EX-10.5



 




EXHIBIT
10.5


CONFIDENTIAL


Execution Copy


SUBLICENSE AGREEMENT


By And Between


ATHERSYS, INC.


And


ANGIOTECH PHARMACEUTICALS, INC.


Effective as of May 5, 2006


 








 





TABLE OF CONTENTS



	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE I. DEFINITIONS	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE II. LICENSE GRANT	 	 	5	 
	 

	 	 	2.1	 	 	License Grants By Athersys	 	 	6	 
	 

	 	 	2.2	 	 	Reservation Of Rights	 	 	6	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE III. PAYMENTS	 	 	6	 
	 

	 	 	3.1	 	 	Payments	 	 	6	 
	 

	 	 	3.2	 	 	Reports	 	 	7	 
	 

	 	 	3.3	 	 	Manner Of Conversion	 	 	7	 
	 

	 	 	3.4	 	 	Records Retention And Audit Rights	 	 	7	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE IV. PATENTS	 	 	7	 
	 

	 	 	4.1	 	 	Patent Filing, Prosecution and Commencement or Settlement of Litigation	 	 	7	 
	 

	 	 	4.2	 	 	Patent Infringement	 	 	8	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE V. ADDITIONAL COVENANTS	 	 	8	 
	 

	 	 	5.1	 	 	Compliance	 	 	8	 
	 

	 	 	5.2	 	 	Covenants Regarding The Manufacture Of Licensed Products	 	 	8	 
	 

	 	 	5.3	 	 	Use Of The University’s Name And Trademarks Or The Names Of
University Faculty, Staff Or Students	 	 	8	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE VI. TERM AND TERMINATION	 	 	9	 
	 

	 	 	6.1	 	 	Term	 	 	9	 
	 

	 	 	6.2	 	 	Use of Technology Not Covered by University Patent	 	 	9	 
	 

	 	 	6.3	 	 	Termination	 	 	9	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE VII. CONFIDENTIALITY	 	 	9	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE VIII. REPRESENTATIONS; WARRANTIES; COVENANTS	 	 	10	 
	 

	 	 	8.1	 	 	Authority	 	 	10	 
	 

	 	 	8.2	 	 	Additional Representations, Warranties and Covenants of Athersys	 	 	10	 
	 

	 	 	8.3	 	 	No Conflicts	 	 	11	 
	 

	 	 	8.4	 	 	Disclaimers	 	 	11	 
	 

	 	 	8.5	 	 	Indemnification Of University By Angiotech	 	 	11	 






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TABLE OF CONTENTS
(continued)



	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE IX. DISPUTE RESOLUTION	 	 	11	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE X. MISCELLANEOUS	 	 	11	 
	 

	 	 	10.1	 	 	Governing Law	 	 	11	 
	 

	 	 	10.2	 	 	Minnesota Government Data Practices Act And Trade Secret Information	 	 	12	 
	 

	 	 	10.3	 	 	Assignment	 	 	12	 
	 

	 	 	10.4	 	 	Compliance With Laws	 	 	12	 
	 

	 	 	10.5	 	 	Further Assurances	 	 	13	 
	 

	 	 	10.6	 	 	Severability	 	 	13	 
	 

	 	 	10.7	 	 	Waivers And Amendments; Preservation Of Remedies	 	 	13	 
	 

	 	 	10.8	 	 	Headings	 	 	13	 
	 

	 	 	10.9	 	 	Counterparts	 	 	13	 
	 

	 	 	10.10	 	 	Successors	 	 	13	 
	 

	 	 	10.11	 	 	Notices	 	 	13	 
	 

	 	 	10.12	 	 	No Consequential Damages	 	 	14	 
	 

	 	 	10.13	 	 	Independent Contractor	 	 	14	 
	 

	 	 	10.14	 	 	Complete Agreement	 	 	15	 
	 
	 	 	 	 	 	 	 	 	 	 
	SCHEDULES	 	 	 	 
	Schedule 1.15	 	 	 	 
	Schedule 1.31	 	 	 	 
	Schedule 2.1	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	EXHIBITS	 	 	 	 
	Exhibit A	 	 	 	 




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SUBLICENSE AGREEMENT


     This Sublicense Agreement (this “Sublicense Agreement”) is made and entered into as of
May 5, 2006 (the “Effective Date”), by and between Athersys, Inc., a corporation organized under
the laws of Delaware and having a place of business at 3201 Carnegie Avenue, Cleveland, Ohio 44115
(“Athersys”), and Angiotech Pharmaceuticals, Inc., a corporation organized under the laws of
British Columbia and having a place of business at 1618 Station Street, Vancouver, BC Canada, V6A
1B6 (“Angiotech”). In this Sublicense Agreement, Athersys and Angiotech may each be referred to as
a “Party” and collectively as the “Parties.”


RECITALS




     WHEREAS, MCL LLC and the University (as defined below) entered into an Exclusive License
Agreement, dated May 17, 2002 (“University License Agreement”), and an Ownership Agreement, dated
May 17, 2002 (“Ownership Agreement”);



     WHEREAS, effective as of November 4, 2003, MCL LLC was merged into ReGenesys, LLC, a
subsidiary of Athersys, and thereafter the Ownership Agreement, the University License Agreement
and certain technology, including that which is the subject of the Ownership Agreement and the
University License Agreement, were assigned to Athersys, and as a result thereof, Athersys is the
exclusive licensee of the “University Patents” and “University Technology,” as each is defined in
the University License Agreement;



     WHEREAS, concurrently with the execution of this Sublicense Agreement, Athersys and Angiotech
are entering into that certain Strategic Alliance Agreement (such agreement and the exhibits and
schedules thereto, the “Strategic Alliance Agreement”) concerning the alliance between Angiotech
and Athersys to research, develop, manufacture, market and commercialize certain stem cells and
stem cell therapies for certain indications;



     WHEREAS, concurrently with the execution of this Sublicense Agreement, Athersys and Angiotech
are entering into that certain License Agreement which grants to Angiotech rights to certain
technology and intellectual property owned by Athersys (the “License Agreement”);



     WHEREAS, collectively, the Strategic Alliance Agreement, the License Agreement and this
Sublicense Agreement are referred to herein as the “Transaction Agreements”; and



     WHEREAS, this Sublicense Agreement sets forth the terms and condition under which Athersys is
granting a sublicense to Angiotech to the technology and intellectual property licensed to Athersys
pursuant to the University License Agreement, including the “University Patents” and “University
Technology,” as further described below.



AGREEMENT




     NOW, THEREFORE, in consideration of the covenants and obligations expressed herein, and
intending to be legally bound the Parties agree as follows:



 









 





ARTICLE I.
DEFINITIONS



     1.1 “Affiliate” means, with respect to any Party, any corporation or other business entity
which directly or indirectly through one or more intermediaries controls, is controlled by, or is
under common control with such Party, but only for so long as the relationship exists. A
corporation or other entity shall be regarded as in control of another corporation or entity (a) if
it (or any of its subsidiaries or parents) beneficially owns, holds or directly or indirectly
controls more than fifty percent (50%) of the voting capital stock (or such lesser maximum
percentage permitted by applicable law) or other ownership interest of such other corporation or
entity, or (b) if it possesses, directly or indirectly, the power to direct or cause the direction
of the management and policies of such other corporation or entity, or (c) if it possesses,
directly or indirectly, the power to elect or appoint more than fifty percent (50%) of the members
of the governing body of such other corporation or entity.



     1.2 “Angiotech” has the meaning ascribed to it in the preamble to this Sublicense Agreement.



     1.3 “Athersys” has the meaning ascribed to it in the preamble to this Sublicense Agreement.



     1.4 “Cells” means the following cells identified, developed, and/or intended for use for
treatment and/or prophylaxis of a disease or condition in humans: (a) MAPCs; (b) progeny or
components of any MAPCs; (c) derivatives of any of the foregoing (a) or (b); (d)
genetically-modified MAPCs; and (e) Athersys Stem Cells; and including, without limitation, cells
or tissues that are derived from any of the foregoing, as any of the foregoing cells might be at
the time of treatment (i) in their native, undifferentiated state, (ii) in a partially or fully
pre-differentiated state, (iii) primed for differentiation (for example, through the introduction
of a protein, peptide, gene, polynucleotide, small molecule or other active pharmaceutical
ingredient), or (iv) in a modified form.



     1.5 “Cell Therapy” means the treatment and/or prophylaxis of a disease or condition, by
regional, local, systemic or other delivery, localization and/or administration of Cells. The term
“Cell Therapy” specifically excludes using (a) any of the Cells as reagents; (b) any of the Cells
for diagnostic applications or assays; and (c) any of the Cells for drug and drug target validation
screening. The term “Cell Therapy” specifically includes (x) delivery, localization and/or
administration of a protein, peptide, gene, polynucleotide, small molecule or other active
pharmaceutical ingredient (or any combination of the foregoing) at or near the time of delivery,
localization and/or administration of Cells; (y) delivery, localization and/or administration of
one or more fractions and/or subsets of Cells; and (z) delivery, localization and/or administration
of one or more other cell types at or near the time of delivery, localization or administration of
Cells.



     1.6 “Cell Therapy Product” means a therapeutic and/or prophylactic product for humans that (a)
includes a Cell developed under the Strategic Alliance Agreement that is intended for use or used
as Cell Therapy for at least one Therapeutic Indication, and (b) has obtained Regulatory Approval
in a given country or jurisdiction in the Territory.



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     1.7 “Clinical Development Candidate” means (a) a Cell(s) that meets certain criteria and has
certain characteristics that are necessary and desirable for the submission of an Investigational
New Drug (“IND”) application for use of such Cell(s) in Cell Therapy for at least one Therapeutic
Indication (and, therefore, make such Cell(s) suitable for a Clinical Development Program), as
determined by the JSC; or (b) a Cell(s) that is or has been the subject of an IND for use of such
Cell(s) in Cell Therapy for at least one Therapeutic Indication. The term “Clinical Development
Candidate” shall expressly exclude Cell Therapy Products.



     1.8 “Clinical Development Plan” means, for each Clinical Development Candidate, a detailed
plan that sets forth the responsibilities of, and the activities to be conducted by, each of the
Parties in advancing each such Clinical Development Candidate to regulatory approval for a
Therapeutic Indication (including a detailed budget corresponding to each such plan).



     1.9 “Clinical Development Program” means the clinical development activities conducted by (or
to be conducted by) each Party pursuant to a Clinical Development Plan.



     1.10 “Company Technology” means the technology owned by Athersys through the Ownership
Agreement, namely, the “COMPANY Technology,” as defined in the Ownership Agreement.



     1.11 “Effective Date” has the meaning ascribed to it in the preamble to this Sublicense
Agreement.



     1.12 “License Agreement” has the meaning ascribed to it in the Recitals to this Sublicense
Agreement.



     1.13 “Licensed Patent” means a Patent that claims as an invention one or more aspects of the
Technology.



     1.14 “Licensed Product” means any Technology which is within the scope of one or more claims
of a Licensed Patent and, but for the sublicense granted in this Sublicense Agreement, would
infringe, constitute contributory infringement, or constitute inducement to infringe of one or more
such claims when made by, made for, used, sold, offered for sale, imported, exported, leased or
otherwise disposed of by Angiotech (or its permitted assignees, sublicensees, or transferees).



     1.15 “MAPC” means any multipotent adult progenitor cell, including without limitation those
described in the Patent Rights listed on Schedule 1.15 or described in any Patent Rights
that claim priority to any such Patent Rights listed on Schedule 1.15.



     1.16 “Ownership Agreement” has the meaning ascribed to it in the Recitals to this Sublicense
Agreement.



     1.17 “Party” and “Parties” each has the meaning ascribed to it in the preamble to this
Sublicense Agreement.



     1.18 “Patent” means any and all issued letters patents, including, but not limited to,
implementation, improvement, addition, utility model, or appearance design patents and



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inventors certificates, as well as patents that may issue from any divisions, reissues,
continuation, renewals and extensions of any of the foregoing.



     1.19 “Patent Rights” means rights in (a) issued Patents and pending provisional and
non-provisional applications for Patents, including, without limitation, any continuations,
continuations-in-part or divisions directed to inventions disclosed therein; (b) any
re-examinations, reissues, renewals, substitutions or extensions of any Patents; and (c) foreign
counterparts or equivalents of any of the foregoing.



     1.20 “Pre—Clinical Development Program” means the pre-clinical development activities
conducted by or for a Party in furtherance of advancing a Cell(s) into one or more potential
Clinical Development Candidates for a Therapeutic Indication.



     1.21 “Prior Third Party Agreement” means those agreements between Athersys and a Third Party
set forth on Schedule 2.1, as such agreements exist as of the Effective Date.



     1.22 “Strategic Alliance Agreement” has the meaning ascribed to it in the Recitals to this
Sublicense Agreement.



     1.23 “Sublicense Agreement Term” shall have the meaning set forth in Section 6.1.



     1.24 “Sublicense Net Sales” shall mean the amount invoiced for sales and other dispositions of
Licensed Products sold during the term of this Sublicense Agreement in any arm’s-length
transactions to any unrelated third-party transferee in any channels of distribution less the
following deductions: (a) all trade, quantity, cash or prompt payment discounts or rebates
actually allowed, (b) all credits and allowances actually granted due to rejections, returns,
defective Licensed Product, replacements, warranty, outdating, billing errors, and retroactive
price reductions, (c) customs duties and tariffs, (d) excise, sale, use, turnover, inventory,
value-added, foreign withholding, and equivalent taxes or other government charges, but not net
income or net profit taxes, (e) outbound transportation, insurance charges separately billed to
buyer or prepaid, and advertising allowances, (f) special outbound packing separately billed to
buyer or prepaid, (g) any sales agents, or brokers commissions paid to non-Affiliates, and (h) all
charges in connection with converting, transmitting, or remitting currency. Sales, credits,
refunds, and uncollectible accounts shall be accounted for when recognized by Angiotech according
to generally accepted accounting principles. Shipments between Angiotech and its Affiliates will
not be considered to be sold or otherwise disposed of until they are sold to a third party customer
of Angiotech or of its Affiliates. If a Licensed Product is sold in combination with another
component, Sublicense Net Sales, for purposes of determining royalties on the combination, will be
calculated by multiplying Sublicense Net Sales of the combination by the fraction A/(A+B), where A
is the invoice price of the Licensed Product if sold separately and B is the invoice price of any
other component(s) in the combination if sold separately. If the Licensed Product and the other
component(s) in the combination are not sold separately, Sublicense Net Sales, for purposes of
determining royalties on the combination, will be calculated by multiplying Sublicense Net Sales of
the combination by the fraction C/(C+D), where C is the direct cost of manufacturing the Licensed
Product and D is the direct cost of manufacturing any other component(s) in the combination. Cost
of manufacturing will be determined in accordance with generally accepted accounting principles.
In the event any



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Licensed Product is leased or sold on an installment basis, Sublicense Net Sales shall mean
the revenue stream as and when recognized as revenue by Athersys in accordance with generally
accepted accounting principles. Sublicense Net Sales shall not include any charitable gift by
Angiotech of any Licensed Product or the transfer of Licensed Product to an Affiliate or
non-Affiliate for conducting research or product development for Angiotech’s or Athersys’ benefit.
Sublicense Net Sales shall also exclude the transfer of Licensed Product to a research or
educational institution for research or educational purposes, provided such transfer was made for
no more than de minimus consideration.



     1.25 “Technology” means Company Technology and University Technology, including but not
limited to, multipotent postnatal derived progenitor cells, precursors, progeny or components
thereof, products and information obtained from the foregoing, processes and products utilized in
production or processing of any of the foregoing, methods of utilizing any of the foregoing, and
any Trade Secret Information or know-how relating to the foregoing. The term “Technology” shall
also include any invention involving multipotent postnatal derived progenitor cells (i) that is the
result of research conducted by or under the direction of Drs. Catherine Verfaillie, Leo Furcht or
Morayama Reyes while at the University or is the result of research conducted at the University by
a University faculty, staff or student using such cells provided by the University pursuant to
Section 3.3(a) of the University License Agreement; (ii) that is owned by the University
pursuant to its policies and agreements with its employees; and (iii) that is disclosed to the
University no later than the seventh (7th) anniversary of the “Effective Date” of the
University License Agreement.



     1.26 “Territory” means the world.



     1.27 “Therapeutic Field” means, as the context requires, a field comprising certain
cardiovascular indications.


     1.28 “Trade Secret Information” means trade secret as defined under the Minnesota Uniform
Trade Secrets Act, Minn. Stat. Section 325C.011 et seq.


     1.29 “University” means the Regents of the University of Minnesota, a constitutional,
educational corporation existing under the laws of the State of Minnesota, U.S.A.


     1.30 “University License Agreement” has the meaning ascribed to it in the Recitals to this
Sublicense Agreement.


     1.31 “University Patents” means a Patent Right that claims as an invention one or more aspects
of the University Technology. University Patents include, but are not limited to, the Patent Rights listed on Schedule 1.31


     1.32 “University Technology” means the technology that is owned by the University pursuant to
the Ownership Agreement, namely, the “University Technology,” as defined in the Ownership Agreement.


ARTICLE II.
LICENSE GRANT



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      2.1 License Grants By Athersys. Subject to the provisions of this Sublicense
Agreement, the applicable provisions of the Ownership Agreement and the University License
Agreement, and the Prior Third Party Agreements, Athersys grants to Angiotech during the Sublicense
Agreement Term:


          (a) a co-exclusive (meaning that only Athersys, Angiotech and their Affiliates can act in each
country of the Territory), worldwide, sublicense, with the right to further sublicense (through
multiple tiers of sublicensing), under the University Patents and University Technology to
research, develop, and otherwise use and exploit (but excluding make and have made) Cells and
Clinical Development Candidates in the Therapeutic Field in the Territory as necessary or useful to
conduct any Clinical Development Program, Pre-Clinical Development Program and/or New Pre-Clinical
Development Program and/or its activities under any Transaction Agreement;



          (b) an exclusive (even as to Athersys), worldwide, sublicense, with the right to further
sublicense (through multiple tiers of sublicensing), under the University Patents and University
Technology to promote, market, distribute, advertise, sell, have sold, offer for sale, import and
have imported Cell Therapy Products in the Therapeutic Field in the Territory; and



          (c) in the event that Angiotech obtains rights to manufacture Cells, Clinical Development
Candidates and Cell Therapy Products pursuant to the terms of the Strategic Alliance Agreement, a
co-exclusive (meaning that only Athersys, Angiotech and their Affiliates and permitted
subcontractors can act in each country of the Territory) worldwide, sublicense, with the right to
sublicense (through multiple tiers of sublicensing), under the University Patents and University
Technology to make and have made Cells, Clinical Development Candidates and Cell Therapy Products
in the Therapeutic Field in the Territory.




     2.2 Reservation Of Rights. Except as expressly set forth in Section 2.1,
Athersys reserves all right, title and interest in, to and under the University Technology and
University Patents and all other technologies and intellectual property rights owned by or licensed
to Athersys or any of its Affiliates (other than the licenses granted to Angiotech pursuant to the
License Agreement). No right or license is granted under this Sublicense Agreement by Athersys or
any of its Affiliates to Angiotech or any of its Affiliates, whether expressly, impliedly, by
estoppel or otherwise, in, to or under the University Technology or University Patents or any other
material, technology or intellectual property rights licensed to Athersys or any of its Affiliates,
except as expressly set forth in Section 2.1. The University reserves the rights set forth
in Section 3.2 and Section 3.3 of the University License Agreement.



ARTICLE III.

PAYMENTS




     3.1 Payments. All amounts to be paid by Angiotech for the rights granted by Athersys
pursuant to this Sublicense Agreement are included as part of the consideration to be paid by
Angiotech under the Strategic Alliance Agreement. For the avoidance of doubt, Athersys’
obligations to University under ARTICLE 5 of the University License Agreement shall remain
in full force and effect, and Athersys, in its sole responsibility and at its sole expense, shall
make any required payments thereunder.



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     3.2 Reports. The University License Agreement requires reporting of sales, leases or
other dispositions of Licensed Products notwithstanding that no separate payment is required by
Angiotech to Athersys under this Sublicense Agreement with respect thereto. Accordingly, within
forty-five (45) days after the last day of a calendar quarter during the Sublicense Agreement Term,
Angiotech shall deliver to Athersys a written report (a copy of the form of which is attached to
this Sublicense Agreement as Exhibit A), certified by Angiotech’s chief financial officer
as complete and correct, recounting the number and Sublicense Net Sales amount (expressed in United
States Dollars) of all sales, leases or other dispositions of Licensed Products during such
calendar quarter. If the number and Sublicense Net Sales amount of such sales, leases or other
dispositions of Licensed Products in any calendar quarter is zero, then Angiotech shall deliver a
written report to Athersys stating such information.



     3.3 Manner Of Conversion. All computations under this Sublicense Agreement shall be
in United States dollars. For purposes of determining the dollar value of transactions conducted
in non-United States dollar currencies, the exchange rate for the currency in dollars shall be the
rate set by Citibank, N.A., in New York, New York on the last business day of the month in which
the transaction was entered into.



     3.4 Records Retention And Audit Rights.



          (a) Throughout the Sublicense Agreement Term, Angiotech, at its expense, shall keep and
maintain for a period of three (3) years complete and accurate records of all sales, leases and
other dispositions of Licensed Products during the Sublicense Agreement Term.



          (b) On behalf of the University or Athersys, an independent certified public accountant, at
the University’s or Athersys’ expense, shall have the right to inspect and audit, once each year,
Angiotech’s records referred to in Section 3.4(a) at Angiotech’s address set forth in the
preamble of this Sublicense Agreement during Angiotech’s normal business hours. If the independent
certified public accountant, in accordance with the results of such inspection and audit,
determines that Angiotech has underpaid amounts owed to Athersys hereunder by at least five percent
(5%) or Forty-Two Thousand Dollars ($42,000), whichever is smaller, in any annual reporting period,
Angiotech shall reimburse the University or Athersys, whichever performed the audit, for all of the
University’s or Athersys’ reasonable expenses paid or owed to the accountants to inspect and audit
such records, in addition to payment to Athersys of all underpaid amounts.



ARTICLE IV.
PATENTS


     4.1 Patent Filing, Prosecution and Commencement or Settlement of Litigation. To the
extent permitted by the University License Agreement, and in a manner consistent with the Strategic
Alliance Agreement and the License Agreement, Athersys shall consult with Angiotech regarding
preparation, filing, prosecution, maintenance, and commencement or settlement of patent
infringement litigation related to University Patents and actual and potential patent applications
on any of the Technology for which Athersys is responsible, and shall provide copies to Angiotech
all official correspondence with patent authorities or courts related thereto. Athersys shall (a)
give Angiotech a reasonable opportunity to review and provide substantive



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input for material decisions relating to the filing, prosecution, maintenance and patent
infringement litigation commencement or settlement related to, and (b) shall consult with Angiotech
with respect to, each such University Patent and each such actual and potential patent application,
and shall supply Angiotech with a copy of each such University Patent and patent application as
filed, together with notice of its filing date and serial number. For the avoidance of doubt,
Athersys may take ministerial and non-material procedural actions regarding such University Patents
and patent applications without obtaining prior input from Angiotech. Athersys shall keep
Angiotech informed of the status of all such material patent filing, prosecution, maintenance and
patent infringement litigation commencement or settlement activities, shall provide written reports
to Angiotech at least semi-annually regarding the status of all filings, analyses, strategies,
decisions and proceedings involving such University Patents and patent applications. Angiotech
shall have the right to request and promptly receive additional information regarding such
University Patents and patent applications from Athersys.



     4.2 Patent Infringement. To the extent permitted by the University License Agreement,
and in a manner consistent with the Strategic Alliance Agreement and the License Agreement,
Athersys shall grant to Angiotech the same or substantially similar rights regarding enforcement of
University Patents, or defense of third-party claims alleging that the manufacture, production,
use, development, sale or distribution of products or any technology or intellectual property
licensed to Angiotech under this Sublicense Agreement infringes the patent rights of such third
party.



ARTICLE V.
ADDITIONAL COVENANTS



     5.1 Compliance. Each Party is solely responsible for compliance with, and shall
comply with, all applicable international, federal, state and local laws, rules and regulations in
connection with such Party’s use of the Technology, including, without limitation, all
environmental, import/export, security and food and drug laws, rules and regulations.



     5.2 Covenants Regarding The Manufacture Of Licensed Products. To the extent that
Angiotech has a right to manufacture Licensed Products, the following shall apply. Angiotech will
employ commercially reasonable efforts commensurate with the prevailing industry practices
pertaining to the Technology and/or the Licensed Products to minimize Licensed Products that are
defective in design or manufacture. Angiotech will manufacture, sell, or transfer Licensed
Products that comply with all applicable federal and state law, including all federal export laws
and regulations. Angiotech shall manufacture Licensed Products in the United States of America if
(a) the Licensed Product is to be sold in the United States of America and (b) the Licensed Product
embodies or is produced through use of an invention which is subject to the rights of the federal
government of the United States of America, unless Angiotech is granted a waiver of these
restrictions by the United States of America.



     5.3 Use Of The University’s Name And Trademarks Or The Names Of University Faculty, Staff
Or Students. Unless required by law or an order of a court or governmental agency, Angiotech
shall not use the name or trademarks of the University in promoting or advertising Angiotech or any
product of Angiotech or any Cell Therapy Product without the University’s prior written approval.
Angiotech may use the name of any of the University’s



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faculty, staff or student body members, upon obtaining such member’s written approval.
Notwithstanding this provision, Angiotech and its employees shall have the right to make truthful,
fair, good faith, non-promotional statements about the Technology, including the identity of the
University and any individuals involved with the Technology.


ARTICLE VI.
TERM AND TERMINATION



     6.1 Term. This Sublicense Agreement shall commence on the Effective Date and, unless
sooner terminated under Section 6.3, shall expire at the end of the life of the last to
expire University Patent. The period from the Effective Date through expiration or termination of
this Sublicense Agreement is the “Sublicense Agreement Term.”


     6.2 Use of Technology Not Covered by University Patent. During and after the
expiration or earlier termination of this Sublicense Agreement, Angiotech shall continue to have
the right to make, have made, use, sell, offer to sell, import, export, lease, or otherwise dispose
of any Technology that is not covered by a claim of a Licensed Patent.


     6.3 Termination.



          (a) Automatic. This Sublicense Agreement shall automatically terminate upon
termination of the License Agreement (except as provided for in Section 16.3 of the
Strategic Alliance Agreement) or termination of the University License Agreement. Termination of
this Sublicense Agreement due to termination of the University License Agreement does not by itself
automatically terminate the License Agreement.



          (b) Breach. The failure by a Party to substantially comply with any of the material
obligations contained in this Sublicense Agreement shall entitle the other Party to give notice to
have the default cured. If such default is not cured within sixty (60) days after the receipt of
such notice, or if by its nature such default is not capable of cure within such sixty (60)-day
period, the notifying Party shall be entitled, without prejudice to any of its other rights
conferred on it by this Sublicense Agreement, and in addition to any other remedies that may be
available to it, to terminate this Sublicense Agreement.

          (c) Effect Of Termination. Upon expiration or termination of this Sublicense
Agreement for any reason, the provisions of Article I, to the extent definitions are embodied in
the following listed Articles and Sections of this Agreement; Articles VII and IX; and Sections
2.2, 3.2 — 3.3 (solely with respect to Net Sales accrued before termination), 3.4, 6.2, this
6.3(c), 8.4, 8.5, 10.1, 10.2, and 10.5 — 10.14, as well as any obligations accrued, arising or owed
before the termination of this Sublicense Agreement shall survive any termination of this
Sublicense Agreement, as applicable.

ARTICLE VII.
CONFIDENTIALITY


     The terms of this Sublicense Agreement and the activities conducted and information shared
hereunder shall be considered “Confidential Information” under the Strategic Alliance Agreement and
subject to all of the terms and conditions with respect thereto under the Strategic



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Alliance Agreement; provided, however, that any disclosure by either Party as required under
the University License Agreement shall be deemed a permitted disclosure under Section 13.3
of the Strategic Alliance Agreement.


ARTICLE VIII.
REPRESENTATIONS; WARRANTIES; COVENANTS



     8.1 Authority. Each Party represents and warrants that, as of the Effective Date, it
has the full right, power and authority to enter into this Sublicense Agreement and that this
Sublicense Agreement has been duly executed by such Party and constitutes a legal, valid and
binding obligation of such Party, enforceable in accordance with its terms.


     8.2 Additional Representations, Warranties and Covenants of Athersys. Athersys represents,
warrants and covenants that:


          (a) it has provided Angiotech with a complete, current and accurate copy of the University
License Agreement, including all amendments thereto, as such agreement exists on the Effective
Date;


          (b) except as expressly provided in the University License Agreement, the Strategic Alliance
Agreement or the License Agreement, Athersys has no commitments or agreements with any Third Party
which would materially, individually or in the aggregate, interfere with or preclude the
fulfillment of its obligations under this Sublicense Agreement;


          (c) Athersys has carried out all requirements under the University License Agreement that are
necessary to enable it to validly grant sublicenses to Angiotech pursuant to the terms of the
University License Agreement, and that there are no other requirements necessary to enable Athersys
to validly grant sublicenses to Angiotech under the University License Agreement;


          (d) Athersys has received no notice of default under the University License Agreement, and
Athersys is not in default and, to the best of Athersys’ knowledge after due inquiry, there are no
circumstances existing on the Effective Date which, with notice or the passage of time or both,
could result in a default under the University License Agreement;


          (e) to the best of Athersys’ knowledge, the University License Agreement is a legal, valid and
binding agreement, enforceable in accordance with its terms except as enforceability may be limited
by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors’ rights generally and by general equitable principles;


          (f) Athersys will use commercially reasonable efforts to negotiate and execute a letter
agreement with University that agrees and acknowledges that, should the University License
Agreement terminate through no fault of Angiotech, Angiotech, providing that it is not in default
under its sublicense from Athersys, shall have the right to continue to research, develop, promote,
market, distribute, advertise, sell, have sold, offer for sale, import and have imported and
otherwise use and exploit Licensed Products, as a direct licensee of University on 


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substantially
the same terms as the University License Agreement, to the extent such rights are granted to
Angiotech under this Sublicense Agreement;


          (g) Athersys will not take any action, or fail to take any required action, either of which
results in the termination of the University License Agreement prior to the expiration of its
natural term; and



          (h) within five (5) days of receipt, Athersys will provide Angiotech with copies of all
notices received from the University under Section 8.1.2 of the University License
Agreement, and Angiotech may, at its discretion, take any actions necessary and useful to cure or
prevent a breach of the University License Agreement that would likely lead to termination under
such Section.


     8.3 No Conflicts. Each Party represents and warrants that the execution, delivery and
performance of this Sublicense Agreement and the other Transaction Agreements do not conflict with,
or constitute a breach or default under, any of its charter or organizational documents, any law,
order, judgment or governmental rule or regulation applicable to it, or any material agreement,
contract, commitment or instrument to which it is a party.


     8.4 Disclaimers. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS SUBLICENSE
AGREEMENT OR ANY TRANSACTION AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS NOR EXTENDS ANY
WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, CONCERNING THE TECHNOLOGY,
LICENSED PRODUCTS AND UNIVERSITY PATENTS, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT.


     8.5 Indemnification Of University By Angiotech. Throughout the Sublicense Agreement
Term and thereafter, Angiotech shall indemnify, defend and hold the University harmless from all
suits, actions, claims, liabilities, demands, damages, losses, or reasonable and necessary expenses
(including reasonable attorneys’ fees and investigative expenses), relating to or arising out of
Angiotech’s acts relating to the manufacture, use, lease, sale or other disposition of Licensed
Product by Angiotech, including, without limitation, breach of contract, warranty, and products
liability claims relating to Licensed Product.



ARTICLE IX.
DISPUTE RESOLUTION


     The Parties shall resolve all disputes under this Sublicense Agreement in accordance with the
rules and procedures specified in the Strategic Alliance Agreement.


ARTICLE X.
MISCELLANEOUS


     10.1 Governing Law. This Sublicense Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the principles of
conflict of laws thereof.



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     10.2 Minnesota Government Data Practices Act And Trade Secret Information. Angiotech
acknowledges that the University is subject to the terms and provisions of the Minnesota Government
Data Practices Act, Minnesota Statutes, §13.01 et seq. (the “Act”). Angiotech further acknowledges
that the Act requires, with certain exceptions, the University to permit the public to inspect and
copy any information which the University shall have collected, created, received, maintained or
disseminated. Angiotech further acknowledges that in connection with the performance of its
obligations to the University, Athersys may deliver to the University certain Trade Secret
Information (as defined by the Act) that Angiotech deems proprietary and confidential and,
notwithstanding anything to the contrary in any agreement between Athersys and Angiotech or their
respective Affiliates, such delivery shall not be a breach of any such agreement. In the event the
University receives a request under the Act for the inspection of information collected, created,
received, maintained or disseminated, including, but not limited to, any Trade Secret Information,
the University should promptly notify Athersys of such request and should refuse to disclose such
information. In no event shall the University be required to commence any action to prohibit the
inspection and copying of any such information. However, the University should cooperate with
Angiotech and Athersys if Angiotech or Athersys commences or defends any action to prohibit such
inspection or copying. Angiotech shall reimburse the University for any of the University’s
reasonable and necessary expenses resulting from such cooperation. Angiotech shall defend,
indemnify and hold harmless the University and each of its regents, officers, employees and agents
from and against any claim, suit, demand or expense (including reasonable attorneys’ fees and
investigation expenses) that arose out of or are related to Angiotech’s request that the University
refuse to divulge any such information. If the University complies with the requirements of this
Section 10.2, Angiotech for itself and its employees and agents waives any claim or cause
of action of whatever nature against the University and each of its regents, officers, employees
and agents that arose out of or is related to a request to inspect or copy any such information and
the University shall not be liable to any person for any expenses or damages, including, but not
limited to, consequential, special or incidental damages, or lost profits, in connection with the
inspection or copying of any such information.



     10.3 Assignment. Neither Party shall be permitted to assign or otherwise transfer any
of its rights or obligations under the Transaction Agreements without the prior written consent of
the other Party; provided, however, that, subject to Section 16.2(e) of the Strategic
Alliance Agreement, a Party may assign or otherwise transfer all of its rights and obligations
under the Transaction Agreements without the prior written consent of the other Party (a) in
connection with a sale of all or substantially all of its business or assets, whether by merger,
sale of stock, sale of assets or otherwise or (b) to an Affiliate of such Party. Notwithstanding
the foregoing, in the event of any such permitted assignment or other transfer, all rights and
obligations under the Transaction Agreements must be assigned or otherwise transferred together in
their entirety to such assignee or successor.



     10.4 Compliance With Laws. Each Party shall comply with all applicable laws, rules
and regulations in connection with its performance of its obligations and exercise of its rights
under the Transaction Agreements. Each Party shall furnish to the other Party any information
reasonably requested or required by the requesting Party during the Sublicense Agreement Term to
enable the requesting Party to comply with the requirements of any United States or foreign
federal, state, and/or government agency.



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     10.5 Further Assurances. At any time, or from time to time, following the date of the
Transaction Agreements, each Party shall, at the request of the other Party (a) deliver or cause to
be delivered to the requesting Party any records, data or other documents consistent with the
provisions of the Transaction Agreements, (b) duly execute and deliver, or cause to be duly
executed or delivered, all such consents, assignments, documents or further instruments of transfer
or license as required by the Transaction Agreements, and (c) take or cause to be taken all such
actions, in each case as the requesting Party may reasonably deem necessary in order for the
requesting Party to obtain the full benefits of the Transaction Agreements and the transactions
contemplated hereby.


     10.6 Severability. In the event that any provision of the Transaction Agreements is
determined to be invalid or unenforceable by a court of competent jurisdiction, the remainder of
the Transaction Agreements shall remain in full force and effect without said provision. In such
event, the Parties shall in good faith attempt to negotiate a substitute clause for any provision
declared invalid or unenforceable, which substitute clause shall most nearly approximate the intent
of the Parties in agreeing to such invalid provision, without itself being invalid.


     10.7 Waivers And Amendments; Preservation Of Remedies. The Transaction Agreements may
be amended, modified, superseded, canceled, renewed or extended, and the terms and conditions
hereof may be waived, only by a written instrument signed by the Parties or, in the case of a
waiver, the Party waiving compliance. No delay on the part of any Party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any Party of any right, power or privilege hereunder, nor any single or partial exercise of any
right, power or privilege hereunder, preclude any other or other exercise thereof hereunder. The
rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies
which any Party may otherwise have at law or in equity.


     10.8 Headings. The captions to the several Articles and Sections hereof are not a
part of the Transaction Agreements, but are included merely for convenience of reference only and
shall not affect its meaning or interpretation.


     10.9 Counterparts. The Transaction Agreements may be executed by original or
facsimile signature in any number of counterparts, and each such counterpart shall be deemed to be
an original instrument, and all of which counterparts together shall constitute one instrument.


     10.10 Successors. This Sublicense Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors and permitted assigns.


     10.11 Notices. All notices, requests, demands, claims and other communications
hereunder shall be in writing and shall be deemed to have been duly given if delivered personally,
by fax, sent by nationally recognized overnight courier or mailed by registered or certified mail
(return receipt requested), postage prepaid, to the Parties at the addresses set forth below (or at
such other address for such party as shall be specified by like notice). All such notices and
other communications shall be deemed to have been given and received (a) in the case of personal
delivery, on the date of such delivery, (b) in the case of delivery by facsimile transmission, on
the date of such delivery, (c) in the case of delivery by nationally recognized


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express courier, on the date of such delivery, and (d) in the case of mailing within the United
States, on the fifth (5th) business day following such mailing.


If to Angiotech:


Angiotech Pharmaceuticals, Inc.
1618 Station Street
Vancouver, BC Canada V6A 1B6
Fax: 604-221-2330
Attn: Vice President Business Development


with a required copy to:


Angiotech Pharmaceuticals, Inc.
1618 Station Street
Vancouver, BC Canada V6A 1B6
Fax: 604-221-2330
Attn: General Counsel


If to Athersys:



Athersys, Inc.
3201 Carnegie Avenue
Cleveland, OH 44115-2634
Fax: (216) 361-9495
Attn: Chief Executive Officer


with a copy (which shall not constitute notice) to:



Jones Day
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Fax: (216) 579-0212
Attn: Thomas A. Briggs, Esq.

     10.12 No Consequential Damages. EXCEPT IN CONNECTION WITH A PARTY’S OBLIGATIONS UNDER
ARTICLE XV OF THE STRATEGIC ALLIANCE AGREEMENT, IN NO EVENT SHALL A PARTY BE LIABLE TO THE
OTHER PARTY FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER IN CONTRACT,
WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, LOSS OF
PROFITS OR REVENUE.


     10.13 Independent Contractor. Neither Party shall be construed to be a partner, joint
venturer, franchisee, employee, principal, agent, representative or participant of or with the
other Party for any purpose whatsoever by virtue of the Transaction Agreements. No Party has any



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right or authority to assume or to create any obligation or responsibility, express or implied, on
behalf of or in the name of the other Party in any manner by virtue of the Transaction Agreements.



     10.14 Complete Agreement. This Sublicense Agreement, together with its Schedules and
Exhibits, and any Pre-Clinical Development Plans and Clinical Development Plans approved by the
Parties, the Strategic Alliance Agreement, License Agreement, Note and Purchase Agreement, and the
Mutual Confidential Disclosure Agreement between the Parties dated July 20, 2005, along with any
other letters or agreements signed by both Parties and of even date herewith, constitute the entire
agreement, both written and oral, between the Parties with respect to the subject matter hereof,
and all prior agreements respecting the subject matter hereof, either written or oral, expressed or
implied, are merged and canceled, and are null and void and of no effect.



{Signature page follows.}



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


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