EX-10.1



 




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.





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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;




11









 








          (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



12









 







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



13









 







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



14









 







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



15









 







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



16









 







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.



17









 





     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.



18









 





     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:	 	 	 	 	 	 
	 

	 	 	 
	 	 	 	 	 	 	 	 	 






19









 





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.




20









 








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.



21









 






	 	 	 
	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.



22









 





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









 










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	 






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	 	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	 






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	 	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	 









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5.