EXHIBIT 10.1
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.
RESEARCH COLLABORATION AND LICENSE AGREEMENT
     This Research Collaboration and License Agreement (the “Agreement”) is made
and entered into as of December 8, 2000 (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.
     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.
     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, but excluding Athersys Patents.

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     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.
     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, 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 mean any cell line made by Athersys
pursuant to its work under this Agreement using the RAGE Technology.
     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/or Section 2.5, as the case may be) 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 “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

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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.
     1.11 “Improvement” shall mean any improvement, modification or enhancement
to the Athersys Know-How or Athersys Patents or to the Accepted Cell Lines, and
any Information relating thereto that the possessing Party has the right to
disclose to the other Party without violating contractual obligations to a Third
Party. Furthermore, any Improvement that can be practiced or has utility solely
in connection with one or more Accepted Cell Lines and/or the Athersys Know-How
or Athersys Patents (but, as to the latter, only to the extent that such
Athersys Patent covers a particular Accepted Cell Line) shall be referred to as
a “Specific Improvement,” and any other Improvement shall be referred to as a
“General Improvement.”
     1.12 “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.
     1.13 “License” shall have the meaning assigned to it in Section 3.2.
     1.14 “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

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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.

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     1.15 “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).
     1.16 “Product” shall mean any product containing a Candidate Compound,
including any formulation, dosage form, packaged form or delivery means thereof.
     1.17 “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.
     1.18 “Term” shall have the meaning assigned to it in Section 11.1.
     1.19 “Third Party” means any entity other than Athersys, BMS or an
Affiliate of either of them.
     1.20 “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. 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
collaboration, as set forth in Exhibit A. Athersys shall complete such review
within thirty (30) days after the Effective Date of this Agreement, or the date
Athersys receives information from BMS regarding a proposed target to be
expressed in a RAGE-VT cell line (if later), or upon any other schedule to which
the Parties may mutually agree. If Athersys approves of a proposed RAGE-VT cell
line, 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.” 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. Athersys shall not be obligated to supply to BMS more than a total of six
(6) Collaboration Cell Lines unless BMS exercises its option under Section 2.5.

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     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. Prior to
the first Anniversary Date (as defined in Section 2.5 below), 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 six
(6) weeks. Such reports shall be sent to the attention of the BMS Project
Coordinator. If the Parties proceed with additional Collaboration Cell Lines
under Section 2.5, Athersys will provide BMS such progress reports as the
Parties reasonably agree to at such time.
     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 each Collaboration Cell Line, to review such Collaboration Cell
Line for the purpose of evaluating whether or not the production of protein
meets the applicable requirements referred to in Exhibit A. Unless BMS provides
written notice to Athersys that such Collaboration Cell Line does not meet such
requirements 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
applicable requirements 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, 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 do so
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 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,
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 Option To Expand Collaboration Cell Lines. Provided that at least five
(5) of the six (6) Collaboration Cell Lines initially provided to BMS pursuant
to Section 2.2 have achieved the “HTPS Completion for Accepted Cell Line”
milestone as set forth in Exhibit B by

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the fourteen month anniversary of the Effective Date (the first “Anniversary
Date”), BMS shall at its option have the right (the “BMS Option”), to gain
access to up to forty-four (44) additional Collaboration Cell Lines as follows:
BMS shall have the initial right to designate the construction by Athersys of up
to a maximum of fifteen (15) additional Collaboration Cell Lines, each of which
shall become subject to the terms and conditions of this Agreement. Upon the
achievement of the “HTPS Completion for Accepted Cell Line” milestone for the
10th of such additional Cell Lines, BMS would have the right to designate up to
fifteen (15) more Collaboration Cell Lines for production hereunder, and the
foregoing process would be repeated for up to a maximum of forty-four (44)
additional Collaboration Cell Lines. The foregoing is subject to the additional
proviso that Athersys shall not be required to provide to BMS more than fifteen
(15) Collaboration Cell Lines per year commencing on the Anniversary Date.
Notwithstanding any provision of this Section 2.5 to the contrary, the Parties
will meet on or about each subsequent Anniversary Date to discuss in good faith
whether continuation of the collaboration, as contemplated by this Section 2, is
reasonably in accordance with the scientific and business objectives of the
Parties. In the event the Parties determine that such continuation is not
reasonably within Athersys’s business objectives, any different terms the
Parties may negotiate with respect to any continued collaboration hereunder
shall be reasonably consistent with the terms on which Athersys is then
performing, or reasonably proposing to perform, services of similar character
and quantity for Third Parties.
     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 Use of Accepted Cell Lines as Validation Tools. The Parties acknowledge
and agree that in the future BMS may wish to use one or more particular Accepted
Cell Lines to validate and confirm characteristics and properties of compounds
whose activity with respect to the applicable target protein was identified
other than by use of such Accepted Cell Line (or materials derived therefrom),
and thus which do not fall within the definition of Candidate Compounds. If BMS
decides that it wishes to obtain a license to make such use of an Accepted Cell
Line, BMS shall so notify Athersys at any time during the term of the License
with respect to such Accepted Cell Line. Following Athersys’ receipt of such
notice, the Parties shall negotiate, diligently and in good faith, commercially
reasonable terms and conditions upon which Athersys shall grant BMS such a
license. Such negotiations shall continue for a period of 120 days (or such
longer period as the Parties may agree to).
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

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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, Athersys grants to BMS a royalty-bearing, nonexclusive, worldwide license,
without the right to sublicense, under the Athersys Technology solely to use
each such Accepted Cell Line in the Field (the “License”).
     3.3 General Improvement License. Subject to the terms of this Agreement,
BMS grants to Athersys a royalty-free, non-exclusive, worldwide, perpetual,
irrevocable license, without the right to sublicense, under BMS’s intellectual
property interests in the General Improvements, solely for the conduct of
Athersys’s internal research and development activities.
     3.4 Duration of Athersys License.
          (a) Initial License Duration. The License shall terminate, as to a
particular Accepted Cell Line, three (3) years after the date that BMS first
accepts such Accepted Cell Line from Athersys hereunder, unless extended as
provided in subsection (b) below.
          (b) Extended License Duration. BMS shall have the right to extend the
term of a particular License, as to each Accepted Cell Line, for additional
periods beyond the initial License term, upon notice to Athersys at least thirty
(30) days before the expiration of the existing term and upon payment of the
applicable Extended License Fee pursuant to Section 4.1(b).
     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 Section 3.2. 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 and 3.2 of this Agreement.
          (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.
          (c) No Other Use by Athersys. Athersys covenants and agrees that it
shall not use or practice the General Improvements for any purpose except as
expressly permitted in the licenses granted to Athersys under Section 3.3.
     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

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Cell Lines and the Accepted Cell Lines, subject only to the licenses granted in
Sections 3.1 and 3.2, 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 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.
          (a) Initial License Fees. For each Accepted Cell Line, BMS shall pay
Athersys a license fee of [$*]* (each, an “Initial License Fee”). The Initial
License Fees shall be payable within thirty (30) days after the date of
acceptance by BMS of the applicable Accepted Cell Line.
          (b) Extended License Fee. If BMS elects to exercise its rights under
Section 3.4(b) to extend the term of the License as to a particular Accepted
Cell Line, then BMS shall at its option pay Athersys for each Accepted Cell Line
subject to such extension either (i) [$*] for
 

*   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.

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each successive additional one-year extension of such License term or (ii) a
one-time payment of [$*]* for the use of such Accepted Cell Line in perpetuity
(either, the “Extended License Fee”).
     4.2 Milestone Payments. For each Accepted Cell Line, and for each Candidate
Compound identified for clinical development by BMS or its Affiliate or
sublicensee, BMS shall pay Athersys the milestone payments set forth in
Exhibit B and Exhibit C, respectively, within forty-five (45) days after each
milestone event has been achieved for the particular Accepted Cell Line or
Candidate Compound (as applicable).
     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
 

*   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.

10

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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.
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 Specific 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 and
General Improvements, but excluding any and all Specific 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.
     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;

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          (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 this 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, 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

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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.
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

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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

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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
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 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

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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 3.3, 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

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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.
     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, 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.

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     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. 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.
     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.

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     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:            
 
                       

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Exhibit A
RAGE-VT CELL LINES
Promptly after the Effective Date the Parties shall agree upon an initial list
of specific proteins with respect to which Athersys will create RAGE libraries
and promptly thereafter screen and isolate Athersys Cell Lines expressing such
proteins. Such list shall be deemed to constitute a part of this Exhibit A. 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 Section 2.5, to the extent
applicable) 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 (and Section 2.5, to the extent applicable), 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 Exhibit B 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
screening has commenced prior to receiving notice (a “Pre-existing Program”),
within thirty (30) 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 thirty (30) 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 thirty (30) 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.

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Exhibit B
MILESTONE PAYMENTS – ACCEPTED CELL LINES

      Milestone   Payment
HTS Completion for Accepted Cell Line
  [$*]*
• Verification of target amplification
   
Provide quantitation of target mRNA expression level in the selected clonal
cells, with comparison to basal level expression in cells without target
amplification. When known regulators of the target pathway give the expected
physiological response.
   
 
   
• Quantitative assay performance
   
Calculated signal window of Z’ assay performance parameters will be determined,
on a cell line-by-cell line basis, during the validation study, but in each case
will be equal to, or greater than, 0.4, with an optimal level of 0.5 or greater,
and meet screening requirements; performance in such range for the duration of
the screen, or three months, whichever is less.
   
 
   
• Screening deck size
   
To be specified upon completion of analysis by BMS.
   
 
   
• Potency determination
   
Potency values for reference compounds vary by less than a factor of 5 during
the course of the screen and evaluation of the screen “hits.”
   
 
   
Transition to Full Discovery
  [$*]
Upon Program Transition to Full Discovery, as passed by BMS’ Lead Discovery
Operating Committee, of a Candidate Compound the activity of which was initially
discovered through the use of an Accepted Cell Line or materials or assays
developed from such Accepted Cell Line; provided, however, that after BMS has
made this milestone payment with respect to any Candidate Compound initially
discovered through the use of an Accepted Cell Line (or such related materials
or assays), BMS shall not be required to make this payment with respect to any
other Candidate Compounds discovered through the use of such Accepted Cell Line
(or such related materials or assays).
     
Early Candidate Notice (“ECN”)
  [$*]
Upon delivery of an ECN to BMS’ Early Development Operating Committee that a
Candidate Compound has been selected for exploratory development and a
first-in-man study; provided, however, that after BMS
   

 

*   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.

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      Milestone   Payment
has made this milestone payment with respect to any Candidate Compound initially
discovered through the use of an Accepted Cell Line (or such related materials
or assays), BMS shall not be required to make this payment with respect to any
other Candidate Compounds discovered through the use of such Accepted Cell Line
(or such related materials or assays).
   

BMS shall promptly notify Athersys of the first occurrence of any of the
foregoing milestones.

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Exhibit c
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 C, 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 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 compounds and shall not be obligated to make any
milestone payments with respect to any such back-up or follow-on 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
compound targeting the same molecular target as such dropped Candidate Compound,
such new 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.
 

*   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.

23

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Table Of Contents

                              Page 1.   Definitions     1  
 
  1.1   “Accepted Cell Line”     1  
 
  1.2   “Affiliate”     1  
 
  1.3   “Athersys Know How”     1  
 
  1.4   “Athersys Patents”     2  
 
  1.5   “Athersys Technology”     2  
 
  1.6   “Candidate Compound”     2  
 
  1.7   “Collaboration Cell Line”     2  
 
  1.8   “Confidential Information”     2  
 
  1.9   “Controlled”     2  
 
  1.10   “Field”     2  
 
  1.11   “Improvement”     2  
 
  1.12   “Information”     2  
 
  1.13   “License”     3  
 
  1.14   “Net Sales”     3  
 
  1.15   “Patents”     4  
 
  1.16   “Product”     4  
 
  1.17   “RAGE Technology”     4  
 
  1.18   “Term”     4  
 
  1.19   “Third Party”     4     2.   Collaboration Program     5  
 
  2.1   Review of Proposed Cell Lines by Athersys     5  
 
  2.2   Supply of Collaboration Cell Lines     5  
 
  2.3   Review of Collaboration Cell Lines by BMS     5  
 
  2.4   Option To Expand Collaboration Cell Lines     5     3.   Licenses.     5
 
 
  3.1   Evaluation License     5  
 
  3.2   Research and Development License     6  
 
  3.3   Term of Athersys License     6  
 
      (a) Initial License Term     6  
 
      (b) Extended License Term     6  

i.

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Table Of Contents
(continued)

                              Page
 
  3.4   Negative Covenants     6  
 
      (a) No Other Use     6  
 
      (b) No Transfer to Third Parties     6  
 
  3.5   Athersys Reserved Rights     6  
 
  3.6   Records And Reports     6  
 
      (a) Records     6  
 
      (b) Copies and Inspection of Records     7  
 
      (c) Quarterly Reports     7     4.   Payments     7  
 
  4.1   License Fees     7  
 
      (a) Initial License Fees     7  
 
      (b) Extended License Fee     7  
 
  4.2   Milestone Payments     7  
 
  4.3   Royalty Payments     7  
 
  4.4   Royalty Term     8  
 
  4.5   Blocked Currency     8  
 
  4.6   Non-Monetary Consideration     8     5.   Records and Audit     8  
 
  5.1   Records and Audit     8     6.   Intellectual Property     8  
 
  6.1   Ownership     8  
 
      (a )Athersys     8  
 
      (b) BMS     8  
 
  6.2   Enforcement of Patent Rights     9     7.   Confidentiality     9  
 
  7.1   Confidential Information     9  
 
  7.2   Authorized Disclosure     9  
 
  7.3   Public Disclosure     10  
 
  7.4   Confidential Terms     10     8.   Representations and Warranties     10
 
 
  8.1   Athersys     10  

ii.

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Table Of Contents
(continued)

                              Page
 
  8.2   BMS     10  
 
  8.3   Disclaimer of Warranties     10  
 
  8.4   Unknown Biological Properties     11     9.   Dispute Resolution     11
 
 
  9.1   Mediation     11  
 
  9.2   Arbitration     11     10.   Indemnification     11  
 
  10.1   BMS     11  
 
  10.2   Athersys     12  
 
  10.3   Procedure     12     11.   Term and Termination     12  
 
  11.1   Term of Agreement     12  
 
  11.2   Termination for Cause     12  
 
  11.3   Effect of Termination     12  
 
      (a) Accrued Rights and Obligations     12  
 
      (b) Return of Confidential Information     13  
 
      (c) Survival     13     12.   Miscellaneous     13  
 
  12.1   Governing Law     13  
 
  12.2   Independent Contractors     13  
 
  12.3   Assignment     13  
 
  12.4   Notices     13  
 
  12.5   Force Majeure     14  
 
  12.6   Advice of Counsel     14  
 
  12.7   Compliance with Laws     14  
 
  12.8   Further Assurances     14  
 
  12.9   Severability     14  
 
  12.10   Waiver     14  
 
  12.11   Complete Agreement     14  
 
  12.12   Use of Name     15  
 
  12.13   Headings     15  
 
  12.14   Counterparts     15  

iii.

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5.