing, non-exclusive, worldwide license, without the right to
sublicense, under the Athersys Technology solely to use such Accepted Cell Line
in the Field (the “License”).
     3.3 Counterscreening License. Subject to the terms of this Agreement, and
effective only upon BMS’s acceptance of a particular Accepted Cell Line that BMS
elected under Section

 

--------------------------------------------------------------------------------

 

2.5 to be a Counterscreening Cell Line, Athersys hereby grants to BMS a
non-exclusive, worldwide license (the “Counterscreening License”), without the
right to sublicense, under the Athersys Technology solely to use each such
Counterscreening Cell Line for Counterscreening. For clarity, a particular
Accepted Cell Line may not be used by BMS (or its Affiliate) for use both in the
Field and for Counterscreening except as specified in 4.1 (e).
     3.4 Duration of Athersys Licenses.
          (a) Field License Duration. The License granted in Section 3.2, as to
a particular Accepted Cell Line, shall be perpetual, subject to payment of all
applicable fees, unless terminated by BMS as provided in Section 2.8(b).
          (b) Counterscreening License Duration. Subject to payment of all
applicable fees, the Counterscreening License granted in Section 3.3 shall be
perpetual, as to a particular Counterscreening Cell Line.
     3.5 Negative Covenants.
          (a) No Other Use by BMS. BMS covenants and agrees that it shall not
use the Collaboration Cell Lines for any purpose other than as set forth in
Section 3.1 and shall not use the Accepted Cell Lines or any materials derived
therefrom for any purpose other than as set forth in Sections 3.2 and 3.3, as
applicable. BMS further covenants and agrees that it shall not use or practice
the Athersys Technology for any purpose except as expressly permitted in the
licenses granted to BMS under Sections 3.1, 3.2 and 3.3, as applicable.
          (b) No Transfer to Third Parties. BMS covenants and agrees that BMS
shall not transfer Collaboration Cell Lines or Accepted Cell Lines or any
Information pertaining thereto or any materials derived therefrom, to any Third
Party for any purpose, except that BMS may transfer such Information and
materials to collaborators to the extent necessary for BMS to exercise its right
to use the Accepted Cell Lines in connection with bona fide collaborations with
academic and/or commercial partners in the Field, but may not transfer the
Accepted Cell Lines to such entities except with Athersys’ prior written
consent. For clarity, BMS covenants and agrees that BMS shall not transfer
Collaboration Cell Lines or Accepted Cell Lines, or any Information pertaining
thereto or any materials derived therefrom, to any Third Party for
Counterscreening.
     3.6 Athersys Reserved Rights. BMS understands and agrees that Athersys owns
and reserves to itself all rights, title and interest in the Athersys
Technology, and to the Collaboration Cell Lines and the Accepted Cell Lines,
subject only to the licenses granted in Sections 3.1, 3.2 and 3.3, respectively.
     3.7 Records And Reports.
          (a) Records. BMS shall maintain complete and accurate records that
fully and properly reflect all work done and all results achieved, including raw
data, in the evaluation of Collaboration Cell Lines, the use of Accepted Cell
Lines and the discovery, research and development of Candidate Compounds
(“Records”). The Records shall be kept with sufficient detail and in good
scientific manner appropriate for patent and regulatory purposes and shall be

 

--------------------------------------------------------------------------------

 

kept separate and distinct from other work conducted by BMS, all in a manner
consistent with BMS’ other internal research and development record keeping.
          (b) Copies and Inspection of Records. Athersys shall have the right,
during normal business hours and upon reasonable notice, to inspect the Records
for purposes consistent with this Agreement. Athersys shall maintain all
Information learned from such inspection of the Records in confidence in
accordance with Article 7. All inspections, copying and visits hereunder shall
be conducted in a manner and frequency so as not to disrupt BMS’s business and
in a manner so as not to cause any disclosure of any other BMS Confidential
Information.
          (c) Semi-Annual Reports. Within thirty (30) days following the end of
each six (6) month period during the term of the License with respect to each
Accepted Cell Line, BMS shall provide to Athersys a written progress report that
shall describe the results and developments of the use of such Accepted Cell
Line, and the discovery, research and development of Candidate Compounds
therewith. With such reports, BMS shall disclose to Athersys in summary form
(i.e., in a manner that does not require BMS to disclose sensitive or
competitively-enabling data or information) the development, making, conception
or reduction to practice of all Candidate Compounds that are discovered, made,
investigated, conceived or reduced to practice by use of such Accepted Cell Line
or assays based thereon. In addition, BMS shall fully disclose to Athersys in
each such report any Improvements that BMS may have developed during the period
covered by such report.

4.   Payments.

     4.1 License Fees.
 
1 Confidential treatment has been requested for the redacted portions of this
exhibit, and such confidential portions have been omitted and filed separately
with the Securities and Exchange Commission.
          (a) Screening License Fees. For each Collaboration Cell Line requested
by BMS that is to be used in the Field (i.e., excluding the Counterscreening
Cell Lines), BMS shall pay Athersys non-refundable license fees upon achievement
of the milestone events as provided in the following schedule:

          Event   Payment
Agreed upon Acceptance Criteria
  $ [*]  
•    Athersys accepts BMS’ request for the development of a Collaboration Cell
Line, and the Parties mutually agree upon Acceptance Criteria therefor
       
 
       
 
       
Clonal Cell Line Isolated
  $ [*]  
•    Verified through RT- PCR proof of appropriate vector integration
       
 
       
 
       
Cell Line Acceptance (designation of Accepted Cell Line)
  $ [*]  
•    Achievement, pursuant to Section 2.3(a), of all specific Acceptance
Criteria mutually previously agreed upon by the Parties for the proposed
Accepted Cell Line
       
 
       
HTS Completion for Accepted Cell Line
  $ [*]  
 
       

 

--------------------------------------------------------------------------------

 

BMS and Athersys shall jointly determine the occurrence of any of the foregoing
milestone events with respect to a particular Collaboration Cell Line, and the
applicable payments for each event shall be due and payable within thirty
(30) days of the Parties’ having made such a determination.
          (b) Additional Annual License Fees. For each Accepted Cell Line that
is to be used in the Field (i.e., excluding the Counterscreening Cell Lines)
with respect to which the License has not terminated due to BMS previously
exercising its right to terminate its License under Section 2.8(b), BMS shall
also pay Athersys non-refundable license fees upon achievement of the milestone
events as provided in the following schedule:

          Event   Payment
Six (6) Month Anniversary of Completion of HTS for Accepted Cell Line
  $ [*]  
•    Payable at the end of the six (6) month period beginning on the date BMS
completes HTS for such Accepted Cell Line
       
 
       
Twelve (12) Month Anniversary of Completion of HTS for Accepted Cell Line
  $ [*]  
•    Payable at the end of the twelve (12) month period beginning on the date
BMS completes HTS for such Accepted Cell Line
       
 
       
Eighteen (18) Month Anniversary of Completion of HTS for Accepted Cell Line
  $ [*]  
•    Payable at the end of the eighteen (18) month period beginning on the date
BMS completes HTS for such Accepted Cell Line
       
 
       
Twenty-Four (24) Month Anniversary of Completion of HTS for Accepted Cell Line
  $ [*]  
•    Payable at the end of the twenty-four (24) month period beginning on the
date BMS completes HTS for such Accepted Cell Line
       

For clarity, if BMS exercises its right to terminate the License as provided in
Section 2.8(b) as to a particular Accepted Cell Line, BMS shall make the next
payment due as provided above after serving notice of such termination.
 

1   Confidential treatment has been requested for the redacted portions of this
exhibit, and such confidential portions have been omitted and filed separately
with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

          (c) Counterscreening License Fees. For each Counterscreening Cell Line
requested to be made by BMS, BMS shall pay Athersys non-refundable license fees
upon achievement of the milestone events as provided in the following schedule:

          Event   Payment
Agreed upon Acceptance Criteria
  $ [*]  
•    Athersys accepts BMS’ request for the development of a Collaboration Cell
Line, and the Parties mutually agree upon Acceptance Criteria therefor
       
 
       
Clonal Cell Line Isolated
  $ [*]  
•    Verified through RT- PCR proof of appropriate vector integration
       
 
       
Cell Line Acceptance (designation of Counterscreening Cell Line)
  $ [*]  
•    Achievement, pursuant to Section 2.3(a), of all specific Acceptance
Criteria previously mutually agreed upon by the Parties for the proposed
Counterscreening Cell Line
       

 

1   Confidential treatment has been requested for the redacted portions of this
exhibit, and such confidential portions have been omitted and filed separately
with the Securities and Exchange Commission.

BMS and Athersys shall jointly determine the occurrence of any of the foregoing
milestone events with respect to a particular Counterscreening Cell Line, and
the applicable payments for each event shall be due and payable within thirty
(30) days of the Parties’ having made such a determination.
          (d) Additional Counterscreening License Fees. For each Accepted Cell
Line specified as a Counterscreening Cell Line pursuant to Section 2.5 that is
accepted by BMS pursuant to Section 2.3, BMS shall pay Athersys a non-refundable
license fee of either: (i) an aggregate of [*] dollars ($[*]) license fee, which
shall be payable in six (6) installments of [*] dollars ($[*]) each, to be paid
at the end of each six (6) month period after the date of acceptance by BMS of
the applicable Accepted Cell Line; or (ii) [*] dollars ($[*]) for the use, in
perpetuity, of the Counterscreening License, such fee to be payable on the six
(6) month anniversary of the date of acceptance by BMS of the applicable
Accepted Cell Line.
          (e) Counterscreening License Fee for Accepted Cell Line. For any
particular Accepted Cell Line used in the Field for which BMS has completed
payment of all milestone payments under Sections 4.1(a) and (b) (i.e., a total
of $[*] for such Accepted Cell Line), BMS may elect in writing to Athersys to
obtain the perpetual right to use such Accepted Cell Line in Counterscreening
(under the terms of a Counterscreening License under Section 3.3) by a one-time
payment of $[*] to be made within thirty (30) days of such notice.
     4.2 Milestone Payments. For each Accepted Cell Line used in the Field, BMS
shall pay Athersys the milestone payments set forth in Exhibit B within thirty
(30) days after each milestone event has been achieved for each Candidate
Compound identified for clinical development by BMS or its Affiliate or
sublicensee for the particular Accepted Cell Line.

 

--------------------------------------------------------------------------------

 

     4.3 Royalty Payments. BMS shall pay Athersys a royalty equal to [*] percent
([*]%) of Net Sales of all Products worldwide. Each payment of royalties under
this Agreement shall be accompanied by a statement of the amount of the total
amounts received and calculated as Net Sales during such period, and all other
information necessary to determine the appropriate amount of such payments.
     4.4 Royalty Term. For each Product, on a country-by-country basis, BMS
shall pay to Athersys royalties under Section 4.3 commencing on the first
commercial sale in the applicable country and continuing until the later of
(a) the last to expire Patent in such country owned or controlled by BMS or its
affiliate or licensee containing a Valid Claim covering such Product or the
Candidate Compound therein, or covering the manufacture, use or formulation of
such Product or compound, or (b) ten (10) years from the date of such first
commercial sale in such country.
     4.5 Blocked Currency. In each country where the local currency is blocked
and cannot be removed from the country, at the election of Athersys, royalties
accrued in that country shall be paid to Athersys in such country in local
currency by deposit in a local bank designated by Athersys.
     4.6 Non-Monetary Consideration. In the event BMS (or its Affiliates or
sublicensees) receives any non-monetary consideration in connection with the
sale or other commercial disposition of Products, Athersys’s royalty shall be
based on the fair monetary value of such other consideration. In such case, BMS
shall disclose to Athersys, on a confidential basis, the terms of such
arrangement, and the Parties shall agree in good faith on such monetary value,
which shall then be included in Net Sales for the period in which it was
received by BMS (or its Affiliates or sublicensees).

5.   Records and Audit.

     5.1 Records and Audit. During the term of this Agreement and for a period
of three (3) years thereafter, BMS shall keep complete and accurate records
pertaining to the sale or other disposition of all Products, in sufficient
detail to permit Athersys to confirm the accuracy of all payments due hereunder.
Athersys shall have the right to cause an independent, certified public
accountant to audit such records to confirm BMS’s Net Sales and royalty payments
and payments under Section 4.2; provided, however, that such auditor shall not
disclose BMS’s Confidential Information to Athersys, except to the extent such
disclosure is necessary to verify the portion of the amount of royalties and
payments due under this Agreement. Such audits may be exercised once a year,
within three (3) years after the period to which such records relate, upon
notice to BMS and during normal business hours. Athersys shall bear the full
cost of such audit unless such audit discloses a variance of more than five
percent (5%) from the amount of royalties and payments under Section 4.2
previously paid for such year. In such case, BMS shall bear the full cost of
such audit. The terms of this Section 5.1 shall survive any termination or
expiration of this Agreement for a period of three (3) years.
 

1   Confidential treatment has been requested for the redacted portions of this
exhibit, and such confidential portions have been omitted and filed separately
with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

6.   Intellectual Property.

     6.1 Ownership.
          (a) Athersys. Athersys shall remain the sole owner of the Athersys
Technology, the RAGE Technology, the Collaboration Cell Lines and the Accepted
Cell Lines, including any improvements thereto made by Athersys. Athersys shall
have the sole responsibility, at its discretion, for patent prosecution and
choice of patent counsel in relation to Athersys Patents, and shall pay all
expenses associated therewith. BMS hereby assigns and agrees to assign to
Athersys its entire interest in any Improvements, which shall be deemed to be
part of the Athersys Technology.
          (b) BMS. BMS shall be the sole owner of any inventions and information
resulting from BMS’ use of the Accepted Cell Lines, including any Products, but
excluding all Improvements. BMS shall have the sole responsibility, at its
discretion, for patent prosecution and choice of patent counsel in relation to
such BMS-owned inventions and the Products and shall pay all expenses associated
therewith.
     6.2 Enforcement of Patent Rights. Each Party shall have the sole right, but
not the obligation, to institute, prosecute or control any action or proceeding
with respect to infringement by a Third Party of one or more issued Patents
owned by such Party.

7.   Confidentiality; Publicity.

     7.1 Confidential Information. The Parties agree that, for the Term of this
Agreement and for five (5) years thereafter, the receiving Party shall keep
completely confidential and shall not publish or otherwise disclose and shall
not use for any purpose, except for the purposes expressly permitted by this
Agreement, any Confidential Information furnished to it by the disclosing Party.
The foregoing obligation shall not apply to any information received by a Party
to the extent that it can be established by such receiving Party by competent
evidence that such information:
          (a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure;
          (b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
          (c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission of
the receiving Party in breach of this Agreement;
          (d) was independently developed by the receiving Party as demonstrated
by competent written evidence prepared contemporaneously with such independent
development; or
          (e) was subsequently lawfully disclosed to the receiving Party by a
person other than a Party hereto.

 

--------------------------------------------------------------------------------

 

     7.2 Authorized Disclosure. Notwithstanding the foregoing, a Party may
disclose the Confidential Information of the other Party to the extent such
disclosure is necessary to be disclosed in the following instances:
          (a) Regulatory filings made by BMS;
          (b) Prosecuting or defending litigation or responding to valid
subpoenas;
          (c) Complying with applicable governmental regulations;
          (d) Conducting clinical trials of BMS, its Affiliates and
sublicensees;
          (e) Disclosure, in connection with the performance of this Agreement,
to Affiliates, employees, consultants, or agents, each of whom prior to
disclosure must be bound by similar obligations of confidentiality and non-use
at least equivalent in scope to those set forth in this Section 7;
          (f) Disclosure that is required by applicable law or governmental
regulation; and
          (g) Disclosure of the existence and terms of this Agreement and of
general summaries of the progress made by the Parties under this Agreement (but
excluding the identification of any target nominated by BMS under Section 2.1
and of any Collaboration Cell Line or Accepted Cell Line developed by Athersys
hereunder) to existing or potential investment bankers, investors and/or merger
or acquisition parties, provided that the disclosing Party obtains from such
recipient prior to disclosure an agreement to be bound by obligations of
confidentiality and non-use at least similar in scope to those set forth in this
Section 7.
     7.3 Disclosure. If a Party is required to make any disclosure of another
Party’s Confidential Information that is authorized under subsections (a), (b),
(c), (d) or (f) of Section 7.2, it will give reasonable advance notice to the
latter Party of such disclosure and will afford the latter Party a reasonable
opportunity, and will cooperate reasonably with such Party, to secure
confidential treatment of such information prior to its disclosure (whether
through protective orders or otherwise) and to limit the extent of the
disclosure as much as possible. Except as otherwise required by law, and subject
to Section 7.5, neither Party shall issue a press release or make any other
disclosure of the terms of this Agreement or any aspect of the research
conducted pursuant to this Agreement without the prior approval of such press
release or disclosure by the other Party hereto. Each Party shall submit any
such press release or disclosure to the other Party, and the receiving Party
shall have ten (10) business days to review and approve any such press release
or disclosure, which approval shall not be unreasonably withheld. If the
receiving Party does not respond within such ten (10) day period, the press
release or disclosure shall be deemed approved. In addition, if a public
disclosure is required by law, including without limitation in a filing with the
Securities and Exchange Commission, the disclosing Party shall provide copies of
the disclosure reasonably in advance of such filing or other disclosure for the
nondisclosing Party’s prior review and comment.

 

--------------------------------------------------------------------------------

 

     7.4 Confidential Terms. Except as expressly provided herein, each Party
agrees not to disclose any terms of this Agreement or any aspect of the research
conducted pursuant to this Agreement to any Third Party without the consent of
the other Party.
     7.5 Initial Press Release. The Parties shall issue a mutually approved,
initial press release promptly after the Effective Date. The Parties agree that
this press release shall be in the form of the press release attached to this
Agreement as Exhibit C.

8.   Representations and Warranties.

     8.1 Athersys. Athersys represents and warrants that: (i) it is a
corporation duly organized validly existing and in good standing under the laws
of the State of Delaware; (ii) the execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate action on the
part of Athersys; (iii) the performance of Athersys’s obligations under this
Agreement will not conflict with its charter documents or result in a material
breach of any agreements, contracts or other arrangements to which it is a
party; (iv) Athersys will not, during the Term of this Agreement, enter into any
agreements, contracts or other arrangements that would be materially
inconsistent with its obligations under this Agreement; (v) Athersys has
sufficient facilities, experienced personnel and other capabilities reasonably
suited to enable it to perform its obligations under this Agreement; (vi)
Athersys is the owner of, or has licensed rights to, all of the Athersys Patents
in existence on the Effective Date, and has the right to grant the licenses or
sublicenses, as the case may be, therefor granted under this Agreement; and
(vii) as of the Effective Date, Athersys is not aware of any asserted or
unasserted claim or demand which is being, or which Athersys believes can be,
rightfully enforced by a Third Party against any of the Athersys Patents that
would materially limit, hinder, delay or otherwise adversely affect BMS’s
enjoyment of its rights and satisfaction of its obligations under this
Agreement.
     8.2 BMS. BMS represents and warrants that: (i) it is a corporation duly
organized validly existing and in good standing under the laws of the State of
Delaware; (ii) the execution, delivery and performance of this Agreement have
been duly authorized by all necessary corporate action on the part of BMS;
(iii) the performance of BMS’s obligations under this Agreement will not
conflict with its charter documents or result in a material breach of any
agreements, contracts or other arrangements to which it is a party; (iv) BMS has
sufficient facilities, experienced personnel and other capabilities reasonably
suited to enable it to perform its obligations under this Agreement; and (v) BMS
will not, during the Term of this Agreement, enter into any agreements,
contracts or other arrangements that would be materially inconsistent with its
obligations under this Agreement.
     8.3 Disclaimer of Warranties. THE ATHERSYS KNOW-HOW, ATHERSYS PATENTS AND
COLLABORATION CELL LINES ARE PROVIDED AND LICENSED TO BMS “AS IS”, AND ATHERSYS
AND ITS RESPECTIVE AFFILIATES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES
OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT THERETO OR TO
THE PRODUCTS OR ATHERSYS TECHNOLOGY, INCLUDING, BUT NOT LIMITED TO, WARRANTIES
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF THE PATENT
RIGHTS LICENSED HEREUNDER, OR

 

--------------------------------------------------------------------------------

 

NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
     8.4 Unknown Biological Properties. BMS understands and agrees that the
Collaboration Cell Lines may have unpredictable and unknown biological and/or
chemical properties, that they are to be used with caution, and that they are
not to be used for testing in or treatment of humans. BMS shall use the
Collaboration Cell Lines in compliance with all applicable laws and regulations,
including, but not limited to, any laws or regulations relating to the research,
testing, production, storage, transportation, export, packaging, labeling or
other authorized use of the Collaboration Cell Lines.

9.   Dispute Resolution.

     9.1 Mediation. If a dispute arises out of or relates to this Agreement, or
the breach thereof, and if said dispute cannot be settled through negotiation,
the Parties agree first to try in good faith to settle the dispute by good faith
discussions by the Vice President of External Science and Technology of BMS and
the CEO or senior executive officer of Athersys (or each such person’s
designee), and failing resolution thereby by mediation under the Commercial
Mediation Rules of the American Arbitration Association, before resorting to
arbitration, litigation, or some other dispute resolution procedure.
     9.2 Arbitration. Subject to Section 9.1, Athersys and BMS agree that any
dispute or controversy arising out of, in relation to, or in connection with
this Agreement, or the validity, enforceability, construction, performance or
breach thereof, shall be settled by binding arbitration in New York, New York,
under the then-current Rules of Commercial Arbitration of the American
Arbitration Association by one (1) arbitrator appointed in accordance with such
Rules. The arbitrator shall determine what discovery will be permitted, based on
the principle of limiting the cost and time that the Parties must expend on
discovery; provided, however, that the arbitrator shall permit such discovery as
he or she deems necessary to achieve an equitable resolution of the dispute. The
decision and/or award rendered by the arbitrator shall be written, final and
non-appealable, absent manifest error, and may be entered in any court of
competent jurisdiction. The Parties agree that, any provision of applicable law
notwithstanding, they will not request, and the arbitrator shall have no
authority to award punitive or exemplary damages against any Party. The costs of
any arbitration, including administrative fees and fees of the arbitrator, shall
be shared equally by the Parties, unless the arbitrator determines otherwise.

10.   Indemnification.

     10.1 By BMS. Subject to Section 10.3, BMS shall indemnify, defend and hold
harmless Athersys and its directors, officers and employees (each an “Athersys
Indemnitee”) from and against any and all liabilities, damages, losses, costs or
expenses (including attorneys’ and professional fees and other expenses of
litigation and/or arbitration) (each a “Liability”) resulting from a claim, suit
or proceeding made or brought by a Third Party against an Athersys Indemnitee
arising from or occurring as a result of (i) any breach of the representations
and warranties set forth in Section 8.2, or (ii) the performance (or failure to
perform) by BMS of its obligations hereunder.

 

--------------------------------------------------------------------------------

 

     10.2 By Athersys. Subject to Section 10.3, Athersys shall indemnify, defend
and hold harmless BMS and its directors, officers and employees (each a “BMS
Indemnitee”) from and against any and all Liabilities resulting from a claim,
suit or proceeding made or brought by a Third Party against a BMS Indemnitee
arising from or occurring as a result of (i) any breach of the representations
and warranties set forth in Section 8.1, or (ii) the performance (or failure to
perform) by Athersys of its obligations hereunder.
     10.3 Limitation on Indemnity Obligations.
          (a) Negligence, etc. No Athersys Indemnitee or BMS Indemnitee (each,
an “Indemnitee”) shall be entitled to the indemnification under Section 10.1 or
10.2, as the case may be, to the comparative extent the Liability for which
indemnification is sought was caused by a grossly negligent, reckless or
intentional act or omission by the Party with which such Indemnitee is
affiliated or any of such Party’s Affiliates or sublicensees or any of their
respective directors, officers, employees or authorized agents.
          (b) Target Proteins and Collaboration Cell Lines. Athersys
acknowledges and agrees that it will conduct a reasonable intellectual property
investigation of each target protein that is the basis of a particular
Collaboration Cell Line, and of matters relating to the creation of the
Collaboration Cell Line, that BMS selects and Athersys agrees to produce
pursuant to Section 2.1, which shall be in addition to any such investigation
that BMS may have conducted. BMS also acknowledges and agrees that it will
conduct a reasonable intellectual property investigation of each target protein
that BMS proposes for selection by Athersys as the basis for producing a
Collaboration Cell Line pursuant to Section 2.1, which shall be in addition to
any such investigation that Athersys may conduct, and shall disclose to Athersys
the results of such investigation. BMS shall not be obligated to provide
indemnification under Section 10.1 against any Liabilities resulting from a
claim, suit or proceeding to the extent it is alleged, proven or agreed in such
claim, suit or proceeding that any such target protein (or the creation of the
corresponding Collaboration Cell Line) infringes upon or otherwise violates the
intellectual property rights of any Third Party, except to the comparative
extent such infringement or violation results from a grossly negligent, reckless
or intentional act or omission by BMS or any of BMS’ Affiliates or any of their
respective directors, officers, employees or authorized agents.
     10.4 Procedure. In the event that an Indemnitee intends to claim
indemnification under this Article 10, it shall promptly notify the indemnifying
Party in writing of such alleged Liability. The indemnifying Party shall have
the sole right to control the defense and settlement thereof. The indemnifying
Party shall have the right to settle or compromise any Liabilities for which it
is providing indemnification under this Article 10, provided that the consent of
the Indemnitee (which shall not be unreasonably withheld or delayed) shall be
required in the event any such settlement or compromise would adversely affect
the interests of such Indemnitee. The Indemnitees shall cooperate with the
indemnifying Party and its legal representatives in the investigation of any
action, claim or liability covered by this Article 10. The Indemnitees shall
not, except at their own cost, voluntarily make any payment or incur any expense
with respect to any claim or suit without the prior written consent of the
indemnifying Party, which the indemnifying Party shall not be required to give.

 

--------------------------------------------------------------------------------

 

11.   Term and Termination.

     11.1 Term of Agreement. The term of this Agreement (the “Term”) shall
commence on the Effective Date and continue until expiration upon the end of all
royalty and payment obligations of BMS under Article 4, or until such earlier
date as the Parties agree in writing to terminate the Agreement or the Agreement
terminates as provided below.
     11.2 Termination for Cause. Either Party may terminate this Agreement in
the event the other Party has materially breached or defaulted in the
performance of any of its obligations hereunder, and such default has continued
without cure for sixty (60) days after written notice thereof was provided to
the breaching Party by the non-breaching Party. Any termination shall become
effective at the end of such sixty (60) day period unless the breaching Party
has cured any such breach or default prior to the expiration of the sixty
(60) day period. Notwithstanding the above, in the case of a failure to timely
pay any amounts due hereunder, the period for cure of any subsequent default
following notice thereof shall be thirty (30) days and, unless payment is made
within such period the termination shall become effective at the end of such
period.
     11.3 Effect of Termination.
          (a) Accrued Rights and Obligations. Termination of this Agreement for
any reason shall not release any Party hereto from any liability which, at the
time of such termination, has already accrued to the other Party or which is
attributable to a period prior to such termination nor preclude either Party
from pursuing any rights and remedies it may have hereunder or at law or in
equity with respect to any breach of this Agreement. It is understood and agreed
that monetary damages may not be a sufficient remedy for any breach of this
Agreement and that the non-breaching Party may be entitled to injunctive relief
as a remedy for any such breach.
          (b) Return of Confidential Information. Upon any termination of this
Agreement, each of Athersys and BMS shall promptly return to the other Party all
Confidential Information of the other; provided that counsel of each Party may
retain one (1) copy of such Confidential Information solely for archival
purposes.
          (c) Survival. Sections 3.5 and 11.3, and Articles 4, 5, 6, 7, 9, 10
and 12 of this Agreement shall survive termination of this Agreement for any
reason.

12.   Miscellaneous.

     12.1 Governing Law. This Agreement and any dispute, including without
limitation any arbitration, arising from the performance or breach hereof shall
be governed by and construed and enforced in accordance with the laws of the
State of New York, without giving effect to its conflict of laws rules and
regulations.
     12.2 Independent Contractors. The relationship of the parties hereto is
that of independent contractors. The parties hereto are not deemed to be agents,
partners or joint venturers of the others for any purpose as a result of this
Agreement or the transactions contemplated thereby.

 

--------------------------------------------------------------------------------

 

     12.3 Assignment. Neither Party may assign its rights or obligations under
this Agreement absent the prior written consent of the other Party, not to be
unreasonably withheld; provided, however, that either Party may assign this
Agreement without such consent to any of its Affiliates or to any successor in
interest by merger, acquisition or sale of all or substantially all of its
assets in a manner such that the assignee will be liable and responsible for the
performance and observance of all its duties and obligations hereunder. This
Agreement shall be binding upon the successors and permitted assigns of the
Parties. Any attempted delegation or assignment not in accordance with this
Section 12.3 shall be void and of no force or effect. In the case of BMS, if any
such successor in interest had, before its merger with, or acquisition or
purchase of, BMS, an agreement with Athersys providing such entity with a
license to the RAGE Technology, then within ninety (90) day after the effective
date of such merger, acquisition or purchase Athersys may terminate this
agreement, upon written notice to such successor in interest.
     12.4 Notices. All notices, requests and other communications hereunder
shall be in writing and shall be personally delivered or sent by telecopy or
other electronic facsimile transmission or by registered or certified mail,
return receipt requested, postage prepaid, in each case to the respective
address specified below, or such other address as may be specified in writing to
the other parties hereto:

     
If to BMS:
  Bristol-Myers Squibb Company
 
  Route 206 and Province Line Road
 
  P. O. Box 4000
 
  Princeton, New Jersey 08543-4000
 
  Attn: Vice President and Senior Counsel,
 
            Pharmaceutical Research Institute and
 
            Worldwide Business Development
 
  Fax No.: (609) 252-4232
 
   
If to Athersys:
  Athersys, Inc.
 
  3201 Carnegie Avenue
 
  Cleveland, Ohio 44115-2634
 
  Attn: President
 
  Fax No.: (216) 361-9495

     12.5 Force Majeure. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses (except for payment obligations)
on account of failure of performance by the defaulting Party if the failure is
occasioned by war or terrorism, strike, fire, Act of God, earthquake, flood,
lockout, embargo, governmental acts or orders or restrictions, failure of
suppliers, or any other reason where failure to perform is beyond the reasonable
control and not caused by the negligence, intentional conduct or misconduct of
the nonperforming Party has exerted all reasonable efforts to avoid or remedy
such force majeure; provided, however, that in no event shall a Party be
required to settle any labor dispute or disturbance.
     12.6 Advice of Counsel. BMS and Athersys have each consulted counsel of
their choice regarding this Agreement, and each acknowledges and agrees that
this Agreement shall not be deemed to have been drafted by one Party or another
and will be construed accordingly.

 

--------------------------------------------------------------------------------

 

     12.7 Compliance with Laws. Each Party will comply with all applicable laws
and regulations in connection with its performance under this Agreement. Each
Party shall furnish to the other Party any information requested or required by
that Party during the term of this Agreement or any extensions hereof to enable
that Party to comply with the requirements of any U.S. or foreign federal, state
and/or government agency.
     12.8 Severability. In the event that any provisions of this Agreement are
determined to be invalid or unenforceable by a court of competent jurisdiction,
the remainder of the Agreement 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.
     12.9 Waiver. It is agreed that no waiver by either Party hereto of any
breach or default of any of the covenants or agreements herein set forth shall
be deemed a waiver as to any subsequent and/or similar breach or default.
     12.10 Complete Agreement. This Agreement, together with its Exhibits,
constitutes the entire agreement, both written and oral, between the Parties
with respect to the subject matter hereof, and that all prior agreements,
including the term sheet, 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 as of the Effective Date. No amendment or change hereof or
addition hereto shall be effective or binding on either of the parties hereto
unless reduced to writing and duly executed on behalf of both Parties. For
clarity, the cells lines created under the Original Agreement, and any
amendments thereto, are not considered within the subject matter of this
Agreement.
     12.11 Use of Name. Unless otherwise permitted by this Agreement or required
by applicable laws or regulations, neither Party shall use the name or
trademarks of the other Party without the prior written consent of such other
Party.
     12.12 Headings. The captions to the several Sections and Articles hereof
are not a part of this Agreement, but are included merely for convenience of
reference only and shall not affect its meaning or interpretation.
     12.13 Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed an original and which together shall constitute
one instrument.
* * *

 

--------------------------------------------------------------------------------

 

     In Witness Whereof, BMS and Athersys have executed this Agreement by their
respective duly authorized representatives.

                      Bristol-Myers Squibb Company       Athersys, Inc.    
 
                   
By:
          By:        
 
 
 
         
 
   
 
                   
Print Name:
          Print Name:        
 
 
 
         
 
   
 
                   
Title:
          Title:        
 
 
 
         
 
   

 

--------------------------------------------------------------------------------

 

Exhibit A
RAGE-VT CELL LINES
A. Creation of Collaboration Cell Lines
Within ninety (90) days after the Effective Date, BMS shall provide Athersys
with an initial list of specific proteins for which BMS requests that Athersys
will create RAGE libraries, for Athersys’ review under Section 2.1(a). If
Athersys accepts such proposed proteins as provided therein, Athersys shall seek
to create RAGE libraries, and screen and isolate Collaboration Cell Lines
expressing such proteins after the Parties agree upon Acceptance Criteria for
each particular Collaboration Cell Line. Such list may be supplemented from time
to time by mutual agreement of the Parties or by designation of additional
specific proteins by BMS and acceptance of such proteins by Athersys, as
provided in Section 2.1 and in accordance with the procedure provided below.
From time to time, BMS may nominate specific proteins for consideration by
Athersys under Section 2.1 for use in constructing a Collaboration Cell Line
using its RAGE technology and other Athersys Know-How. Any such Collaboration
Cell Line shall conform to the general specifications set forth in Section B
below and to any other specific requirements agreed to by the Parties.
Athersys shall have the right, before accepting such request of a particular
protein by BMS hereunder, to review and approve the technical and intellectual
property feasibility of constructing the requested Collaboration Cell Line. If
requested by Athersys, BMS shall promptly provide to Athersys the relevant
technical requirements of BMS for the requested Collaboration Cell Line.
Athersys shall make its determination of technical feasibility, intellectual
property analysis and/or conflict with preexisting exclusive research
obligations to Third Parties or preexisting internal research programs for which
research has commenced prior to receiving notice (a “Pre-existing Program”),
within forty-five (45) days of the request by BMS. If Athersys believes that the
project is not constrained by any of these considerations or fails to provide
any such notice within such forty-five (45) day period, then the nominated
protein (and corresponding Collaboration Cell Line) shall be deemed to be added
to this Exhibit A. If Athersys believes the project is constrained by any of
such considerations and provides such notice within such forty-five (45) day
period, such protein and cell line shall not be added to Exhibit A; provided
that Athersys shall provide to BMS all pertinent information Controlled by
Athersys regarding the basis for its rejection of such request. In that event,
BMS shall be entitled to nominate another protein (with the foregoing process
being repeated), until a protein nominated by BMS hereunder is accepted by
Athersys. For purposes of calculating the maximum number of cell lines permitted
under this Agreement, any substitute request made by BMS shall be deemed to have
been made as of the date of the original request.
In addition, in the event Athersys commences a Pre-existing Program with respect
to a target (either internally or with a Third Party), and BMS subsequently
proposes such target under Section 2.1, Athersys shall promptly inform BMS of
such program and request that BMS propose a substitute target. In such event,
Athersys shall, upon BMS’ request, provide, on a confidential basis, a
reasonable demonstration of such commencement and prosecution of any

 

--------------------------------------------------------------------------------

 

such Pre-existing Program for a given target prior to the date of BMS’ proposal
of such target under Section 2.1.
B. Acceptance Criteria for Collaboration Cell Lines
The Parties shall discuss and agree upon a set of specific Acceptance Criteria
for each Collaboration Cell Line based upon the Generic Criteria set forth
below. Such Acceptance Criteria shall be deemed to constitute a part of this
Exhibit A. In each case, BMS and Athersys shall agree upon one primary assay
(with respect to each Collaboration Cell Line, the “Primary Assay”) as the
determining criterion for optimization and proof of target over-expression for
purposes of determining whether a particular Collaboration Cell Line satisfies
various of its Acceptance Criteria. If BMS wishes to have receptor density as
determined by radioligand binding (which may require MTX amplification) as an
acceptance criterion, BMS may specify up to three (3) such Collaboration Cell
Lines in a particular year, and, in the aggregate, not more than fifty percent
(50%) of the Collaboration Cell Lines during the term of this Agreement, for
such acceptance treatment. If BMS wishes Athersys perform multiple assay
validation and/or make radioligand binding determinations in addition to those
specified in the preceding sentence, BMS shall bear the additional cost thereof.
Generic Collaboration Cell Line Acceptance Criteria

                  Testing to determine if Category   Criteria   Criteria are Met
by:
1. Vector integration upstream of target gene in HEK 293 or HT 1080 cells or
other cell lines specified by the Parties
  RT-PCR demonstrating RIG vector (RAGE specific vector) spliced to target
sequence mRNA   Athersys
 
       
2. Target gene mRNA over-expression (RAGE vs. parental)
  Quantitative PCR (qPCR) demonstrating >10 fold mRNA increase   Athersys
 
       
3. Target protein over-expression (RAGE vs. parental) and functionality (Primary
Assay format)
 
•     Functional assay: such as FLIPR with dose response, agonist/antagonist,
cAMP determination
  Athersys
 
       
 
  or    
 
       
 
 
•     Protein over-expression: a ten-fold increase of Target protein in RAGE
clone versus parental, as determined by Western blot or FACS analysis
   
 
       
4. RAGE clone robustness
 
•     Freeze/thaw
  Athersys
 
       
 
 
•     Expression stability (e.g. qPCR) over four weeks
   
 
       
5. RAGE cell line performance in HTS
  Performance in Primary Assay under simulated HTS conditions and general Cell
Line characteristics.   BMS

 

--------------------------------------------------------------------------------

 

Exhibit B
MILESTONE PAYMENTS – CANDIDATE COMPOUNDS

          Milestone   Payment
Filing of first IND for the Candidate Compound directed against a designated
target expressed by an Accepted Cell Line
  $ [*]  
Initiation of first Phase II clinical study for the Candidate Compound
  $ [*]  
Initiation of first Phase III clinical study for the Candidate Compound
  $ [*]  
Approval of a Product containing the Candidate Compound by Food and Drug
Administration as drug
  $ [*]  

As used in this Exhibit B, the phrase “Initiation of first Phase III clinical
study” shall be deemed to include, if a party conducts a Phase II/III study on a
Candidate Compound, the point during such Phase II/III clinical trial when the
party conducting the trial has the regulatory approval to proceed with such
trial as a pivotal trial.
BMS shall promptly notify Athersys of the first occurrence of any milestone with
respect to each Candidate Compound. Milestone payments shall be made only once
with respect to any given Candidate Compound, regardless of the number of
indications sought (or approvals obtained) with respect to such Candidate
Compound, whether alone or in combination with other compounds or products, and
regardless of any new dosage strengths, preparations or forms of administration
for such Candidate Compound.
If BMS develops as a back-up Candidate Compound that inhibits or otherwise
modulates the activity of a particular molecular target of a Candidate Compound
on which BMS is already making milestone payments, then BMS may conduct clinical
development on such back-up or follow-on Candidate Compounds and shall not be
obligated to make any milestone payments with respect to any such back-up or
follow-on Candidate Compound, except as otherwise provided below. In the event
that a particular Candidate Compound is dropped from active clinical development
work or marketing for safety or efficacy reasons and is specifically replaced
with a different Candidate Compound targeting the same molecular target as such
dropped Candidate Compound, such new Candidate Compound shall be deemed a
“Replacement Compound.” BMS shall not be obligated to make milestone payments
that were earlier made with respect to a dropped Candidate Compound and replaced
by a Replacement Compound, but, subject to the preceding paragraph, BMS shall
pay all milestone payments for milestone events achieved by such Replacement
Compound that had not been achieved by such dropped Candidate Compound.
 

1   Confidential treatment has been requested for the redacted portions of this
exhibit, and such confidential portions have been omitted and filed separately
with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

Exhibit C
FORM PRESS RELEASE
[Athersys to supply initial draft]

2.