Document:

EX-10.34

 

EXHIBIT
10.34

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.

EXCLUSIVE LICENSE AGREEMENT

     THIS EXCLUSIVE LICENSE AGREEMENT is made and entered into as of May                     , 2002, by and
between Regents of the University of Minnesota, (“University”), a constitutional, educational
corporation under the laws of the state of Minnesota, having an office at 600 McNamara Alumni
Center, 200 Oak Street SE, Minneapolis, MN 55455-2070 and MCL, LLC (“Company”), a limited liability
corporation organized under the laws of the State of Minnesota, having a principal place of
business at 2100 West 21st Street, Minneapolis, MN 55405.

     WHEREAS, Dr. Catherine Verfaillie, Dr. Leo Furcht and Dr. Morayama Reyes have developed
Technology relating to multipotent postnatal derived progenitor cells, their precursors, progeny
and components, products made therefrom, processes used in their production and processing, and
methods for their use.

     WHEREAS, that Technology is described inter alia in the Patent Applications;

     WHEREAS, the University, has waived its interest to certain parts of the Technology, inter
alia, the multipotent postnatal derived progenitor cells, and that waived part of the Technology
(“Company Technology”) is assigned to and owned by the Company; and

     WHEREAS, the remaining part of the Technology (“University Technology”) is owned by the
University and ownership of the Company Technology and the University Technology is governed by a
separate agreement between the University and the Company; and

     WHEREAS, the University desires to grant to the Company and the Company desires to receive an
exclusive license to the University Technology subject to the terms of this Agreement;

     NOW, THEREFORE, the University and the Company agree as follows:

ARTICLE 1 — DEFINITIONS

     1.1 Definitions. Whenever used in this Agreement, unless otherwise clearly indicated
by the context, the following terms shall have the meaning ascribed to them in this article 1.1:

     “Affiliate” shall mean any legal entity directly or indirectly controlling, controlled by or
under common control with the Company. For purposes of this Agreement, “control” means the (i)
direct or indirect ownership of more than fifty percent of the outstanding voting securities of a
legal entity, (ii) right to receive more than fifty percent of the profits or earnings of a legal
entity, or (iii) right to control the policy decisions of a legal entity.

 

 

     “Agreement” shall mean this agreement, entitled Exclusive License Agreement, between the
University and the Company entered into on the Effective Date.

     “Common Stock” shall mean the Common Stock of the Company as it exists on the Effective Date,
which has no anti-dilution, pre-emptive, or cumulative voting rights provision and as described in
the articles of incorporation on file with the Secretary of State of the State of Minnesota.

     “Company” shall mean MCL, LLC, a limited liability corporation organized under the laws of the
State of Minnesota.

     “Company Technology” shall mean that part of the Technology that is owned by the Company
pursuant to that certain Ownership Agreement dated as of the Effective Date.

     “Effective Date” shall mean the date set forth in the first paragraph of this Agreement.

     “Field of Use” shall mean any and all fields of use, including but not limited to diagnostic,
therapeutic and research applications.

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

     “Licensed Product” shall mean any Technology which is within the scope of one or more claims
of a Licensed Patent and, but for the license granted in this 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 the Company (or its permitted assignees, sublicensees, or transferees).

     “Net Sales” shall mean the amount invoiced for sales and other dispositions of Licensed
Products sold during the Term of this Agreement and the Post-Termination Period, in any
arm’s-length transactions to any unrelated third-party transferee in any channels of distribution
less the following deductions (i) all trade, quantity, cash or prompt payment discounts or rebates
actually allowed, (ii) all credits and allowances actually granted due to rejections, returns,
defective Licensed Product, replacements, warranty, outdating, billing errors, and retroactive
price reductions, (iii) customs duties and tariffs, (iv) excise, sale, use, turnover, inventory,
value-added, foreign withholding, and equivalent taxes or other government charges, but not net
income or net profit taxes (v) outbound transportation, insurance charges separately billed to
buyer or prepaid, and advertising allowances, (vi) special outbound packing separately billed to
buyer or prepaid, (vii) any sales, agents, or brokers commissions paid to non-Affiliates, and
(viii) all charges in connection with converting, transmitting, or remitting currency. Sales,
credits, refunds, and uncollectable accounts shall be accounted for when recognized by the Company
according to generally accepted accounting principles. Shipments between the Company and its
Affiliates will not be considered to be sold or otherwise disposed of until they are sold to a
third party customer of the Company or of its Affiliates. If a Licensed Product is sold in
combination with another component, Net Sales, for purposes of determining royalties on the
combination, will be calculated by multiplying Net Sales of the combination by the fraction
A/(A+B), where A

2

 

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, Net Sales, for purposes of
determining royalties on the combination, will be calculated by multiplying 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 Licensed Product is leased or sold on an installment basis, Net Sales shall mean
the revenue stream as and when recognized as revenue by the Company in accordance with generally
accepted accounting principles. Net Sales shall not include any charitable gift by the Company of
any Licensed Product or the transfer of Licensed Product to an Affiliate or non-Affiliate for
conducting research or product development for the Company’s benefit. 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 minims consideration.

     “Patent” shall mean any and all issued letters patents, including but not limited to
implementation, improvement, addition, utility model, or appearance design patents and inventors
certificates, as well as patents that may issue from any divisions, reissues, continuation,
renewals, and extension of any of the foregoing.

     “Patent Applications” shall mean the applications listed in Exhibit A.

     “Post-Termination Period” shall mean the one hundred eighty (180) day period commencing on the
date of termination of this Agreement as described in article 8.3.

     “Royalty Rate” shall mean [*%].

     “Sublicensees” shall mean any sublicensees of the Company, including Affiliates of the
Company.

     “Technology” shall mean 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 (a) 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
sub-article 3.3(a) of this Agreement; (b) that is owned by the University pursuant to its
p*olicies and agreements with its employees; and (c) that is disclosed to the University
no later than the seventh (7th) anniversary of the Effective Date.

 

			
	*	 	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.

3

 

     “Term” shall mean the period commencing on the Effective Date and expiring upon the occurrence
of any of the events set forth in article 2.

     “Territory” shall mean worldwide.

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

     “University” shall mean the Regents of the University of Minnesota, a constitutional,
educational corporation under the laws of the State of Minnesota.

     “University Technology” shall mean that part of the Technology that is owned by the University
pursuant to that certain Ownership Agreement dated as of the Effective Date.

     “Up-Front Payment-In-Kind” shall mean the transfer by the Company to the University of 5% of
the Company’s Common Stock.

ARTICLE 2 — TERM

     2.1 Term. The Term of this Agreement shall commence on the Effective Date and, unless
terminated earlier as provided in Article 8, this Agreement shall terminate at the end of the life
of the last to expire Licensed Patent.

     2.2. Initial Fixed Term. Notwithstanding any provision of this Agreement to the
contrary, without the written consent of the University and the Company, the Company shall not
terminate this Agreement during the first two (2) years of the Term.

     2.3 Use of Technology Not Covered By Licensed Patent. During and after the expiration
of this Agreement, the Company 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.

ARTICLE 3 — GRANT OF LICENSE

     3.1 The Company’s Rights.

     (a) Subject to the terms and conditions of this Agreement, the University grants to the
Company and the Company accepts, an irrevocable, exclusive right and license in any and all Fields
of Use, including the right to sublicense to Affiliates or unrelated third parties, to the Licensed
Patents and the University Technology to make, have made, use, sell, offer to sell, import and
export, lease or otherwise dispose of Licensed Product in the Territory.  

     (b) The Company, without the prior approval of the University, may assign this Agreement to
another if (i) the Company delivers to the University written notice of the proposed assignment
(along with pertinent information about the terms of the assignment and the assignee) at least
thirty (30) days prior to the date of the event described below in part ii of this

4

 

sub-article 3.1(b), and (ii) the assignment is made as a part of and in connection with (a)
the sale by the Company of all or substantially all of its assets to a single purchaser, (b) the
sale, transfer, or exchange by the shareholders, partners, or equity owners of the Company of a
majority interest in the Company to a single purchaser, or (c) the merger of the Company into
another corporation or other business entity. Any assignment made in violation of this sub-article
3.1(b) shall be void.

     (c) The Company shall give the University at least ten (10) days advance written notice of any
proposed sublicense prior to its execution so that the University may review its proposed terms.
Any sublicense granted by the Company to a third party shall be subject in all applicable respects
to the terms contained in this Agreement.

     3.2 The United States Government’s Rights. This Agreement, including the grant of
license set forth above in sub-article 3.1, may be subject to the applicable terms of the United
States laws concerning government funded inventions (including, without limitation, 37 Code of
Federal Regulations Sec. 401) and subject to the associated rights of and obligations owed to the
federal government of the United States of America for any such portion of the Technology the
development of which was supported by United States government funding. As of the Effective Date,
to the knowledge of the University the research and development resulting in the creation of
Technology was performed with grant rights independent of the normal march-in rights of the federal
government of the United States of America. Should the federal government of the United States of
America assert any such rights, the University shall fully cooperate with the Company and shall
assist the Company to obtain copies of any records relevant to this matter within the control of
the University and allow the Company to interview any individual at the University with knowledge
relevant to this matter. If in the future during the term of this Agreement, the University
accepts funding from the United States government or any other sponsor for research and development
of any Technology, the University shall notify the Company within 14 days of such acceptance.

     3.3 The University’s Rights.

     (a) The University reserves an irrevocable, nonexclusive, and transferable (transferable only
to the extent as set forth below in this sub-article 3.3(a)) right to the University Technology and
the Company grants to the University an irrevocable, nonexclusive, and transferable (transferable
only to the extent as set forth below in this sub-article 3.3(a)) right and license to the Company
Technology (i) for use by the University for its own non-commercial educational and non-commercial
research purposes and (ii) to provide to not-for-profit research institutions and to not-for-profit
educational institutions for such institution’s non-commercial educational and non-commercial
research purposes, the multipotent post natal progenitor cells; protocols, methods and information
related to or derived from the isolation, purification, use and propagation of the cells;
protocols, methods and information related to or derived from the differentiation of the cells into
various cell types; protocols, methods and information related to or derived from the isolation of
purified differentiated cells, and the use of the differentiated cells. This right to use and
provide the Technology specifically excludes the right to use or provide for use the Technology for
any commercial purposes and for any in vivo use in humans. The University shall not assign the
University’s rights granted or reserved in this sub-article

5

 

3.3(a) to use or provide the Technology. The University may transfer (i) the Company’s
Technology to the extent granted to the University by the Company under this sub-article 3.3(a) and
(ii) the University Technology to the extent the University has reserved rights in the University
Technology under this sub-article 3.3(a) so long as such transfer is substantially in accordance
with the terms of the Material Transfer Agreement, attached to this Agreement as Exhibit C. The
University shall provide such Technology only after receiving an agreement substantially in
accordance with the terms of such Material Transfer Agreement signed by the institution and the
University. The University shall deliver a copy of the signed Material Transfer Agreement to the
Company within 14 days after its receipt by the University.

     (b) The University shall have the right to publish or otherwise disclose in writing,
information concerning the Technology, except as limited by this sub-article. At least thirty (30)
days prior to the publication, presentation, or the disclosure of the Technology, the University
shall deliver to the Company a copy of the paper, slides, or other media containing such
information to be published, presented or electronically distributed. Upon request made by the
Company in writing within such thirty-day period, the University shall withhold publication,
presentation, or disclosure of the Technology until after intellectual property protection has been
applied for, but in no event shall the University be obligated to so withhold for more than ninety
(90) days after the Company has delivered its written request. The University acknowledges the
Company’s interest in preserving the patentability of the Technology. Notwithstanding any language
in this Agreement to the contrary, the University shall, if the Company requests, prohibit the
publication or otherwise disclose any information concerning the Technology if the publication or
disclosure would violate the terms of any valid nondisclosure agreement between the Company and the
University.

ARTICLE 4 — COMMERCIALIZATION

     4.1 Commercialization. The Company shall use commercially reasonable efforts
commensurate with the prevailing industry practices pertaining to the Technology and/or any
Licensed Product and the early-stage research and development nature of the Company, to:

     (a) in preparation for meeting with the Food and Drug Administration, initiate a regulatory
audit of and provide a written report to the University on the status of the Technology in terms of
safety and efficacy within 2 years, which shall include making a reasonable determination whether
more animal studies for safety and efficacy are needed and the general nature of these studies.

     (b) submit an application to the Food and Drug Administration for use of the Technology as an
orphan drug within 4 years.

     (c) submit an IND application to the Food and Drug Administration for use of the Technology in
a selected therapeutic category within 6 years and commence clinical trails as soon as practical
once the IND has been approved.

     (d) commercialize a Licensed Product within 10 years.

6

 

     (e) satisfy one of the following fund raising milestones:

	 	(i)	 	raise two hundred fifty thousand dollars ($250,000) over and above
the Company capitalization existing as of the Effective Date, either singularly
or a combination thereof from venture capital firms, investment banks, corporate
partners, private investors or SBIR grants within 2 years, or
	 
	 	(ii)	 	make an R&D investment in the University’s stem cell research
laboratory of which Catherine Verfaillie is the head of at least two hundred
fifty thousand dollars ($250,000) within 2 years.

     All dates referenced in milestones 4.1 subsections a-e commence on the Effective Date

     4.2 Covenants Regarding the Manufacture of Licensed Products. The Company, its
assignees, or its Sublicensees will employ commercially reasonable efforts commensurate with the
prevailing industry practices pertaining to the Technology and/or the Licensed Product to minimize
Licensed Products that are defective in design or manufacture. The Company, its assignees, or its
Sublicensees will manufacture, sell, or transfer Licensed Products that comply with all applicable
federal and state law, including all federal export laws and regulations. The Company shall, and
it shall require and cause any assignees or Sublicensees to, 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, as described above in
sub-article 3.2, unless the Company is granted a waiver of these restrictions by the United States
of America.

     4.3 Commercialization Reports. Throughout the Term and during the Post-Termination
Period, the Company shall deliver to the University along with the Report described below in
article 5.2, a written annual report describing the Company’s efforts and plans to achieve the
commercialization goals set forth in sub-article 4.1.

     4.4 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, the Company
shall not use the name or trademarks of the University in promoting or advertising the Company or
any product of the Company without the University’s prior written approval. The Company may use
the name of any of the University’s faculty, staff, or student body members, upon obtaining such
members’ written approval. Notwithstanding this provision, the Company 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.

     4.5 Press Release. The University and the Company will issue, within 45 days
following execution of this Agreement, a joint press release announcing that the University has
entered into an agreement granting an exclusive, worldwide license of the University Technology to
the Company. Such press release will be reviewed and agreed to by both the University and the
Company prior to release. The financial terms of this Agreement shall remain confidential unless
required by law or by an order of a court of competent jurisdiction or other

7

 

governmental agency to be disclosed. At any time after the joint release of such press
release, the Company shall have the right to disclose any and all information about this Agreement,
including its terms, to any other person or to the public.

ARTICLE 5 — PAYMENTS, REIMBURSEMENTS, REPORTS AND RECORDS

     5.1 Payments.

     5.1.1 Up-Front Payment-In-Kind. Within thirty (30) business days of the
Effective Date, the Company shall deliver to the University the Up-Front Payment-In-Kind.
The University shall enter into the Company’s Subscription Agreement, attached to this
Agreement as Exhibit D, prior to delivery of the Company’s shares of Common Stock.

     5.1.2 Royalty Payments On Net Sales. Within 60 days after the last day of a
calendar quarter during the Term and during the Post-Termination Period, the Company shall
deliver to the University its check for royalty payments on Net Sales in an amount equal to
the Royalty Rate multiplied by the Net Sales of Licensed Products sold, leased, or otherwise
disposed of to a third party that is not an Affiliate of the Company less (a) the amount of
any fees (such as awards or settlement amounts payable to third parties for past
infringement as a result of a credible threat of litigation or actual litigation) and (b)
any lump sum and/or periodic royalties the Company shall be required pay to any third party
to license intellectual property rights, including but not limited to any patent rights as
either (i) a result of patent infringement litigation against the Company as referred to in
Article 7.2, or (ii) that are necessary or commercially desirable to permit the Company to
manufacture, sell, lease, or otherwise dispose of Product. The deduction from royalty
payments on Net Sales in connection with any fees, lump sums, or periodic royalties to any
third party shall not exceed the aggregate of the lesser of 1/2 of the royalty paid by the
Company to any such third party or [*%] of Net Sales of any such third party, otherwise due
the University if no such deduction were allowed.

     5.1.3 Sublicense Payments. In the event of any sublicenses by the Company to a
third party that is not an Affiliate, the Company shall pay a royalty to the University in
the amount of the lesser of 1/2 of the royalty paid to the Company by such Sublicense or [*]%
of Net Sales of such Sublicensee, if and when the Company actually collects a royalty
payment on such Net Sales. The Company shall pay to the University [*%] *of any
cash payments (if such payments are not based upon a royalty on Net Sales of Product of the
Sublicensee) the Company receives from the sublicense, if and when such cash payments are
paid to the Company. Since the University will share any benefit that inures to the Company
due to the University’s ownership of Common Stock (the University’s Up-Front
Payment-In-Kind) in the Company, the Company shall not be obligated to pay a percentage of
or share with the University any (i) equity in a Sublicense received by the Company from any
Sublicensee, (ii) equity investment a Sublicensee makes in the Company, or (ii) cash
received by the Company for research,

 

			
	*	 	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.

8

 

development, clinical studies, and Licensed Products and/or cells produced for the
Company or Sublicensee for research studies that will benefit the Company. Notwithstanding
that the Company is not obligated to pay a percentage of or share with the University any
equity or cash as set forth in the previous sentence, in the event the Company (i) assigns
this Agreement in connection with a transaction described in sub-article 3.1(b) or (ii)
assigns substantially all of its rights in the Technology and Licensed Patents to a third
party or enters into a transaction that is tantamount to such, the University shall receive
a share of any equity received by the Company in exchange for such assignment. The
University’s percentage share of the equity shall be equal to the University’s percentage
share of its equity in the Company on the date of such assignment.

     5.1.4 Licensed Product Covered by Valid and Subsisting Claim. Royalty payments
under sub-article 5.1.2 and sublicense payments under sub-article 5.1.3 shall be due only
for Net Sales of Licensed Product covered by a valid and subsisting claim of a Licensed
Patent. Royalty payments and sublicense payments shall not be due for Net Sales of any
product covered only by a claim of a pending application.

     5.1.5 Currency and Checks. All computations and payments made under this
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. All checks to the
University shall be made payable to the “Regents of the University of Minnesota” and shall
be sent to the address specified in article 12.10 of this Agreement.

     5.2 The Company’s Reports. Within 60 days after the last day of a calendar quarter
during the Term and the Post-Termination Period, the Company shall deliver to the University a
written report (a copy of the form of which is attached to this Agreement as Exhibit B) recounting
the number and Net Sales amount (expressed in U. S. dollars) of all sales, leases or other
dispositions of Licensed Products during such calendar quarter. The Company shall deliver such
written report to the University even if the Company is not required to pay to the University a
payment for sales, leases or other dispositions of Licensed Products during the calendar quarter.

     5.3 Records Retention and Audit Rights.

     5.3.1 Throughout the Term, the Post-Termination period, and after the Post-Termination
period, the Company, 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 Term and the Post-Termination period. The Company may discard any
records older than three (3) years.

     5.3.2 On behalf of the University an independent certified public accountant, at the
University’s expense except as set forth below in this sub-article 5.3.2, shall have the
right to inspect and audit, once each year, the Company’s records referred to in sub-article

9

 

     5.3.1 at the Company’s address as set forth in article 12.10 or such other location as
the University and the Company shall mutually agree during the Company’s normal business
hours. If the independent certified public accountant, in accordance with the results of
such inspection and audit, determines that the Company has underpaid amounts owed to the
University by at least 5% percent or $42,000, whichever is smaller, in any annual reporting
period, the Company shall reimburse the University for all of the University’s reasonable
expenses to the accountants to inspect and audit such records.

     5.4 Interest. Interest computed at six percent (6%) per annum shall accrue on all
unpaid amounts to the University under this Agreement, commencing on the date payment for such
amount was due and owing.

ARTICLE 6 – PATENT APPLICATIONS AND PATENTS

     6.1 Pre-License Patent Filings. The University and the Company acknowledge that as of
the Effective Date, no Patents have issued on any of the Patent Applications. The University and
the Company each acknowledge that it has reviewed the Patent Applications and that neither the
University nor the Company has any basis to challenge or dispute the work product of any of the
Patent Applications. In connection with the filing and prosecution of the Patent Applications and
of any other patent applications filed pursuant to this Agreement, the Company shall pay for all
costs, including attorney’s fees, related to the Patent Applications and such other patent
applications.

     6.2 The Filing and Prosecution of Patent Applications Covering the Technology During the
Term of this Agreement. At this time and in the future, the Company, at its discretion, shall
determine if it will file a patent application on any of the Technology; in which countries to file
a patent application; if it will continue to prosecute any patent application; or whether to pay or
continue to pay any maintenance fees on any Licensed Patents; and, subject to the terms of
sub-article 7.1 of this Agreement, whether to commence and or settle any patent infringement
litigation involving any Licensed Patent. The Company, in consultation with and the reasonable
approval of, the University, shall choose patent counsel to prepare and prosecute or continue to
prosecute any foreign or domestic patent application covering the Technology; provided, however,
the Company’s determination as to the expertise of a particular attorney to prosecute a patent
application shall be accorded great weight in the decision to select and retain counsel. The
Company shall pay all costs, including attorney’s fees, associated with prosecution of any patent
applications, incurred during the Term.

     The University shall throughout the Term of the Agreement cause its employees, faculty, staff
and students who are conducting research, development or other inventive work and others under such
an obligation to the University to disclose to the University inventions that are or reasonably
could be deemed to be within the definition of Technology as used in this Agreement and to assign
to the University rights in such invention such that the Company shall receive, by this Agreement,
the license agreed to be granted to the Company.

     The University shall inform the Company 30 days prior to any event -including but not limited
to, any publication or public display of an aspect of the Technology not previously

10

 

published or publicly displayed- that would statutorily bar the Company from filing a patent
application on that aspect of the Technology in the United States of America or any other country.
If the Company declines to file a patent application on any Technology, it shall so inform the
University. The University shall have the option to file a patent application on such Technology
at the University’s expense. The University shall own any patent that issues on such patent
application without any obligation to license any such patent to the Company.

     The University and the Company shall inform each other, from time to time and within a
reasonable time, of the status of any patent application not yet filed but in progress and the
subsequent prosecution of the patent application, including delivering to the each other pertinent
notices, written and oral communications with governmental officials, and documents. Each, if they
wish, may comment on the drafting of any patent application and on the prosecution of the patent
application, which the other, in good faith, shall consider.

     6.3 Company’s Right to Monitor Technology. The University shall use reasonable
efforts to provide the Company with access to the Technology created during the Term of this
Agreement for the purpose of monitoring and reviewing the progress and results of the Technology,
including but not limited to, facilitating the Company to meet on a monthly basis with University
employees, faculty, staff, and students conducting the research and development of the Technology.

ARTICLE 7 — INFRINGEMENT

     7.1 Third Party Infringement of the Patent.

     7.1.1 Notice of Third Party’s Infringement. In the event the University or the
Company learns of substantial, credible evidence that a third party is making, having made,
using, selling or importing a product in the Field of Use and in the Territory that
infringes any Licensed Patent, the University or the Company, as the case may be, having
such evidence shall promptly deliver written notice of possible infringement to the other,
describing in detail the information suggesting infringement.

     7.1.2 The Company’s Authority.

     (a) The Company shall have the sole discretion and authority for the enforcement of all
rights relating to a Licensed Patent. Upon the delivery of the notice described above in
sub-article 7.1.2, the Company shall within 18 months thereafter complete its investigation
of the matter and inform the University of its decision whether or not to commence
litigation against the third party to enjoin the third party from infringing the Licensed
Patent and/or to seek compensation for the acts of infringement and reimbursement for
related costs and expenses; to enter into a sublicense agreement with the third party; or to
settle the matter with the third party. If the Company’s decision is not to commence
litigation and it has not settled the matter with the third party or entered into a
sublicense agreement with the third party, the University shall have the right to commence
litigation at its sole expense and shall be entitled to any and all proceeds or awards of
monetary damages for past infringement resulting from such

11

 

litigation. If the Company’s decision is to commence litigation, both the Company and
the University shall each have the right to fund a percentage of the cost of litigation and
to share in any and all proceeds or awards of monetary damages for past infringement
resulting from such litigation in direct proportion to their respective funding share of the
litigation. The funding share shall not exceed 50% for the Company and 50% for the
University, but in the event one of the parties agrees to a percentage share less than its
maximum of 50%, the other party shall have the right to fund the litigation by a percentage
share equal to 100% less the other parties agreed to funding share. If the total of agreed
to funding shares of the University and the Company is less than 100%, neither party shall
be required to pursue the litigation. If, during the Company’s 18 month investigative
period, the Company sublicenses the Licensed Patents and/or the Technology to a third party
and/or enters into a settlement agreement with a third party and thereby receives any lump
sum cash payment, then the University shall be entitled to [*%]* of any such lump
sum cash payment (after deduction of attorneys fees and out-of-pocket costs incurred by the
Company in connection with the settlement or the sublicense). In the event any on-going
royalties based on Net Sales of a third party, as referred to in the previous sentence, are
to be paid to the Company for future use of the Technology and/or the Licensed Patents,
pursuant to a sublicense agreement or settlement, the University shall be paid in accordance
with sub-article 5.1.3, except that the Company shall retain all on-going royalties based on
Net Sales of such third party until all of the Company’s attorneys fees and out-of-pocket
costs incurred in connection with the sublicense or settlement (which fees and costs during
the Company’s 18 month investigative period have not been previously recouped based upon the
circumstances set forth in the previous sentence) are recouped. The Company may consider
when making its decision to (i) initiate any litigation, (ii) settle any claim it may have
against a third party prior to or during litigation, or (iii) sublicense such third party
prior to or during litigation, whether the cost-benefit and risk-reward ratios of doing so
are favorable to the Company.

     (b) Suit jointly by the Company and the University.

     If it is legally required that the University join in any litigation, the University
shall do so as a co-party with the Company. A reasoned opinion of the Company’s patent
infringement counsel that the University is a necessary party shall be an adequate basis to
require the University to join as a co-party in the litigation. The University and the
Company shall, in good faith, make reasonable efforts to agree upon counsel to represent
them jointly in the action. Unless the University otherwise agrees in writing, the Company
shall pay all reasonable and necessary attorney fees and court costs of such joint
engagement. Notwithstanding the previous sentence if the University has chosen to
participate in the litigation pursuant to sub-article 7.1.2(a), the Company shall not be
obligated to pay any such fees and costs. In the absence of an agreement on joint
engagement of counsel, the University and the Company, at the sole expense of each for its
respective counsel, may engage separate counsel to represent it in the action. In any

 

			
	*	 	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.

12

 

litigation involving the Licensed Patents, the University shall cooperate with the
Company.

     7.2 The Company’s Alleged Infringement.

     7.2.1 Notice and Investigation of Alleged Infringement. In the event the
University learns of substantial, credible evidence that the Company’s manufacture, sale,
lease, or other disposition of Licensed Products potentially or likely infringes the patent
rights of a third party, the University shall promptly thereafter deliver written notice of
the possible infringement to the Company, describing in detail the information suggesting
such infringement.

     7.2.2 Settlement and Defense. If the University or both the University and the
Company are named as parties in a third party’s infringement action based upon acts of the
Company, the Company shall defend the University and the University shall cooperate with the
Company in the defense of the action. The University and the Company shall mutually agree
upon the terms of any settlement of the third party’s claims arising out of the manufacture,
sale, offer for sale, use, lease or other disposition of Licensed Products, if the
settlement would require the University to pay any sum of money or be restrained in any way.
The Company shall have no obligation to defend the University against any claim by a third
party that is based on acts by the University.

ARTICLE 8 — TERMINATION

     8.1 By the University.

     8.1.1 The following events shall constitute an event of default by the Company:

	 	(i)	 	if royalties due the University are unpaid and
overdue pursuant to this Agreement; or
	 
	 	(ii)	 	if the Company fails to perform a material term of this Agreement.

     8.1.2 Upon the occurrence on an event of default by the Company, the University shall
deliver to the Company a written notice of default. The University may terminate this
Agreement and the Company’s right to use the Licensed Patents by delivering to the Company a
written notice of termination if the default set forth in sub-article 8.1.1.1(i) has not
been cured in full within 30 days of the delivery to the Company of the notice of default or
if the default set forth in sub-article 8.1.1.1(ii) has not been cured in full within 60
days of the delivery to the Company of the notice of default.

     8.2 By the Company. The Company may terminate this Agreement at any time after the
expiration of the period described in article 2.2, by delivering to the University a written notice
of termination at least 60 days prior to the effective date of termination.

     8.3 Post-Termination Period. Even after the termination under sub-articles 8.1.2, 8.2,
or 8.4 of this Agreement, the Company may sell, offer for sale, lease, or otherwise dispose of

13

 

Licensed Products in the Territory, provided the Licensed Products were manufactured or were
in the process of being manufactured prior to the effective date of termination of this Agreement.
Otherwise, the Company shall not make, have made, use, sell, offer to sell, import, export, lease,
or otherwise dispose of any Licensed Products in a manner that would infringe the claims of any
Licensed Patent after the effective date of termination of this Agreement.

     8.4 Bankruptcy. The University may terminate this Agreement at any time should the
Company cease operations, be adjudicated by a United States Bankruptcy court to be bankrupt, make a
general assignment for the benefit of its creditors, or permit the appointment of a receiver for
its business or assets.

ARTICLE 9 — RELEASE, INDEMNIFICATION AND INSURANCE

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

     9.2 The University’s Indemnification. Subject to the limitations on liability set
forth in article 11, throughout the Term and thereafter, the University shall indemnify, defend and
hold the Company harmless from all suits, actions, claims, liabilities, demands, damages, losses or
expenses (including reasonable attorney’s fees and investigative expenses), relating to or arising
out of the University’s breach of the express warranties set forth in article 10.

     9.3 The Company’s Insurance.

     9.3.1 Commencing with the onset of human clinical trials by the Company and throughout
the remainder of the Term, the Company shall maintain in full force and effect comprehensive
general liability (CGL) insurance, with an aggregate claim limit of $1,000,000 and a single
claim limit of $500,000. Prior to the sale by the Company of a Food and Drug Administration
approved Licensed Product, the University and the Company shall mutually agree upon
commercially reasonable insurance limits for such a product and upon such agreement, the
Company shall amend the limits set forth in the first sentence to such new agreed upon
limits. Such insurance policy shall include coverage for claims that may be asserted by the
University against the Company under articles 9.1 and for claims by a third party against
the Company or the University arising out of purchase or use of a Licensed Product. Such
insurance policy shall name the University as an additional insured. Upon receipt of the
University’s written request, the Company shall deliver to the University a copy of the
certificate of insurance for such policy.

     9.3.2 The provisions of Article 9.3.1 shall not apply if the University agrees in
writing to accept a self-insurance plan of the Company as adequate insurance.

14

 

ARTICLE 10 — WARRANTIES

     10.1 Authority. The University and the Company each represent and warrant to the
other that it has full corporate power and authority to execute, deliver, and perform this
Agreement and no other corporate proceedings are necessary by it to authorize the execution or
delivery of this Agreement.

     10.2 Exclusive Rights. The University warrants that except for the possible rights of
the federal government as described in sub-article 3.2, to the best of its knowledge, the
University owns or has acquired the exclusive rights (including all patent and other intellectual
property rights) in the University Technology.

     10.3 Disclaimers.

     10.3.1 EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN ARTICLE 10, THE UNIVERSITY
DISCLAIMS AND EXCLUDES ALL WARRANTIES, EXPRESS AND IMPLIED, CONCERNING THE TECHNOLOGY, THE
PATENT APPLICATIONS, THE LICENSED PATENTS, AND ANY LICENSED PRODUCTS INCORPORATING THE
TECHNOLOGY, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR PARTICULAR PURPOSE.

     10.3.2 The University expressly disclaims any warranties and makes no representations:

	 	(i)	 	that the Patent Applications and any other
patent applications filed by the Company pursuant to this Agreement
will be approved by any patent office of any nation or that a patent
will issue;
	 
	 	(ii)	 	concerning the validity or scope of any
Licensed Patent that may be issued; or
	 
	 	(iii)	 	that the manufacture, use, sale, lease,
importation or other disposition of Licensed Products will not infringe
a third party’s patent or violate its intellectual property rights.

     10.3.3 Notwithstanding sub-article 10.3.2, the University represents and warrants that
it will cooperate with the Company in the prosecution and maintenance of any Patent
Application and any other patent applications filed pursuant to this Agreement after the
Effective Date and that the University will promptly bring to the attention of the Company
prior art or other information that the University becomes aware of and that would adversely
affect the patentability of any Patent Application or such patent application or the
validity and/or enforceability of any Licensed Patent.

15

 

ARTICLE 11 — DAMAGES

     11.1 Remedy Limitation. EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, IN NO
EVENT SHALL THE UNIVERSITY OR THE COMPANY BE LIABLE TO THE OTHER FOR (A) PERSONAL INJURY OR
PROPERTY DAMAGES OR (B) LOST PROFITS, LOST BUSINESS OPPORTUNITY, INVENTORY LOSS, WORK STOPPAGE,
LOST DATA, ANY OTHER RELIANCE OR EXPECTANCY, DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, OF ANY KIND.

     11.2 Damage Cap. IN NO EVENT SHALL THE UNIVERSITY’S OR THE COMPANY’S TOTAL LIABILITY
FOR THE BREACH OR NONPERFORMANCE OF THIS AGREEMENT EXCEED THE AMOUNT OF ROYALTIES PAID TO THE
UNIVERSITY UNDER ARTICLE 5.1 OF THIS AGREEMENT. THIS LIMITATION SHALL APPLY TO CONTRACT, TORT, AND
ANY OTHER CLAIM OF WHATEVER NATURE.

ARTICLE 12 — MISCELLANEOUS PROVISIONS

     12.1 Amendment and Waiver. This Agreement may be amended from time to time only by a
written instrument signed by the University and the Company. No term or provision of this
Agreement shall be waived and no breach excused unless such waiver or consent shall be in writing
and signed by the party claimed to have waived or consented. No waiver of a breach shall be deemed
to be a waiver of a different or subsequent breach.

     12.2 Assignment. Except as provided in Article 3.1(b) of this Agreement, the Company
shall not assign or delegate its duties under the terms of this Agreement, unless the University
consents to the assignment or delegation. Any assignment or delegation made in violation of this
sub-article 12.2 shall be void. Absent the consent of the University, an assignment or delegation
shall not release the Company from its obligations under this Agreement.

     This Agreement shall inure to the benefit of the Company and the University and their
respective permitted assignees and sublicensees.

     12.3 Applicable Law. The internal laws of the state of Minnesota shall govern the
validity, construction, and enforceability of this Agreement, without giving effect to the conflict
of laws principles of the state of Minnesota.

     12.4 Minnesota Government Data Practices Act and Trade Secret Information. The
University and the Company acknowledge 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”). The University and the Company further acknowledge 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. The
University and the Company further acknowledge that in connection with the performance of

16

 

this Agreement, the Company may deliver to the University certain Trade Secret Information,
which the Company deems proprietary and confidential. 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 shall
promptly notify the Company of such request and shall 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 shall cooperate with the Company if the
Company commences or defends any action to prohibit such inspection or copying. The Company shall
reimburse the University for any of the University’s reasonable and necessary expenses resulting
from such cooperation. The Company 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 attorney’s fees and investigation expenses) that arose out of or are
related to the Company’s request that the University refuse to divulge any such information. If
the University complies with the requirements of this sub-article 12.4, the Company 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.

     To the extent permitted by law, the University shall hold in confidence and disclose only to
University employees, faculty, staff and students who need to know the reports and other
information described in sub-articles 4.1(a)-(c), 4.3, 5.2, and 5.3. No provision of this
Agreement shall prohibit, limit, or condition the University’s right to use and disclose any
information in connection with enforcing this Agreement, in court or elsewhere.

     12.5 Construction. The headings preceding and labeling the articles of this Agreement
are for the purpose of identification only and shall not in any event be employed or used for the
purpose of construction or interpretation of any portion of this Agreement. As used in this
Agreement and where necessary, the singular shall include the plural and vice versa, and masculine,
feminine and neuter expressions shall be interchangeable.

     12.6 Enforceability. If a court of competent jurisdiction adjudges a provision of
this Agreement unenforceable, invalid or void, such determination shall not impair the
enforceability of any of the remaining provisions and such provisions shall remain in full force
and effect.

     12.7. Entire Agreement; No Third Party Beneficiaries. This Agreement is intended by
the University and the Company as the final and binding expression and the complete and exclusive
statement of the terms of their agreement with respect to the subject matter of this Agreement.
This Agreement cancels, supersedes, and revokes all prior negotiations, representations, and
agreements between the University and the Company, whether oral or written, relating to the subject
matter of this Agreement. Notwithstanding the preceding two sentences, that certain Ownership
Agreement between the University and the Company also dated as of the Effective Date of this
Agreement shall be a part of this Agreement to the extent set forth in that certain Ownership
Agreement.

17

 

     No provision of this Agreement, express or implied, is intended to confer upon any person
other than the University and the Company any rights, remedies, obligations, or liabilities under
this Agreement.

     12.8 Language and Currency. Unless otherwise expressly provided in this Agreement,
all notices, reports, and other documents and instruments that the University and the Company are
required by the terms of this Agreement to deliver to the other shall be in English, and all
notices, reports, and other documents and instruments detailing Net Sales shall be United States
dollar denominated.

     12.9 Notices/Administration. All notices, requests, and other communications that the
University and the Company are required to deliver shall be in writing and shall be delivered
personally or by facsimile (provided such delivery is confirmed) or by a recognized overnight
courier service or by United States mail, first-class, certified, or registered, postage prepaid,
return receipt requested, to the other at its address set forth below in this sub-article 12.9 or
to such other address as may be designated by notice given pursuant to this article:

	 	 	 	 	 
	If to the University:	 	Patent and Technology Marketing
	 

	 	 	 	University of Minnesota
	 

	 	 	 	Attention:
	 

	 	 	 	University Gateway Center, Suite 450
	 

	 	 	 	200 Oak Street S. E.
	 

	 	 	 	Minneapolis, MN 55455
	 

	 	 	 	Facsimile No.: (612) 624-6554
	 
	 	 	 	 
	If to the Company:

	 	 	 	MCL, LLC
	 

	 	 	 	Attention: Leo T. Furcht, MD, and President
	 

	 	 	 	2100 West 21st St.
	 

	 	 	 	Minneapolis, MN 55405
	 

	 	 	 	Facsimile No.:                     

     12.10 Relationship of Parties. In entering into, and performing their duties under
this Agreement, the University and the Company are acting as independent contractors and
independent employers. No provision of this Agreement shall create or be construed as creating a
partnership, joint venture, or agency relationship between the University and the Company. Neither
the University nor the Company shall have the authority to act for or bind the other in any
respect.

     12.11 Survival. Upon termination or expiration of this Agreement, the Company’s
obligations that accrued prior to the effective date of termination or expiration of this Agreement
(e.g., the obligation to report and make payments of royalties on Net Sales) and the obligations
specified in Article 5.3 of the Agreement shall survive.

     12.12 Collection Costs and Attorney’s Fees. If the University or the Company shall
fail to perform an obligation or otherwise breaches one or more of the terms of this Agreement, the
other may recover from the non-performing breaching party all its necessary and reasonable

18

 

costs, including reasonable attorneys fees and investigative fees, to enforce the terms of
this Agreement.

     12.13 Forum Selection. A suit, claim or other action to enforce the terms of this
Agreement shall be brought exclusively in the District Court of Hennepin County, Minnesota. The
University and the Company submits to the jurisdiction of that court and waives any objections
either may have to that court asserting jurisdiction over the University and the Company or
either’s assets and property.

     IN WITNESS WHEREOF, the University and the Company have caused this Agreement to be duly
executed by their respective authorized representatives.

	 	 	 	 	 
	REGENTS OF THE UNIVERSITY OF MINNESOTA	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	 

	 	Anthony L. Strauss	 	 
	 

	 	Acting Assistant Vice President for	 	 
	 

	 	Patent & Technology Marketing	 	 
	 
	 	 	 	 
	MCL, LLC	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	 

	 	Leo Furcht	 	 
	 

	 	President	 	 

19

 

EXHIBIT A TO EXCLUSIVE LICENSE AGREEMENT

	 	 	 
	Application Number	 	Filing Date
	60/147,324

	 	8/5/99
	60/164,650

	 	11/10/99
	PCT/US00/21387

	 	8/4/00
	AU 66218/00

	 	2/14/02
	CA national phase

	 	2/4/02
	EP national phase

	 	3/5/02
	IL 147990

	 	2/4/02
	IN national phase

	 	2/28/02
	JP 2001-515800

	 	2/5/02
	NZ 517002

	 	2/4/02
	SG 200200649-2

	 	2/4/02
	US 10/048,757

	 	2/1/02
	ZA 2002/1125

	 	2/8/02
	60/268,786

	 	2/14/01
	60/269,062

	 	2/15/01
	60/310,625

	 	8/7/01
	60/343,386

	 	10/25/01
	PCT/US02/

	 	2/14/02

A-1

 

Exhibit B to Exclusive License Agreement

University of Minnesota

 

	 	 	 
	Patents and Technology Marketing

	 	450 University Gateway
	 

	 	200 Oak Street SE
	 

	 	Minneapolis, MN 55455-2070

Royalty Report

Date

Company Name & Address

License Number                     

	 	 	 	 	 	 	 
	Reporting Period:

	 	 

	 	Report Due Date:
	 	 

This report must be submitted regardless of whether royalties are owed.

Please do not leave any column blank. State all information requested below.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	U of M	 	 	 	 	 	 	 	 	Quantity/	 	 	 	 
	 	Docket #	 	 	Product Description	 	 	Royalty Rate	 	 	Net Sales	 	 	Royalty Due	 
	 

	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 
	Report Completed by:

	 	 	 	Total Royalties Due:	 	 
	 

	 	 
	 	 	 	 

	 	 	 	 	 
	Telephone Number:

	 	 	 	 
	 

	 	 	 	 

	 	 	 
	If you have questions please contact:

	 	Julie Hodder
	 

	 	612-625-4537
	 

	 	hodde001@ptm.umn.edu

Please make check payable to: Regents of the University of Minnesota

 

EXHIBIT C TO EXCLUSIVE LICENSE AGREEMENT

	 	 	 	 	 
	For Internal University Use Only	 	 
	 
	 	 	 	 
	PTM Docket Number(s):
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	 

MATERIAL TRANSFER AGREEMENT

     THIS AGREEMENT (the “Agreement”) is dated and effective as of the date of last signature
hereto, and is made by and among the Regents of the University of Minnesota, a constitutional
educational corporation under the laws of the state of Minnesota, having an office at 450 McNamara
Alumni Center, 200 Oak Street SE, Minneapolis, Minnesota 55455-2070 (the “University”), and the
Institution (the “Institution”) and Scientist/Researcher (the “Researcher”) each as identified in
section 1 of Schedule A. The Institution and Researcher are collectively referred to as the
“Recipient”.

     The parties agree that:

1. Delivery of the Biological Material. Subject to the terms of this Agreement, the
University shall deliver to the Researcher the multipotent post-natal progenitor stem cell line
materials identified in Schedule A (the “Biological Material”) to the address set forth in section
2 of Schedule A. Additionally, the University, at its option, may disclose to Recipient know-how
or other information related to the Biological Material, including but not limited to, protocols,
methods and information related to or derived from the isolation, purification, use and propagation
of the multipotent post-natal progenitor cells; protocols, methods and information related to or
derived from the differentiation of such cells into various cell types; protocols, methods and
information related to or derived from the isolation of purified differentiated cells, and the use
of the differentiated cells. All such Biological Materials and Know-how or other information, and
all copies thereof (including materials resulting from propagation of the Biological Material)
shall be deemed “Confidential Information” for purposes of this Agreement. Confidential
Information shall be used only in connection with the permitted use of the Biological Material, and
its use shall be limited in the same fashion and subject to the same terms, conditions and
restrictions as those set forth for the Biological Material in this Agreement.

2. Use of the Biological Material and the Confidential Information.

     2.1. The University grants Recipient a limited nonexclusive license to use the Biological
Material and Confidential Information solely for non-commercial research and academic purposes
within the United States and solely in accordance with the terms in this Agreement. The Biological
Material and Confidential Information shall only be used in connection with the research project
described in Schedule B (the “Research Project”) and only under the direction of Researcher in
Researcher’s laboratory facilities identified in Schedule B. The Biological Material and
Confidential Information shall not be transferred to any other facilities, shall not be taken,
shipped, communicated or otherwise transferred outside of the

C-1

 

United States and shall be only used in conformance with all applicable federal, state and
local laws, rules, and regulations, including, without limitation, all such related to exports from
the United States, and all applicable policies and procedures of the Institution.

     2.2. The Biological Material shall not be used for any human diagnostic or human in vivo
therapeutic purpose, including, but not limited to, the use of the Biological Material in human or
non-human embryos.

     2.3. The Biological Material and the Confidential Information shall not be delivered to, nor
shall access to such be provided to, any person unless that person is working at the Institution
under the Researcher’s direct supervision on the Research Project and is bound by a written
obligation of confidentiality with respect to the Biological Material and the Confidential
Information or is likewise bound by an obligation of confidentiality under the Institution’s
written policy regarding confidentiality. Each person who is to receive the Biological Material
and/or Confidential Information shall be notified of his or her obligations of confidentiality by
Recipient prior to being provided with the Biological Material or Confidential Information. At no
time may the Biological Material nor the Confidential Information be provided to any guest or
visitors (including for example visiting professors, post doctoral students, graduate students and
students) to the laboratory of the Researcher or the Institution without the execution of a written
agreement by the guest or visitor to be bound by the terms of this Agreement.

     2.4. Except for projects sponsored solely by the National Institutes of Health pursuant to
which the federal government of the United States of America under 37 CFR 401 et seq. has rights as
described in this section, the Biological Material and/or the Confidential Information shall not be
used in any research project under which a third party has been, or will be, granted any rights of
whatever nature, including, without limitation, license, option or first refusal rights, in
inventions or the results of the research project.

     2.5. The Researcher shall have primary responsibility for monitoring use of the Biological
Material and the Confidential Information and for ensuring conformance with the terms of this
Agreement. The Institution shall at all times remain responsible for use of the Biological
Materials and Confidential Information by Researcher and any individual who may receive access to
the Biological Material and Confidential Information as a result of this Agreement or as a result
of any breach of this Agreement.

3. Inventions.

     3.1. The Institution shall promptly disclose to the University each invention (“Biological
Material Invention”) conceived of and/or reduced to practice using the Biological Material or
Confidential Information, whether or not patentable. Disclosure of each such Biological Material
Invention to the University shall include tangible samples of the invention which shall be
delivered to the University. At least thirty (30) days prior to the filing of any and all
applications seeking patent or other intellectual property protection for Biological Material
Inventions, the Institution shall deliver a copy of such application to the University for its
review and comment.

C-2

 

     3.2. The inventorship of each Biological Material Invention shall be determined under the
federal patent laws of the United States of America.

     3.3. With respect to each jointly owned Biological Material Invention, the Institution hereby
grants the University an irrevocable, freely assignable and sublicensable, fully paid up, worldwide
exclusive license in all fields of use to all the Institution’s intellectual property rights
(including American and foreign patent rights) in each such Biological Material Invention. The
University and the Institution shall enter into an interinstitutional agreement for the marketing
and licensing of the Biological Material Invention. Such agreement shall provide, unless the
parties otherwise mutually agree, that the University and the Institution shall share equally the
net revenues earned from the licensing of such Biological Material Invention to third parties and
that the University shall have primary right and responsibility for marketing such Biological
Material Invention and the right to prosecute and maintain all applications for intellectual
property protection of such inventions world-wide including but not limited to patents. The
Parties agree to negotiate in good faith and to use their best efforts to enter into and execute
such an agreement within one hundred and eighty (180) days of the disclosure of each Biological
Material Invention.

     3.4. With respect to Biological Material Inventions owned by the Institution, the Institution
hereby grants the University an exclusive, irrevocable, freely assignable, fully paid up, option to
obtain a worldwide exclusive license in all fields of use to the Institution’s intellectual
property rights (including American and foreign patent rights) in each such Biological Material
Invention (the “Option”). The Option shall be exercisable for each Biological Material Invention
basis during the one hundred twenty day period following disclosure of the Biological Material
Invention to the University (the “Option Period”). The University may exercise the Option during
the Option Period, by providing notice in writing to the Institution of its desire to exercise the
Option. The Option shall expire if it is not exercised within the Option Period. Upon exercise of
the Option by the University, the parties shall negotiate in good faith and use their best efforts
to execute a license agreement with respect to the Biological Material Invention within one hundred
and eighty (180) days of the University’s exercise of the Option. In the event that the University
does not exercise its Option, the Institution further grants the University an irrevocable, freely
assignable right of first refusal with respect to the Biological Material Invention and all
intellectual property rights therein such that prior to the Institution’s granting to any third
party a license to the subject invention, the Institution will provide the University with notice
of the proposed license including the terms thereof. Within fifteen (15) days of receiving such
notice, the University may exercise its right of first refusal by providing the Institution with
written notice of its desire to enter into a license on the same terms. If the right of first
refusal is exercised, the parties agree to negotiate in good faith and to use their best efforts to
execute such a license within a reasonable time. In no event shall the institution enter into a
license agreement regarding, assign, sell, or otherwise transfer, a Biological Material Invention
and/or the intellectual property rights therein to a third party on terms more favorable to the
third party than those offered to the University without first offering such terms to the
University.

     3.5. Notwithstanding the terms of sections 3.4 and 3.5, the Institution shall grant to the
University a nonexclusive, irrevocable license to make and use each Biological Material Invention
for non-commercial research and academic purposes.

C-3

 

4. Publishing and Reports.

     4.1. The Researcher shall have the right to publish, present or otherwise disclose information
concerning the Biological Material (“Biological Material Information”), except as limited by the
confidentiality provisions of section 6 of this Agreement and by the terms of this section 4. At
least thirty (30) days prior to the publication, presentation or disclosure of any Biological
Material Information, the Researcher shall deliver to the University (to Patents and Technology
Marketing, Attn. Director, Health Technologies Marketing, 450 McNamara Center, 200 Oak Street SE,
Minneapolis, MN 55455) a copy of all papers, slides or other items containing such information to
be published. If requested by the University, the Researcher shall withhold publication,
presentation or disclosure of the Biological Material Information until after intellectual property
protection has been applied for, but in no event shall the Researcher be obligated to so withhold
for more than ninety (90) days after the University has delivered its written request. The
University shall hold in confidence the materials delivered by the Researcher under this section.

     4.2. For so long as this Agreement shall remain in effect, within fifteen (15) days of each
anniversary of the commencement of this Agreement, the Researcher shall provide to the University a
written report describing all research carried out with the Biological Materials and the
Confidential Information under the Researcher’s direction within the preceding year.
Additionally, the Researcher shall provide a similar report within thirty (30) days of any
termination or expiration of this Agreement which provides the details of all research performed
with the Biological Materials and the Confidential Information provided to Recipient under this
Agreement.

5. The University’s Use of the Biological Materials. No provision of this Agreement
limits, conditions or otherwise affects the University’s right (i) to use the Biological Material
or the Confidential Information, (ii) to deliver the Biological Material or the Confidential
Information to a third party, or (iii) to grant a third party an exclusive or nonexclusive license
or other right to the Biological Material.

6. Confidentiality and the Confidential Information.

     6.1. For purposes of this Agreement, the term “Confidential Information” refers to any
nonpublic, proprietary, information disclosed by the University to the Recipient in connection with
this Agreement, provided (i) that the Recipient is notified by the University of the confidential
nature of the disclosure such as by marking written, printed or electronic materials as
“Confidential Trade Secret Information” or with a similar designation, or (ii) the University
notifies the Recipient of the confidential nature of the disclosure within thirty (30) days of the
disclosure and provides to Recipient a written recordation of the disclosure. The parties
acknowledge and agree that the Biological Material is and shall be Confidential Information.

     6.2. The term “Confidential Information” shall not include, and the restrictions in section
6.3 of this Agreement shall not apply to, any information that:

(a) at the time the University disclosed it to the Recipient, was in the public
domain;

C-4

 

(b) after the University’s disclosure of it to the Recipient, was placed in the
public domain, other than through the Recipient’s acts or omissions, including, but
not limited to, its breach of any term of this Agreement; or

(c) at the time the University disclosed it to the Recipient, the Recipient had
written evidence of its actual knowledge of the information, provided the Recipient
acquired such knowledge in conformance with all applicable laws and not as the
receiver, directly or indirectly, of such information in violation of a valid and
enforceable confidentiality agreement.

     6.3. Throughout the five (5) year period commencing on the date on which the University
disclosed the Confidential Information to the Recipient, except as permitted under section 2 of
this Agreement or by the University in a separate written consent, Confidential Information shall
be maintained in confidence and shall not be used or disclosed.

7. Intellectual Property Rights.

     7.1 Except for the right to use the Biological Material and the Confidential Information as
described in section 2 and the right to publish as described in section 4 of this Agreement,
neither the Institution nor the Researcher shall have any right to use or disclose the Biological
Material or the Confidential Information nor any of the intellectual property rights therein.
Additionally, Recipient shall not sell, grant any licenses to or property rights in, nor otherwise
encumber with liens or otherwise, the Biological Material or the Confidential Information or any
intellectual property rights therein.

     7.2 No provision of this Agreement grants the Institution or the Researcher (i) any right or
interest in the patent, copyright, trademark, or equivalent rights in the Biological Material or
the Confidential Information, nor (ii) any license, right, or option (A) to commercially utilize
the Biological Material under such patent, copyright, trademark, or equivalent right or (B) to make
or use any products or processes derived from or with Biological Material for profit-making or
commercial purposes.

     7.3. The Institution shall obtain a license prior to making any profit from, or any commercial
use of, any product or process derived from the Biological Material. The University shall have no
obligation to grant any such a license to the Institution.

     7.4. As between the parties, the University shall be the sole and exclusive owner of all
rights, title, and interest in and to the Biological Material and the Confidential Information and
hereby expressly retains all rights not explicitly granted to Recipient under this Agreement.

     7.5 Upon the University’s written request at any time, the Biological Material and all documents,
papers, samples and other tangible goods and property delivered to the Researcher which contain or
reflect the Confidential Information shall be delivered to the University; provided, however, the
Institution may retain one copy of any documents and papers containing or reflecting the
Confidential Information for the sole purpose of determining Institution’s obligations under this
Agreement. Upon the University’s request, the Institution shall certify in writing its and the
Researcher’s compliance with the requirements of this section 7.5.

C-5

 

8. No Warranties or Liability. The Institution and the Researcher acknowledge their
understanding that the Biological Material is experimental in nature. THE INSTITUTION AND THE
RESEARCHER ACCEPT THE BIOLOGICAL MATERIAL “AS IS, WITH ALL FAULTS.” THE INSTITUTION AND THE
RESEARCHER ACKNOWLEDGE THAT IT, HE OR SHE HAS NOT RELIED UPON ANY STATEMENTS MADE BY THE UNIVERSITY
CONCERNING THE BIOLOGICAL MATERIAL. THE UNIVERSITY DISCLAIMS ALL WARRANTIES OF ANY KIND, EITHER
EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, AND THAT THE USE OF THE BIOLOGICAL MATERIAL WILL NOT INFRINGE ANY THIRD PARTY’S PATENT,
COPYRIGHT, TRADEMARK, OR OTHER RIGHTS. IN NO EVENT SHALL THE UNIVERSITY BE LIABLE FOR ANY
CONSEQUENTIAL, INCIDENTAL, PECUNIARY, EXPECTANCYOR COMPENSATORY DAMAGES, INCLUDING LOST PROFITS OR
LOST BUSINESS OPPORTUNITY.

9. Release. The Institution, for itself and its employees and agents, releases the
University and its employees and agents from any claim, suit, action or liability arising out of
this Agreement, including, without limitation, the Institution’s use of the Biological Material.
In no event shall the University be liable for any use of such Biological Material.

10. Indemnification. The Institution shall defend, indemnify, and hold the University
harmless from any loss, claim, damage, or liability, of whatsoever kind or nature, which may arise
from or in connection with this Agreement or the use of such Biological Material.

11. Term and Termination.

     11.1. This Agreement shall commence as of the date of the last signature and shall, subject to
earlier termination in accordance with its terms, naturally expire on the date set forth in
Schedule B, or if no such date is specified, two (2) years from the date of the last signature
hereto. This Agreement shall be renewable for additional one year periods upon mutual agreement of
the parties, such agreement shall only be effective if executed by the parties in writing.

     11.2. If the Recipient fails to perform one or more of its, his or her duties under this
Agreement, the University may deliver a written notice of default to Recipient. If the default is
not cured within thirty (30) days after the delivery of a notice of default, the University may
terminate this Agreement by delivering to the Institution a written notice of termination. Upon
termination of this Agreement, the Researcher shall promptly deliver to the University all
Biological Material and Confidential Information in his or her possession and the Institution shall
deliver to the University a written certification that all Biological Material and Confidential
Information has been delivered to the University. The Institution and the Researcher acknowledge
that their failure to perform their obligations under this Agreement will irreparably harm the
University and that specific performance is an appropriate remedy for their nonperformance.

C-6

 

     11.3 Should the Researcher’s status as an employee of the Institution be discontinued at any
time, this Agreement shall immediately terminate and the Recipient shall promptly return all
Biological Material and Confidential Information to the University.

12. Survival. Despite any expiration or termination of this Agreement, sections 3, 4, 5,
6, 7, 8, 9, 10, 13 and 14 of this Agreement shall survive.

13. Further Assurances. Each party hereby agrees to execute documents and do things as
reasonably requested by the other party in order for the other party to protect rights to which it
is entitled under this Agreement, including intellectual property rights.

14. Notice: Any notice to be given under this Agreement shall be in writing and shall be
deemed to have been sufficiently given or made for all purposes if mailed by certified U.S. mail or
by a common overnight delivery carrier, postage prepaid, addressed to the other party at the
address identified in the first paragraph of this Agreement or in Schedule A.

15. General Terms. This Agreement shall constitute the entire understanding of the parties
with respect to the subject matter hereof, and shall supersede all prior agreements and
understandings of the parties on such subject matter. This Agreement shall be amended only in a
writing duly executed by all the parties. No party may assign or delegate any right or duty under
this Agreement unless the other party has consented in writing to such assignment or delegation.
An assignment or delegation made in violation of this section 15 shall be void and shall not bind
the other party. This Agreement shall be interpreted in accordance with the laws (with the
exception of conflicts of laws provisions) of the state of Minnesota. All claims, suits or causes
of action arising out of this Agreement shall be brought in the courts of the state of Minnesota,
county of Hennepin.

C-7

 

     IN WITNESS WHEREOF, the parties have caused this Material Transfer Agreement to be duly
executed by their respective representatives.

	 	 	 	 	 
	REGENTS OF THE UNIVERSITY OF MINNESOTA	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	 

	 	Michael F. Moore	 	 
	 

	 	Director, Health Technologies Marketing	 	 
	 
	 	 	 	 
	Date:                     , 20____	 	 
	 
	 	 	 	 
	INSTITUTION	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Its:
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Date:                     , 20____	 	 
	 
	 	 	 	 
	RESEARCHER	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Date:                     , 20____	 	 

C-8

 

	 	 	 	 	 
	For Internal University Use Only	 	 
	 
	 	 	 	 
	PTM Docket Number(s):
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	 

Schedule A

Material Transfer Agreement Worksheet

	1.	 	Name of Institution and Researcher:
	 
	2.	 	Shipping Address:

C-9

 

Schedule B

Research Project

[Insert description of the Research Project including anticipated term of the project and the
location of the laboratory facilities where the project will be performed.]

C-10

 

EXHIBIT D TO EXCLUSIVE LICENSE AGREEMENT

MCL LLC

SUBSCRIPTION AGREEEMNT

INCLUDING INVESTMENT REPRESETNATIONS

UNITS OF MEMBERSHIP INTEREST

     The undersigned, Regents of the University of Minnesota, hereby subscribes for the purchase
from MCL LLC (the “Company”) of                      Units of membership interest (the “Units”). In consideration of
the Units, the undersigned hereby transfers all right, title and interest in the patent application
entitled “Totipotent Adult Stem Cells and Methods for Isolation” and all related intellectual
property, concepts, technology, products and know-how related to such invention which the
undersigned may develop in the future relating to the Company’s business (collectively the
“Products”). The undersigned agrees to execute such further documents and take such further action
as the Company may reasonably request and to perform such other lawful acts as the Company may
reasonably require to fully secure and/or evidence the rights or interests provided herein.

     The Company shall have the right to prosecute the above-referenced patent and to apply for
patents to cover the Products in the U.S. and foreign countries in the Company’s own name including
the right to claim any priority rights to which such applications are entitled under international
conventions, treaties or otherwise. The undersigned agrees to fully cooperate with the Company in
the filing of such patents and agrees to execute, or cause to be executed, all documents reasonably
necessary to effectuate and properly document such assignments and transfers, including, without
limitations, securing the signature of any individual inventor required to be listed on such patent
application assigning all rights in the application, and in the invention described in, to the
Company. Any filing fees required to document such transfers shall be payable by the Company.

     The preceding two paragraphs are included in this Agreement only for the purpose of providing
a partial summary of certain of the mutual consideration that the Company and the University are
exchanging for the Units. The full and complete statement of the mutual consideration exchanged by
the parties is collectively contained in the Ownership Agreement and Exclusive License Agreement
entered into by the parties, and those two agreements shall govern and not this Agreement should
there be a conflict between those two agreement and this Agreement.

     1. Certain Representations of the Subscriber. In connection with, and in
consideration of, the sale of the Units to the undersigned, the undersigned hereby represents and
warrants to the Company and its managers, governors, employees, agents and members that the
undersigned:

D-1

 

	 	(a)	 	Has had an opportunity to review and ask questions of the executive managers
of the Company concerning its business and desires no further information.
	 
	 	(b)	 	Realizes that the Company has had no operations and must raise additional
funds to support its ongoing operations and to develop products essential to the
Company’s long-term viability.
	 
	 	(c)	 	Realizes that a purchase of the Units represents a speculative investment
involving a high degree of risk.
	 
	 	(d)	 	Can bear the economic risk of an investment in the Units for an indefinite
period of time, can afford to sustain a complete loss of such investment, has no need
for liquidity in connection with an investment in the Units, and can afford to hold
the Units indefinitely.
	 
	 	(e)	 	Realizes that there will be no market for the Units after this offering and
that there are significant statutory and contractual restrictions on the
transferability of the Units as set forth in Sections 2 and 3 below.
	 
	 	(f)	 	Realizes that the Units have not been registered for sale under the
Securities Act of 1933, as amended (the “Act”) or applicable state securities laws
(the “State Laws”) and may be sold only pursuant to registration under the Act and
State Laws or an opinion of counsel that such registration is not required.
	 
	 	(g)	 	Is experienced and knowledgeable in financial and business matters, capable
of evaluating the merits and risks of investing in the Units, and does not need or
desire the assistance of a knowledgeable representative to aid in the evaluation of
such risks.

     2. 180-Day Restriction on Transfer After A Public Offering. The undersigned
understands that the Company at a future date may file a registration or offering statement (the
“Registration Statement”) with the Securities and Exchange Commission to facilitate a public
offering of its securities. The undersigned agrees, for the benefit of the Company, that should
such an initial public offering be made and should the managing underwriter of such offering
require, the undersigned will not, without the prior written consent of the Company and such
underwriter, during the 180-day period of commencing on the effective date of the Registration
Statement (the “Lockup Period”) (i) sell, transfer or otherwise dispose of, or agree to sell,
transfer or otherwise dispose of any of the Units beneficially held by the undersigned during the
Lockup Period, (ii) sell, transfer or otherwise dispose of, or agree to sell, transfer or otherwise
dispose of any options, rights or warrants to purchase any of the Units beneficially held by the
undersigned during the Lockup Period, or (iii) sell or grant, or agree to sell or grant, options,
rights or warrants with respect to any of the Units. The foregoing does not prohibit gifts to
donees or restrictions set forth herein or transfers by

D-2

 

will or the laws of descent to heirs or beneficiaries provided such donees, heirs and
beneficiaries shall be bound by the restrictions set forth herein.

     3. Investment Intent. The undersigned has been advised that the Units have not been
registered under the Act or the relevant State Laws but are being offered, and will be offered, and
sold pursuant to exemptions from the Act and State Laws, and the Company’s reliance upon such
exemptions is predicated in part of the undersigned’s representations contained herein. The
undersigned represents and warrants that the Units are being purchased for the undersigned’s own
account and for long term investment and without the intention of reselling or redistributing the
Units, that the undersigned had made no agreement with others regarding any of the Units, and that
the undersigned’s financial condition is such that it is not likely that it will be necessary for
the undersigned to dispose of any the Units in the foreseeable future. The undersigned represents
and warrants that the undersigned has a financial net worth or anticipated income such that a sale
of such Units need not be made in the foreseeable future to satisfy any financial obligation of
which the undersigned is, or contemplates, being subject. The undersigned is aware that (i) there
is presently no public market for the Units, and, in the view of the Securities and Exchange
Commission, a purchase of securities with an intent to resell by reason of any foreseeable specific
contingency or anticipated change in market values, or any change in the liquidation or settlement
of any loan obtained for the acquisition of any of the Units and for which the Units were or may be
pledged as security would represent an intent inconsistent with the investment representations set
forth above and (ii) the transferability of the Units is restricted and (A) requires the written
consent of the Company and, in the event the Company is effecting the initial public offering of
its securities, the managing underwriter of such offering, and (B) will further restricted by a
legend placed on the certificate(s) representing the Units containing substantially the following
language:

“The securities represented by this certificate have not been registered under either the
Securities Act of 1933 or applicable state securities laws and may not be sold,
transferred, assigned, offered, pledged or otherwise distributed for value unless there is
an effective registration statement under such Act and such laws concerning such
securities, or the Company receives an opinion of counsel acceptable to the Company stating
that such sale; transfer, assignment, offer, pledge or the distribution for value is exempt
from the registration and prospectus delivery requirement of such Act and such laws. Sale
or other transfer of these securities of the Company by the terms of a Subscription
Agreement, a copy of which is available for inspection at the offices of the Company.”

     The undersigned further represents and agrees that if, contrary to the undersigned’s foregoing
intentions, the undersigned should later desire to dispose of or transfer any of the Units in any
manner, the undersigned shall not do so without first obtaining (i) an opinion of counsel
satisfactory to the Company that such proposed disposition or transfer may be made lawfully without
the registration of such Units pursuant to the Act and applicable State Laws and an agreement by
the transferee to be bound by terms and restrictions of this Subscription Agreement, or (ii)
registration of

D-3

 

such Units (it being expressly understood that the Company shall not have any obligation to
register such Units).

     4. Residence. The undersigned represents and warrants that the undersigned is a bona
fide resident of (or if any entity is organized or incorporated under the laws of, and is domiciled
in), the State of Minnesota and that the Units are being purchased by the undersigned in the
undersigned’s name solely for the undersigned’s own beneficial interest and not as nominee for, on
behalf of, for the beneficial interest of, or with the intention to transfer to, any other person,
trust or organization.

     5. Miscellaneous.

	 	(a)	 	The undersigned agrees that the undersigned understands the meaning and legal
consequences of the agreements, representations and warranties contained herein,
agrees that such agreements, representations and warranties shall survive and remain
in full force and effect after the execution hereof and payment for an issuance of the
Units, and further agrees to indemnify and hold harmless the Company, each current and
future officer, director, employee, agent and shareholder from and against any and all
loss, damage or liability due to, or arising out of, a breach of any agreement,
representation or warranty of the undersigned contained herein.
	 
	 	(b)	 	This Agreement shall be construed and interpreted in accordance with
Minnesota law.

D-4

 

	 	 	 	 	 
	Dated: May
     , 2002	 	 
	 
	 	 	 	 
	Regents of the University of Minnesota	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	 

	 	Anthony L. Strauss	 	 
	 

	 	Acting Assistant Vice President, PTM	 	 
	 
	 	 	 	 
	Address to Which Correspondence	 	 
	Should be Directed:	 	 
	 
	 	 	 	 
	200 Oak Street SE, Suite 450	 	 
	Minneapolis, MN 55405	 	 
	 
	 	 	 	 
	 	 	 
	Tax Identification or Social Security Number	 	 
	 
	 	 	 	 
	ACCEPTANCE:	 	 
	 
	 	 	 	 
	MCL LLC hereby accepts this subscription
for                      Units On ** day of **, 19**.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	 

	 	Title: *	 	 

D-5EX-10.35

 

EXHIBIT
10.35

CONFIDENTIAL

Execution Copy

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.

STRATEGIC ALLIANCE 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. CERTAIN TRANSACTION COMPONENTS
	 	 	11	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	2.1 Concurrent Execution.
	 	 	11	 	 	 	 	 
	 
	2.2 Right of First Negotiation for Non-Licensed Cardiovascular Indications.
	 	 	11	 	 	 	 	 
	 
	2.3 Additional Investment.
	 	 	13	 	 	 	 	 
	 
	2.4 Phase I Milestone Fee.
	 	 	13	 	 	 	 	 
	 
	2.5 Exclusivity.
	 	 	14	 	 	 	 	 
	 
	2.6 Retained Rights.
	 	 	14	 	 	 	 	 
	 
	2.7 Costs Borne by Each Party.
	 	 	15	 	 	 	 	 
	 
	2.8 Certain Restrictions on Athersys’ Activities Outside of Cardiovascular Indications.
	 	 	15	 	 	 	 	 
	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE III. JOINT STEERING COMMITTEE
	 	 	15	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	3.1 Joint Steering Committee.
	 	 	15	 	 	 	 	 
	 
	3.2 Subcommittees.
	 	 	15	 	 	 	 	 
	 
	3.3 Chairperson.
	 	 	15	 	 	 	 	 
	 
	3.4 JSC Meetings.
	 	 	15	 	 	 	 	 
	 
	3.5 Responsibilities of the Joint Steering Committee.
	 	 	16	 	 	 	 	 
	 
	3.6 Voting; Decision-Making.
	 	 	19	 	 	 	 	 
	 
	3.7 JSC Disputes.
	 	 	19	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV. PRE-CLINICAL DEVELOPMENT
	 	 	20	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	4.1 Existing Pre–Clinical Development Programs.
	 	 	20	 	 	 	 	 
	 
	4.2 Costs for Existing Pre-Clinical Development Programs.
	 	 	21	 	 	 	 	 
	 
	4.3 New Pre-Clinical Development Programs.
	 	 	21	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE V. CLINICAL DEVELOPMENT
	 	 	21	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	5.1 Proposed Clinical Plans; Clinical Development Plans.
	 	 	21	 	 	 	 	 
	 
	5.2 Athersys Responsibilities.
	 	 	21	 	 	 	 	 
	 
	5.3 Angiotech Responsibilities.
	 	 	22	 	 	 	 	 
	 
	5.4 Subcontracting.
	 	 	22	 	 	 	 	 

 - i -

 

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page
	ARTICLE VI. OPT-OUT RIGHTS
	 	 	23	 
	 
	 	 	 	 
	6.1 Opt-Out Rights.
	 	 	23	 
	 
	6.2 Development Updates.
	 	 	25	 
	 
	6.3 Failure to Exercise Sole Development Option.
	 	 	25	 
	 
	6.4 Diligence Requirement.
	 	 	25	 
	 
	 	 	 	 
	ARTICLE VII. COSTS, PAYMENTS AND FINANCIAL RECORD KEEPING
	 	 	26	 
	 
	 	 	 	 
	7.1 Clinical Development Costs.
	 	 	26	 
	 
	7.2 Development Costs Quarterly Reconciliation.
	 	 	26	 
	 
	7.3 Milestone Payments.
	 	 	27	 
	 
	7.4 Profit Sharing.
	 	 	27	 
	 
	7.5 Royalties on Sole Development Products.
	 	 	27	 
	 
	7.6 Calculation and Payment of Royalties.
	 	 	29	 
	 
	7.7 Sharing of Sole Development Income.
	 	 	30	 
	 
	7.8 Financial Record Keeping.
	 	 	31	 
	 
	7.9 Audits.
	 	 	31	 
	 
	7.10 Late Payments.
	 	 	31	 
	 
	 	 	 	 
	ARTICLE VIII. COMMERCIALIZATION
	 	 	32	 
	 
	 	 	 	 
	8.1 Commercialization of Cell Therapy Products.
	 	 	32	 
	 
	 	 	 	 
	ARTICLE IX. MANUFACTURE AND SUPPLY OF CLINICAL DEVELOPMENT CANDIDATES AND CELL THERAPY
PRODUCTS
	 	 	32	 
	 
	 	 	 	 
	9.1 Athersys’ Manufacturing Obligation.
	 	 	32	 
	 
	9.2 Manufacturing Costs.
	 	 	33	 
	 
	9.3 Manufacturing Compliance.
	 	 	33	 
	 
	9.4 Product Conformity.
	 	 	33	 
	 
	9.5 Ordering; Forecasting; Acceptance and Rejection.
	 	 	33	 
	 
	9.6 Inspection.
	 	 	34	 
	 
	9.7 Supply Disruption.
	 	 	34	 
	 
	9.8 Back-Up Supplier.
	 	 	34	 

 - ii -

 

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page
	ARTICLE X. REGULATORY MATTERS
	 	 	35	 
	 
	 	 	 	 
	10.1 Ownership of Regulatory Documentation and Reference Rights; Regulatory Strategy.
	 	 	35	 
	 
	10.2 Regulatory Communications.
	 	 	35	 
	 
	10.3 Other Regulatory Responsibilities.
	 	 	36	 
	 
	10.4 Cell Therapy Product Complaints and Recalls.
	 	 	36	 
	 
	10.5 Compliance With All Applicable Laws and Regulations; Cooperation.
	 	 	36	 
	 
	 	 	 	 
	ARTICLE XI. INTELLECTUAL PROPERTY
	 	 	37	 
	 
	 	 	 	 
	11.1 Existing Intellectual Property Rights Retained.
	 	 	37	 
	 
	11.2 Ownership Of New Intellectual Property.
	 	 	37	 
	 
	 	 	 	 
	ARTICLE XII. CLINICAL PROGRAM RECORD KEEPING
	 	 	37	 
	 
	 	 	 	 
	12.1 Scientific, Patent and Regulatory Records.
	 	 	37	 
	 
	12.2 Review of Records.
	 	 	37	 
	 
	12.3 Policies For Records.
	 	 	38	 
	 
	 	 	 	 
	ARTICLE XIII. CONFIDENTIAL INFORMATION
	 	 	38	 
	 
	 	 	 	 
	13.1 Confidential Information.
	 	 	38	 
	 
	13.2 Confidentiality Obligations.
	 	 	38	 
	 
	13.3 Permitted Disclosures.
	 	 	39	 
	 
	13.4 Publication.
	 	 	41	 
	 
	 	 	 	 
	ARTICLE XIV. REPRESENTATIONS AND WARRANTIES
	 	 	41	 
	 
	 	 	 	 
	14.1 Authority.
	 	 	41	 
	 
	14.2 No Conflicts.
	 	 	41	 
	 
	14.3 Additional Representations and Warranties of Athersys.
	 	 	42	 
	 
	14.4 Additional Covenants of Athersys.
	 	 	44	 
	 
	14.5 Additional Covenants of Angiotech.
	 	 	46	 
	 
	14.6 Disclaimer Of Warranties.
	 	 	47	 
	 
	 	 	 	 
	ARTICLE XV. INDEMNIFICATION AND INSURANCE
	 	 	47	 
	 
	 	 	 	 
	15.1 Indemnification By Athersys.
	 	 	47	 
	 
	15.2 Indemnification By Angiotech.
	 	 	48	 
	 
	15.3 Insurance.
	 	 	49	 

 - iii -

 

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page
	ARTICLE XVI. TERM AND TERMINATION
	 	 	49	 
	 
	 	 	 	 
	16.1 Term.
	 	 	49	 
	 
	16.2 Termination.
	 	 	49	 
	 
	16.3 Effects of Termination.
	 	 	52	 
	 
	16.4 Survival Of Obligations.
	 	 	53	 
	 
	 	 	 	 
	ARTICLE XVII. DISPUTE RESOLUTION
	 	 	53	 
	 
	 	 	 	 
	17.1 Dispute Resolution Process.
	 	 	53	 
	 
	17.2 Injunctive Relief.
	 	 	54	 
	 
	 	 	 	 
	ARTICLE XVIII. MISCELLANEOUS PROVISIONS
	 	 	55	 
	 
	 	 	 	 
	18.1 Governing Law.
	 	 	55	 
	 
	18.2 Assignment.
	 	 	55	 
	 
	18.3 Compliance With Laws.
	 	 	55	 
	 
	18.4 Further Assurances.
	 	 	55	 
	 
	18.5 Severability.
	 	 	55	 
	 
	18.6 Waivers And Amendments; Preservation Of Remedies.
	 	 	56	 
	 
	18.7 Headings.
	 	 	56	 
	 
	18.8 Counterparts.
	 	 	56	 
	 
	18.9 Successors.
	 	 	56	 
	 
	18.10 Notices.
	 	 	56	 
	 
	18.11 No Consequential Damages.
	 	 	57	 
	 
	18.12 Independent Contractor.
	 	 	57	 
	 
	18.13 Complete Agreement.
	 	 	57	 

SCHEDULES

Schedule 1.13

Schedule 1.14

Schedule 1.33

Schedule 1.45

Schedule 2.2

Schedule 4.1

Schedule 7.3

Schedule 7.4

Schedule 14.3(b)

Schedule 14.3(g)

 - iv -

 

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page
	Schedule 14.3(l)
	 	 	 	 
	 
	 	 	 	 
	EXHIBITS
	 	 	 	 
	Exhibit A – Note Purchase Agreement
	 	 	 	 
	Exhibit B – License Agreement
	 	 	 	 
	Exhibit C – Sublicense Agreement
	 	 	 	 

- v -

 

STRATEGIC ALLIANCE AGREEMENT

     This Strategic Alliance Agreement (this “Strategic Alliance 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, British Columbia, Canada V6A 1B6 (“Angiotech”). In this Strategic Alliance Agreement,
Athersys and Angiotech may each be referred to as a “Party” and collectively as the “Parties.”

RECITALS

     A. Angiotech is engaged in, among other things, design, research, development, manufacture and
commercialization of medical devices and therapeutic, biopharmaceutical and biosurgery products and
biomaterials.

     B. Athersys is engaged in, among other things, the research and development of therapeutic
biologics to treat disease.

     C. Angiotech and Athersys desire to enter into a strategic alliance relating to the research,
development, manufacture, market and commercialization of clinical development candidates and cell
therapy products for the treatment and/or prophylaxis of certain cardiovascular diseases, disorders
and conditions.

     D. Concurrently with the execution of this Strategic Alliance Agreement, Angiotech and
Athersys are entering into that certain Note Purchase Agreement attached hereto as Exhibit
A, pursuant to which Angiotech will loan $5,000,000.00 to Athersys pursuant to a convertible
promissory note (the “Note”) on the terms and conditions set forth therein (such Note Purchase
Agreement and the exhibits and schedules thereto, the “Purchase Agreement”).

     E. Concurrently with the execution of this Strategic Alliance Agreement, Angiotech and
Athersys are entering into that certain License Agreement attached hereto as Exhibit B
(such License Agreement and the exhibits and schedules thereto, the “License Agreement”) concerning
Athersys’ license to Angiotech of technology and intellectual property related to certain stem
cells and stem cell therapies.

     F. Concurrently with the execution of this Strategic Alliance Agreement, Angiotech and
Athersys are entering into that certain Sublicense Agreement attached hereto as Exhibit C
(such Sublicense Agreement and the exhibits and schedules thereto, the “Sublicense Agreement”)
concerning Athersys’ sublicense to Angiotech of technology and intellectual property related to
certain stem cells and stem cell therapies licensed from the University of Minnesota.

     G. This Strategic Alliance Agreement, the License Agreement and the Sublicense Agreement
hereinafter shall be referred to collectively as the “Transaction Agreements”, and unless expressly
specified otherwise in the License Agreement, the Sublicense Agreement or this

 

 

Strategic Alliance Agreement, the terms and conditions of this Strategic Alliance Agreement
shall apply to all Transaction Agreements.

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 considered a
control percentage) 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.

     1.3 “Angiotech Indemnitees” has the meaning ascribed to it in Section 15.1.

     1.4 “Athersys” has the meaning ascribed to it in the preamble.

     1.5 “Athersys Indemnitees” has the meaning ascribed to it in Section 15.2.

     1.6 “Athersys Stem Cells” has the meaning ascribed to it in the License Agreement.

     1.7 “Athersys Stem Cell Technology” has the meaning ascribed to it in the License
Agreement.

     1.8 “Cardiovascular Indications” means myocardial infarction (whether chronic (e.g.,
ischemia) or acute) and peripheral vascular disease (excluding neurovascular) in humans.

     1.9 “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

 - 2 - 

 

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.

     1.10 “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.

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

     1.12 “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
IND for use of such Cell(s) in Cell Therapy for at least one Cardiovascular 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 Cardiovascular Indication. The term “Clinical Development
Candidate” shall expressly exclude Cell Therapy Products.

     1.13 “Clinical Development Costs” means the costs incurred by the Parties in connection
with their respective activities under a Clinical Development Plan, as such costs are more
fully described on Schedule 1.13.

     1.14 “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 Cardiovascular Indication (including a detailed budget corresponding to each
such plan). Each such Clinical Development Plan shall include, without limitation, the
following activities (or their equivalents), to the extent applicable:

          (a) conducting pre-clinical research, pre-clinical development and other pre-clinical
studies that are intended to support clinical development of a Clinical Development
Candidate for a Cardiovascular Indication;

 - 3 - 

 

          (b) preparation and filing of an IND for a Clinical Development Candidate for a
Cardiovascular Indication;

          (c) conducting clinical trials of such Clinical Development Candidate for a
Cardiovascular Indication, including clinical trials that are intended to support
Regulatory Approvals for such Clinical Development Candidate for such Cardiovascular
Indication; and

          (d) preparation and filing of documentation, applications (including, for example, an
NDA/BLA) and related activities to enable the Parties to seek Regulatory Approval for such
Clinical Development Candidate for such Cardiovascular Indication.

Each Clinical Development Plan approved by the Parties shall be attached hereto as
Schedule 1.14.

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

     1.16 “Commercialization Costs” means the costs incurred by Angiotech in connection with
the promotion, marketing, advertising, sale and/or distribution of Cell Therapy Products, as
such costs are more fully described on Schedule 1.13.

     1.17 “Commercially Reasonable Efforts” shall mean efforts and deployment of resources,
consistent with the exercise of reasonable and prudent scientific and business judgment,
normally used by a research-based pharmaceutical company for a product owned by it or to
which it has rights, which is of similar market potential at a similar stage in its
development or product life, taking into account issues of safety and efficacy, product
profile, the competitiveness of the marketplace, the proprietary position of the product,
the regulatory and reimbursement structure involved, the cost of scaling up a manufacturing
process (including facility costs), the profitability of the applicable products, and other
relevant factors.

     1.18 “Confidential Information” has the meaning ascribed to it in Section 13.1.

     1.19 “Disclosing Party” has the meaning ascribed to it in Section 13.1.

     1.20 “Effective Date” has the meaning ascribed to it in the preamble.

     1.21 “FDA” means the United States Food and Drug Administration and any successor
governmental agency having substantially the same function.

     1.22 “FDA Approval” means the receipt by a Party of all approvals by the FDA necessary
or required for the commercialization in the United States of a Cell Therapy Product.

 - 4 - 

 

     1.23 “First Commercial Sale” shall mean, for each Cell Therapy Product in each country
in the Territory on a country-by-country basis, the first sale by Angiotech, or a
sublicensee of Angiotech, of a Cell Therapy Product to an independent Third Party after the
required Regulatory Approval to sell such Cell Therapy Product in that country has been
granted by the relevant regulatory authority. If Regulatory Approval is not required in
order to sell a Cell Therapy Product in a particular jurisdiction, then First Commercial
Sale shall mean the first transfer of title by Angiotech, or a sublicensee of Angiotech, of
a Cell Therapy Product to an independent Third Party for consideration in any arm’s-length
transaction in such jurisdiction. Cell Therapy Product sale shall be deemed to occur on the
earlier of (a) the date the Cell Therapy Product is shipped to the purchaser, or (b) the
date of the invoice to the purchaser of the Cell Therapy Product.

     1.24 “IND” means (a) an Investigational New Drug Application, as defined in the United
States Federal Food, Drug and Cosmetic Act, as amended, and the rules and regulations
promulgated thereunder, that is required to be filed with the FDA before beginning clinical
testing in the United States of a Clinical Development Candidate in human subjects, or any
successor application or procedure; and (b) all supplements and amendments thereto,
including any supplemental Investigational New Drug Application; and (c) any related foreign
counterparts of (a) and (b) that may be filed with respect to the foregoing.

     1.25 “Intellectual Property” means all of the following (including any substantial
equivalent or counterpart) in any jurisdiction throughout the Territory: (a) Patents and
Patent Rights; (b) trademarks, service marks, trade dress, trade names, corporate names,
logos and Internet domain names; (c) copyrights, software, source code and copyrightable
works; (d) applications and registrations for any of the foregoing; and (e) Know-How.

     1.26 “JSC” has the meaning ascribed to it in Section 3.1.

     1.27 “JSC Dispute” has the meaning ascribed to it in Section 3.7(a).

     1.28 “Know-How” means inventions, discoveries, data, information, trade secrets,
processes, methods, techniques, materials, technology, results or other know-how, whether or
not patentable.

     1.29 “License Agreement” has the meaning ascribed to it in the Recitals.

     1.30 “Local Therapeutic Company” means a corporation or other business entity engaged
in the business of exploiting products for human or veterinary uses wherein all or a
substantial portion of the activities of such corporation or other business entity are
competitive with those of Angiotech.

     1.31 “Manufacturing Costs” means, with respect to each Clinical Development Candidate
and Cell Therapy Product, the costs incurred by Athersys in connection with the manufacture
and supply of the Clinical Development Candidate or Cell Therapy Product (respectively) to
Angiotech or any Third Party on Angiotech’s behalf, as such costs are more fully described
on Schedule 1.13.

 - 5 - 

 

     1.32 “Major Market” means the following markets: United States, Australia, Canada,
United Kingdom, Germany, France, Italy, Spain and Japan.

     1.33 “MAPC” means any multipotent adult progenitor cell, including without limitation
those described in the Patent Rights listed on Schedule 1.33 or described in any
Patent Rights that claim priority to any such Patent Rights listed on Schedule 1.33.

     1.34 “NDA/BLA” means (a) a New Drug Application and/or a Biologics License Application
as defined in the United States Federal Food, Drug and Cosmetic Act or the United States
Public Health Service Act, each as amended, and the rules and regulations promulgated
thereunder, that is required to be filed with the FDA before commercialization of a product
in the United States, and any successor application or procedure; (b) all supplements and
amendments thereto; and (c) any related foreign counterparts of (a) and (b) that may be
filed with respect to the foregoing.

     1.35 “Net Sales” means the gross amount invoiced for sale or other commercial
disposition of a Cell Therapy Product (or any Cells sold for use in the Therapeutic Field)
by Athersys or Angiotech or any of their Affiliates or their respective direct or indirect
licensees, sublicensees or subcontractors, to a Third Party (including, without limitation,
sales to distributors), in bona fide, arm’s-length transactions, after deduction of the
following items (to the extent actually incurred and to the extent not already deducted in
the amount invoiced):

          (a) all trade, quantity and cash discounts, wholesaler-charge backs or rebates
(including, but not limited to, rebates to governmental agencies, managed care
organizations, health management organizations, pharmacy benefit managers and group
purchasing organizations) actually allowed;

          (b) all credits or allowances actually granted for rejection or return of a previously
sold Cell Therapy Product (or Cells sold for use in the Therapeutic Field);

          (c) excise, sales and other consumption taxes and customs duties;

          (d) retroactive price reductions including, but not limited to, those imposed by
governmental agencies; and

          (e) any charge for freight or insurance if separately stated on the same invoice as for
the sale of the Cell Therapy Product (or Cells sold for use in the Therapeutic Field) and
directly related to the sale or distribution of the Cell Therapy Product (or Cells sold for
use in the Therapeutic Field);

all in accordance with standard allocation procedures, allowance methodologies and
accounting methods consistently applied, which procedures and methodologies shall be in
accordance with generally accepted accounting principles (“GAAP”). A “sale” of a Cell
Therapy Product (or Cells sold for use in the Therapeutic Field) is deemed to occur upon the
invoicing, or if no invoice is issued, upon the earlier of shipment or transfer of title in
the Cell Therapy Product (or the Cells) to the Third Party. Sales between or among a Party,
on the one hand, and its Affiliates, licensees or sublicensees, on the other

 - 6 - 

 

hand, shall not be used to calculate “Net Sales” unless the purchasing Affiliate, licensee
or sublicensee is an end-user. “Net Sales” for purposes of this Strategic Alliance
Agreement includes all such sales by assignees or other successors to either Party’s rights
under this Strategic Alliance Agreement. If a Cell Therapy Product (or the Cells) is sold
as part of a larger bundle or kit that incorporates or includes other products in addition
to the Cell Therapy Product (or the Cells), Net Sales will be computed using an average net
selling price of the Cell Therapy Product (or the Cells) sold separately or, if such average
net selling price is unavailable, it will include only that part of such sale reasonably
allocated by the JSC to the value of the Cell Therapy Product (or the Cells) as compared to
the value of the larger bundle or kit sold without the Cell Therapy Product (or the Cells).

     1.36 “Non-Licensed Cardiovascular Indications” means any disease, disorder, condition,
or the prevention, palliation, treatment, or correction of the same, which involves or
relates to the heart and/or blood vessels, other than the Cardiovascular Indications and
neurovascular disease (including stroke). Non-Licensed Cardiovascular Indications
explicitly includes, but is not limited to, congestive heart failure.

     1.37 “Party” and/or “Parties” has the meaning ascribed to it in the preamble.

     1.38 “Patent” means any and all issued and granted patents, or other registration of
ownership of an invention, granted by any governmental authority in the Territory,
including, but not limited to, patents of implementation, improvement or addition; utility
patents; design patents; and inventors’ certificates, as well as those patents that may
issue or be granted from any divisions, reissues, continuations (in whole or in part),
reexaminations, renewals, substitutions and extensions of any of the foregoing.

     1.39 “Patent Prosecution” means the (a) preparation, filing and/or prosecution of
applications (of all types) for Patent(s); (b) maintenance of any Patent Rights; and (c)
management of any interference or opposition proceeding relating to the foregoing.

     1.40 “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.

     1.41 “Phase I Study” means a clinical study in human subjects that is intended to
initially evaluate the tolerance, safety and/or pharmacological effects of (or to otherwise
satisfy the requirements of 21 C.F.R. § 312.21(a) or its foreign equivalent with respect to)
a Clinical Development Candidate for a particular Cardiovascular Indication.

     1.42 “Phase II Study” means a clinical study in human patients that is intended to
initially evaluate the effectiveness of (or to otherwise satisfy the requirements of 21
C.F.R. § 312.21(b) or its foreign equivalent with respect to) a Clinical Development
Candidate for a particular Cardiovascular Indication.

 - 7 - 

 

     1.43 “Phase III Study” means a pivotal clinical study in human patients with a defined
dose or set of doses of a Clinical Development Candidate that is designed to ascertain the
safety and efficacy of (or to otherwise satisfy the requirements of 21 C.F.R. § 312.21(c) or
its foreign equivalent with respect to) such Clinical Development Candidate for a particular
Cardiovascular Indication, which Phase III Study is conducted for the purpose of enabling
the preparation and submission of applications for Regulatory Approval to the competent
regulatory authorities in a country of the Territory.

     1.44 “Phase IV Study” means any clinical study in human patients that is commenced
after receipt of Regulatory Approval of a Cell Therapy Product in any country of the
Territory, which study is conducted within the parameters of the Regulatory Approval, and
shall include studies required or requested by the Regulatory Authority as a condition of,
or in connection with, obtaining Regulatory Approval with respect to such Cell Therapy
Product for a particular Cardiovascular Indication. Phase IV Studies also shall include
studies conducted to gather additional information regarding such Cell Therapy Product,
including, without limitation, potential risks, medical or pharmacoeconomic benefits,
optimal use, dose, route and schedule of administration, modeling and pharmacoeconomic
studies, and investigator-sponsored clinical trials.

     1.45 “Pre-Clinical Development Plan” means a detailed plan that sets forth the
responsibilities of, and activities to be conducted by, Athersys (and Angiotech pursuant to
Section 4.3) in advancing one or more Cells and/or Cell Therapies into one or more
potential Clinical Development Candidates for a particular Cardiovascular Indication
(including a detailed budget corresponding to each such plan). Each such Pre-Clinical
Development Plan shall include, without limitation, the following activities (or their
equivalents), to the extent applicable:

          (a) conducting research and development activities related to Cells and Cell Therapy,
as a step in the ultimate objective of identifying and characterizing Clinical Development
Candidates; and

          (b) conducting pre-clinical research, pre-clinical development and other pre-clinical
studies that are intended to facilitate and support progression of one or more Cells and/or
Cell Therapies to selection as Clinical Development Candidates, and ultimately to Regulatory
Approval of such Clinical Development Candidate(s) as a Cell Therapy Product(s);

An initial draft Pre-Clinical Development Plan(s) has been prepared by Athersys and
presented to Angiotech prior to the Effective Date. Within ninety (90) days after the
Effective Date, the JSC shall finalize such draft Pre-Clinical Development Plan(s), and such
final Pre-Clinical Development Plan shall be attached hereto as Schedule 1.45.

     1.46 “Pre–Clinical Development Program” means the pre-clinical development activities
conducted by (or to be conducted by) each Party pursuant to a Pre-Clinical Development Plan.

     1.47 “Profit(s)” has the meaning ascribed to it on Schedule 7.4.

 - 8 - 

 

     1.48 “Purchase Agreement” has the meaning ascribed to it in the Recitals.

     1.49 “Receiving Party” has the meaning ascribed to it in Section 13.1.

     1.50 “Regulatory Approval” means any and all approvals (including any applicable
governmental price and reimbursement approvals), licenses, registrations or authorizations
of any federal, national, multinational, state, provincial or local regulatory agency,
department, bureau, commission, council or other governmental entity necessary for the
commercial manufacture, use, storage, import, export, transport, distribution, promotion,
marketing, offer for sale and sale of a therapeutic and/or prophylactic product in a country
of the Territory.

     1.51 “Royalty Term” shall mean, for a particular Sole Development Product in a
particular country in the Territory, the period of time from First Commercial Sale of such
Sole Development Product to the date on which market exclusivity in such country ends, which
shall mean the later date to occur of the following: (a) the expiration of all Patent Rights
covering such Sole Development Product in such country; or (b) the expiration of market
exclusivity related to such Sole Development Product in such country.

     1.52 “Sole Development Income” shall mean any payments that the Developing Party
receives from a licensee or sublicensee of the rights owned by or granted to the Developing
Party hereunder, in consideration for the license or sublicense of such rights as applicable
to a Sole Development Product, including, without limitation, license fees, milestone
payments, license maintenance fees, and other payments received for such a license or
sublicense, but specifically excluding royalty-type payments based on Net Sales, bona fide
payments for research and development, marketing, sales and/or other services, bona fide
reimbursement for costs and expenses incurred by the Developing Party (such as patent
prosecution costs), payments to the extent of fair market value for the issuance of equity
or debt (or for debt financing such as loans), and payments resulting from any bona fide
arms length agreement relating to the supply to such licensee or sublicensee of the
applicable Sole Development Products (and/or ingredients or components thereof).

     1.53 “Sole Development Product” has the meaning ascribed to it in Section 6.1.

     1.54 “Strategic Alliance Agreement” has the meaning ascribed to it in the preamble.

     1.55 “Sublicense Agreement” has the meaning ascribed to it in the Recitals.

     1.56 “Successful Completion” means, with respect to a clinical study of a Clinical
Development Candidate in human patients, (a) completion of such clinical study; (b) the
meeting of all primary and secondary clinical endpoints of such clinical study or the
advancement of the Clinical Development Candidate to the next phase of clinical trials (or
to commercialization, where the subject clinical study is a Phase III Study), even though
the Clinical Development Candidate does not meet all secondary endpoints; and

 - 9 - 

 

(c) delivery to the JSC of the corresponding written, completed study report prepared
according to the study protocol.

     1.57 “Term” has the meaning ascribed to it in Section 16.1.

     1.58 “Territory” means the world.

     1.59 “Therapeutic Field” means, as the context requires, a field comprising any one or
more of the Cardiovascular Indications.

     1.60 “Third-Party” means a person or entity other than Angiotech or Athersys.

     1.61 “Third Party Payments” shall mean all amounts payable to a Third Party for rights
or licenses to Intellectual Property in connection with the manufacture, use, sale, offer
for sale or importation of Clinical Development Candidates and/or Cell Therapy Products,
including without limitation license fees, milestone payments, license maintenance fees,
royalties and other payments made for such a right or license.

     1.62 “Transaction Agreements” has the meaning ascribed to it in the Recitals.

     1.63 Additional Definitions.

	 	 	 
	Defined Term	 	Section in which Defined
	CFOs
	 	7.2(c)
	Change of Control
	 	16.2(e)
	Change of Control Notice
	 	16.2(e)
	CHF Offer
	 	2.2(b)
	CHF Offer Notice
	 	2.2(b)
	Co-Chair
	 	3.3
	Code
	 	16.2(c)
	Developing Party
	 	6.1
	Diligence Requirement
	 	6.4
	Discontinuing Party
	 	6.1
	Existing Third Party Agreement
	 	4.1
	for cause
	 	16.2(d)(i)
	GAAP
	 	1.35
	Heads of Research
	 	3.7(b)
	Negotiation Notice
	 	2.2(a)
	New Pre-Clinical Development Programs
	 	4.3
	Offer Notice
	 	2.2(a)

 - 10 - 

 

	 	 	 
	Defined Term	 	Section in which Defined
	Offer Period
	 	2.2(a)
	Opt-Out Notice
	 	6.1
	Paying Party
	 	7.6(a)
	Phase I Milestone Fee
	 	2.4(a)
	Product Specifications
	 	9.4
	Proposed Clinical Plan(s)
	 	3.5(c)
	Replacement Fee
	 	2.4(b)(i)
	Royalty Recipient
	 	7.6(a)
	Sole Development Option
	 	6.1
	Supply Disruption
	 	9.7
	Terms and Conditions
	 	2.2(b)

ARTICLE II.

CERTAIN TRANSACTION COMPONENTS

     2.1 Concurrent Execution. Each Party shall execute all of the Transaction
Agreements and the Purchase Agreement, and shall deliver each of them to the other Party,
and each of the Transaction Agreements and the Purchase Agreement shall be effective as of
the Effective Date. Neither Party shall have any obligations under any of the Transaction
Agreements or the Purchase Agreement unless and until all of the Transaction Agreements and
the Purchase Agreement have been so executed and delivered.

     2.2 Right of First Negotiation for Non-Licensed Cardiovascular Indications.

          (a) Throughout the Term, Angiotech shall have the first right to negotiate to obtain an
exclusive license to Cell Therapy for all or any part of the Non-Licensed Cardiovascular
Indications. Athersys shall promptly notify Angiotech in writing if: (a) Athersys intends
to initiate a research and/or development and/or commercialization program for Cell Therapy
involving any of the Non-Licensed Cardiovascular Indications; (b) Athersys intends to take
any action to initiate any process to license (whether exclusively or non-exclusively) to a
Third Party (or otherwise grant to a Third Party) any rights to develop or commercialize
Cell Therapy for any of the Non-Licensed Cardiovascular Indications; or (c) Athersys
receives an unsolicited offer from a Third Party that desires to acquire any rights to
develop or commercialize Cell Therapy for any of the Non-Licensed Cardiovascular Indications
(where each of the events set forth in (a-c) above shall obligate Athersys to provide such
written notice, hereinafter termed an “Offer Notice”). The Offer Notice shall specify the
indications within the Non-Licensed Cardiovascular Indications to which the notice applies,
and in the case of (c), shall summarize the terms of the Third Party’s offer. Upon
Angiotech’s receipt of the Offer Notice, Angiotech shall have fifteen (15) days (the “Offer
Period”) to notify Athersys
that Angiotech desires to negotiate with Athersys to obtain a license for Cell Therapy
for

 - 11 - 

 

the applicable Non-Licensed Cardiovascular Indications (such notice by Angiotech is
hereinafter referred to as the “Negotiation Notice”). If Angiotech delivers such
Negotiation Notice to Athersys, Athersys shall negotiate in good faith exclusively with
Angiotech, for a period of not less than ninety (90) days from the date of Athersys’ receipt
of the Negotiation Notice (the “Negotiation Period”), mutually acceptable, commercially
reasonable terms and conditions of an exclusive license to Angiotech for the applicable
Non-Licensed Cardiovascular Indications. Accordingly, Angiotech shall have the right of
first and exclusive negotiation to obtain an exclusive license to Cell Therapy for all or
any part of the Non-Licensed Cardiovascular Indications identified in the Negotiation
Notice. If Angiotech fails to deliver the Negotiation Notice prior to expiration of the
Offer Period, or if Athersys and Angiotech are unable to consummate a mutually acceptable
transaction prior to expiration of the Negotiation Period, Athersys shall be free to license
Cell Therapy for the applicable Non-Licensed Cardiovascular Indications to a Third Party.
If Athersys is unable to complete a transaction granting rights to Cell Therapy for the
applicable Non-Licensed Cardiovascular Indications to a Third Party within ninety days (90)
days after (y) the expiration of the applicable Offer Period if Angiotech has not delivered
a Negotiation Notice, or (z) the expiration of the applicable Negotiation Period if
Angiotech has delivered a Negotiation Notice, then Athersys’ notification requirement shall
“reset” with respect to Cell Therapy for the applicable Non-Licensed Cardiovascular
Indications. For the avoidance of doubt, this right of first negotiation shall apply to
Cell Therapy for all indications within the Non-Licensed Cardiovascular Indications.

          (b) In addition to Section 2.2(a) above, throughout the Term with respect to
Cell Therapy involving congestive heart failure, Angiotech shall have the right of first
refusal to obtain a license to Cell Therapy for congestive heart failure as described in
this Section 2.2(b). Upon the receipt by Athersys from a Third Party of any offer
for any rights relating to Cell Therapy for congestive heart failure that Athersys desires
to accept (a “CHF Offer”), Athersys shall provide written notice of such CHF Offer to
Angiotech (the “CHF Offer Notice”). The CHF Offer Notice shall include a detailed summary
of the material terms and conditions of the CHF Offer (the “Terms and Conditions”). If the
Terms and Conditions are substantially more favorable to such Third Party than the terms and
conditions offered by Angiotech pursuant to Section 2.2(a), Angiotech shall have
thirty (30) days from receipt of the CHF Offer Notice to accept or reject the CHF Offer
according to the Terms and Conditions. If Athersys and Angiotech do not conclude such
transaction within a ninety (90)-day period of exclusive, good faith negotiations that
begins on receipt of Angiotech’s notice of “acceptance,” or if Angiotech does not provide
such written notice before expiration of its 30-day acceptance period (or if Angiotech
rejects the CHF Offer in writing before the end of such 30-day period), Athersys shall then
have ninety (90) days to negotiate definitive, binding agreements with such Third Party on
terms and conditions not substantially more favorable to such Third Party than the Terms and
Conditions. If (i) Athersys is unable to complete such a transaction within such ninety
(90) day period with such Third Party, then the notification requirement shall “reset” with
respect to Cell Therapy for congestive heart failure, or (ii) the terms and conditions
negotiated with such Third Party and acceptable to both Athersys and such Third Party
concerning such transaction are substantially more favorable to such Third
Party than the Terms and Conditions, then the terms and conditions of the transaction as

 - 12 - 

 

negotiated shall be considered to be a new CHF Offer that is subject to the right of
first refusal on behalf of Angiotech described in this Section 2.2(b).

     2.3 Additional Investment.

          (a) Angiotech shall make an additional $5,000,000.00 investment in Athersys pursuant to
the terms described in Section 2.3(b) within ten (10) business days after Athersys
fulfills the first of the following conditions to occur (provided that if Athersys fulfills
any such condition prior to January 1, 2007, then such condition shall be deemed to have
been fulfilled on January 1, 2007):

          (i) Athersys has commenced at least one additional pre-clinical animal study
between the Effective Date and January 1, 2007 (in accordance with the applicable
Pre-Clinical Development Plan) and either (A) such study has been completed prior to
January 1, 2007 in accordance with the applicable pre-clinical animal study
protocol; or (B) such study is ongoing as of January 1, 2007 and is being conducted
in accordance with the applicable pre-clinical animal study protocol, or

          (ii) at any time after January 1, 2007 Athersys completes at least one
additional pre-clinical study (in accordance with the applicable Pre-Clinical
Development Plan) in accordance with the applicable pre-clinical animal study
protocol.

          (b) With respect to the investment described in (a) above:

          (i) if the Note has not been converted into capital stock of Athersys prior to
the date of such investment, then Angiotech and Athersys shall enter into a note
purchase agreement, in substantially the form of the Purchase Agreement, pursuant to
which Angiotech shall loan $5,000,000.00 in cash to Athersys pursuant to a
convertible promissory note having the same terms and conditions as the Note; and

          (ii) if the Note has been converted into capital stock of Athersys prior to the
date of such investment, then Angiotech and Athersys shall enter into a securities
purchase agreement, in substantially the form of the Purchase Agreement (except for
necessary adaptations for a securities purchase instead of a note purchase),
pursuant to which Angiotech shall purchase with cash the number of whole shares of
capital stock of Athersys that can be purchased with $5,000,000.00 in cash, at one
hundred ten percent (110%) of the per share price at which stock is sold in the Bona
Fide Financial Investment (as defined in the Note), on the terms and conditions set
forth therein. The class and series of capital stock shall be the same as that sold
in the Bona Fide Financial Investment.

     2.4 Phase I Milestone Fee.

          (a) As soon as reasonably practicable after the passage of thirty (30) days (or such
other period of time during which the FDA may then be permitted to impose a

 - 13 - 

 

clinical hold)
following the first IND submission to the FDA in connection with the first Clinical
Development Candidate hereunder without the FDA imposing a clinical hold, thereby enabling
the Parties to lawfully initiate a Phase I Study of such Clinical Development Candidate,
subject to Section 2.4(b) below, the Parties shall enter into a one-time only
securities purchase agreement, in substantially the form of the Purchase Agreement (except
for necessary adaptations for a securities purchase instead of a note purchase), pursuant to
which Angiotech shall purchase with cash the number of whole shares of capital stock of
Athersys that can be purchased with [$*] in cash, at the per share price
determined in accordance with Schedule 2.2, on the terms and conditions set forth
therein (the “Phase I Milestone Fee”). For the avoidance of doubt, Angiotech shall not be
required to enter into any further securities purchase agreement(s) in connection with any
subsequent IND submission .

          (b) Angiotech, in its sole discretion, may elect to decline payment of the Phase I
Milestone Fee by providing written notice of such election within the applicable 30-day
period set forth in Section 2.4(a). Within thirty (30) days after receipt of such
written notice from Angiotech, Athersys shall provide written notice to Angiotech choosing
one of the following items as a replacement for the Phase I Milestone Fee:

          (i) requiring Angiotech to, within ten (10) business days following the
Successful Completion of the first Phase III Study for a Clinical Development
Candidate in the U.S. (or foreign equivalent trial) in any Cardiovascular
Indication, pay to Athersys a one-time milestone payment in cash equal to [$*] (the
“Replacement Fee”) upon the Successful Completion of the first Phase III Study for a
Clinical Development Candidate in the U.S. (or foreign equivalent trial) in any of
the Cardiovascular Indications; or

          (ii) modifying the split of Profits from the commercialization of a Cell
Therapy Product described in Schedule 7.4 to be [*%] to Athersys and
[*%] to Angiotech.

     2.5 Exclusivity. Except as expressly provided pursuant to a Clinical
Development Plan or in any Transaction Agreement, during the Term Athersys shall not engage
(itself or with a Third Party) in any clinical development or commercialization activities
directed to the Cardiovascular Indications using any stem cells.

     2.6 Retained Rights. Except as expressly set forth herein or as otherwise mutually agreed by the Parties in
writing, no Intellectual Property rights or licenses are granted by Angiotech to Athersys
under this Strategic Alliance Agreement. Angiotech retains all rights to Angiotech
Intellectual Property. Except as expressly set forth herein or as otherwise mutually agreed
by the Parties in writing, no Intellectual Property rights or licenses are granted by
Athersys to Angiotech under this Strategic Alliance Agreement.

 

			
	*	 	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.

 - 14 - 

 

Athersys retains all rights
to Athersys Intellectual Property to the extent such Intellectual Property rights are not
expressly granted to Angiotech hereunder.

     2.7 Costs Borne by Each Party. Except as expressly set forth herein, including
without limitation Sections 7.1, 7.2 and 7.4 and Schedule
7.4, all costs and expenses connected with a Party’s activities or performance under any
Pre-Clinical Development Program, Clinical Development Plan or this Strategic Alliance
Agreement shall be borne solely by that Party.

     2.8 Certain Restrictions on Athersys’ Activities Outside of Cardiovascular
Indications. In its research and development activities in connection with Third
Parties related to products for Cell Therapy outside of the Cardiovascular Indications,
Athersys shall make Commercially Reasonable Efforts to position such products in a way that
reduces the potential for such products to be used off label in any of the Cardiovascular
Indications.

ARTICLE III.

JOINT STEERING COMMITTEE

     3.1 Joint Steering Committee. Promptly following the Effective Date, the
Parties shall establish a Joint Steering Committee (“JSC”) to oversee and coordinate the
Parties’ responsibilities and activities in accordance with and in furtherance of the
Pre-Clinical Development Plan(s), Clinical Development Plan(s) and this Strategic Alliance
Agreement. The JSC shall be composed of up to four (4) senior, qualified representatives
from each Party (or from a Party’s Affiliate). The total number of JSC members will
initially be up to eight (8), but the number may be increased or decreased from time-to-time
by mutual written agreement of the Parties; provided that the number of representatives from
Angiotech shall always be equal to the number of representatives from Athersys. Each of
Angiotech and Athersys may replace any of its representatives on the JSC at will by giving
written notice thereof to the other Party.

     3.2 Subcommittees. The JSC shall be empowered to create one or more
subcommittees, project teams or working groups, as it may deem appropriate or necessary.
Each such subcommittee, project team and working group shall report to the JSC, which shall
have authority to approve or reject recommendations or actions proposed thereby, subject to
the terms of
this Strategic Alliance Agreement. In general, the Parties contemplate that all JSC
subcommittees shall have an equal number of members appointed by each Party.

     3.3 Chairperson. Each Party shall appoint one of its representatives on the
JSC as a co-chair of the JSC (each, a “Co-Chair”), and a Party may change its Co-Chair from
time to time by written notice to the other Party. Each Party’s Co-Chair shall serve as a
co-chair of the JSC meetings, unless the Co-Chairs jointly determine that they shall
alternate responsibility for chairing JSC meetings (whether on a meeting-by-meeting,
calendar quarter-by-calendar quarter or calendar year-by-calendar year basis).

     3.4 JSC Meetings.

 - 15 - 

 

          (a) The JSC shall meet at least once every calendar quarter during the Term, either in
person, by video conference or by telephone conference, as appropriate, as reasonably
arranged by the Co-Chairs; provided that at least one (1) JSC meeting per calendar year
shall be held in person. Meetings of the JSC shall be effective only if at least one (1)
JSC representative of each Party participates in the meeting (in person or by telephone or
videoconference). The Co-Chairs (or the responsible JSC chairperson, if applicable) shall
be responsible for scheduling meetings of the JSC, preparing agendas for JSC meetings,
sending to all JSC members notices of all regular JSC meetings (at least thirty (30) days
before such meetings) and agendas for such meetings (at least ten (10) days before such
meetings).

          (b) In addition, either Co-Chair may from time to time request a special JSC meeting by
contacting the other Co-Chair and providing a proposed agenda for such meeting. The
Co-Chairs shall arrange a mutually acceptable time for such special JSC meeting as promptly
thereafter as reasonably possible, and shall prepare and circulate an agenda for such
special JSC meeting as far in advance of such meeting as reasonably possible.

          (c) The Co-Chairs (or the responsible JSC chairperson, if applicable) shall be
responsible for having minutes of each JSC meeting prepared and circulated among the JSC
members. The JSC meeting minutes will be documented in writing and shall provide a
description in reasonable detail of the discussions held at the JSC meeting, and a list of
any actions, decisions or determinations taken or approved by the JSC. In addition, the JSC
meeting minutes shall include, with respect to the Parties’ responsibilities, activities and
tasks hereunder, (i) the Parties’ progress to date, (ii) difficulties encountered by the
Parties to date, (iii) schedules for performing and completing the Parties’ tasks and
activities, (iv) each Party’s action plans, and (v) any JSC recommendation that the Parties
approve a Proposed Clinical Plan or end an existing Clinical Development Plan. The
responsible Co-Chair shall distribute the minutes of the JSC meeting to the Parties and the
JSC members within ten (10) days after the conclusion of each JSC meeting. The JSC meeting
minutes shall be deemed to be approved by the JSC members if no written objections to the
meeting minutes are submitted to the JSC within ten (10) days after being distributed to the
JSC members. Each Party shall be
responsible for expenses incurred by its JSC representatives in attending or otherwise
participating in JSC meetings.

     3.5 Responsibilities of the Joint Steering Committee.

          (a) Clinical Development Plans and Clinical Development Candidates. In
addition to its general responsibility to oversee and coordinate the activities of the
Parties in connection with the Pre-Clinical Development Plans, Clinical Development Plans
and this Strategic Alliance Agreement, the JSC shall in particular:

          (i) monitor the progress made by Athersys in connection with the Pre-Clinical
Development Programs in a manner consistent with the corresponding Pre-Clinical
Development Plans and this Strategic Alliance Agreement;

 - 16 - 

 

          (ii) monitor the Existing Third Party Agreements and any other agreements with
a Third Party related to the Pre-Clinical Development Plans, Clinical Development
Plans and/or Cell Therapy in the Therapeutic Field, including without limitation
monitoring compliance with such agreements and activities thereunder, reviewing
reports prepared by or for a Party, evaluating Intellectual Property resulting from
such agreements and ensuring that the appropriate Party obtains rights to any such
Intellectual Property when advisable;

          (iii) designate Cell(s) as Clinical Development Candidate(s) in accordance with
criteria determined by the JSC;

          (iv) monitor the progress made, and direct the activities to be undertaken, by
the Parties in connection with the Clinical Development Programs in a manner
consistent with the corresponding Clinical Development Plans and this Strategic
Alliance Agreement;

          (v) review, modify as it deems appropriate, and recommend, as necessary from
time-to-time, the Clinical Development Plan(s);

          (vi) oversee and, whenever practicable, expedite the implementation of each
Pre-Clinical Development Plan and each Clinical Development Plan;

          (vii) create and update a risk analysis plan;

          (viii) clarify or adjust the tasks of the respective Parties under the
Pre-Clinical Development Plans and Clinical Development Plans, in a manner
consistent with this Strategic Alliance Agreement;

          (ix) ensure adequate resources are assigned by each Party for research
planning, project management and personnel and other resource management related to
the Clinical Development Plans;

          (x) create, review, modify as it deems appropriate, and recommend an annual
budget corresponding to each Clinical Development Plan, in a manner consistent with
this Strategic Alliance Agreement;

          (xi) reasonably determine or adjust milestones and progress related to the
Clinical Development Plans; and

          (xii) recommend whether or not, and to what extent, research or development
studies, beyond those identified in an existing Pre-Clinical Development Plan or
Clinical Development Plan, should be conducted.

          (b) Existing Third Party Agreements. Within thirty (30) days after the
Effective Date, Athersys shall provide to the JSC a report describing the status of, purpose
of, scope of activities encompassed by, recent activities conducted under, and Intellectual
Property developed under each Existing Third Party Agreement related to the

 - 17 - 

 

Pre-Clinical
Development Plans, Clinical Development Plans and/or Cell Therapy in the Therapeutic Field,
together with complete, unredacted copies of each such agreement and any reports delivered
by or provided to Athersys thereunder, subject to confidentiality obligations to the
counterparty to each such Agreement; provided that where such obligations of confidentiality
preclude or limit any such disclosures hereunder, Athersys shall use Commercially Reasonable
Efforts to obtain consent from such counterparty to permit such disclosures to Angiotech.

          (c) Proposed Clinical Plans. The Parties, either separately or jointly, may
submit written proposals for Clinical Development Plans for any Clinical Development
Candidate (“Proposed Clinical Plans”) to the JSC for review (which review shall take place
at the first JSC meeting following submission of a Proposed Clinical Plan to the JSC) and
recommendation to the Parties; provided that each Party may submit no more than one Proposed
Clinical Plan per calendar quarter during the Term. Each Proposed Clinical Plan shall
include, as appropriate, (i) an objective, key milestones and a timetable for the Proposed
Clinical Plan; (ii) a summary of resources expected to be required to conduct the Proposed
Clinical Plan to completion; (iii) a summary of expected Third Party arrangements that may
be necessary or useful, including, without limitation, license agreements and/or supply
arrangements; and (iv) a proposed budget and term for the Proposed Clinical Plan. Any
Proposed Clinical Plan that is recommended by the JSC and approved in writing by the Parties
will be deemed a Clinical Development Plan, and each such approved Clinical Development Plan
shall be a part of, and subject to all of the provisions of, this Strategic Alliance
Agreement and the other Transaction Agreements, as applicable.

          (d) New Pre-Clinical Development Programs. The JSC shall oversee and coordinate
the Parties’ responsibilities and activities, and shall recommend to the Parties appropriate
cost-sharing by the Parties, in connection with each New Pre-Clinical Development Program.

          (e) Advancement or Termination of Clinical Development Plans. Upon the
completion of each Clinical Development Plan, the JSC will have sixty (60) days thereafter
to provide written recommendations to the Parties as to whether the Clinical Development
Plan should either (i) be advanced to the next phase of development or commercialization, as
applicable, or (ii) be terminated by the Parties. With the prior written approval of both
Parties, the JSC will also have the authority to terminate a Clinical Development Plan at
any time.

          (f) Other Responsibilities. The JSC shall have such other responsibilities as
are expressly set forth elsewhere in this Strategic Alliance Agreement, the Transaction
Agreements or as are assigned to it as mutually agreed upon by the Parties.

          (g) Angiotech Proposals. During the term of this Strategic Alliance Agreement,
Angiotech may, but is not obligated to, present to the JSC for consideration medical
devices, biomaterials, compositions and methods that may enhance the development of Cells,
Clinical Development Candidates and/or Cell Therapy Products in the Cardiovascular Field.
The JSC shall consider the value of any such enhancements

 - 18 - 

 

(including where appropriate, for
example, an evaluation of market analysis, financial projections, costs, resources,
responsibilities of Athersys and Angiotech, and timelines). After due consideration, the
Steering Committee shall accept or reject each such proposed enhancement. If the JSC
accepts a proposed enhancement, then the JSC shall (i) recommend appropriate compensation to
Angiotech with respect to such enhancement and the applicable Pre-Clinical Development Plan
or Clinical Development Plan shall be modified to include such enhancement; and (ii)
determine ownership of any Intellectual Property related to the accepted enhancement that
may be made, created, identified, conceived, reduced to practice or derived by or on behalf
of the Parties (either alone or jointly) during the course of performance of a Party’s
obligations under the applicable Pre-Clinical Development Plan or Clinical Development Plan;
provided that Angiotech shall own all Intellectual Property related to any proposed or
accepted enhancement that is made, created, identified, conceived, reduced to practice or
derived by or on behalf of Angiotech or its Affiliates at or prior to the time the
enhancement is presented to the JSC for consideration.

     3.6 Voting; Decision-Making. Regardless of the number of JSC representatives
from any Party, Angiotech shall present one consolidated view and have one vote on any issue
before the JSC, to be cast by Angiotech’s Co-Chair or his/her designee, and Athersys shall
present one consolidated view and have one vote on any issue before the JSC, to be cast by
Athersys’ Co-Chair or his/her designee. Except as otherwise expressly set forth herein, the
JSC may only act by unanimous written agreement. Except as otherwise expressly set forth
herein, the JSC shall have final decision-making authority (which decision-making authority
may be
delegated to a subcommittee by the JSC, in its discretion) regarding all issues
relating to the Pre-Clinical Development Plans and Clinical Development Plans; provided that
the JSC may not modify or renegotiate any terms or conditions of this Strategic Alliance
Agreement. In making decisions on the JSC, each Party shall duly consider in good faith any
suggestions, opinions and proposals made by the other Party, and shall use good faith
efforts to reach consensus with the other Party. If the JSC fails to reach unanimous
agreement on any matter within the scope of its responsibilities, as described in this
Strategic Alliance Agreement or as expressly delegated to the JSC by written agreement of
the Parties, the dispute shall be resolved as set forth in Section 3.7.

     3.7 JSC Disputes.

          (a) If, before adjourning any JSC meeting, the JSC fails to reach unanimous agreement
on any matter or issue upon which the JSC has voted at such JSC meeting, and upon which the
JSC has authority to vote, in accordance with this ARTICLE III (each such matter or
issue, a “JSC Dispute”), such JSC Dispute shall automatically be added as an agenda item for
the next regular meeting of the JSC. Between the meeting in which the JSC Dispute arose and
such next regularly scheduled JSC meeting, the JSC and/or the Parties may negotiate in good
faith to attempt to resolve the JSC Dispute. At any time during such interim time period,
the JSC may call a special meeting to attempt to resolve the JSC Dispute.

 - 19 - 

 

          (b) If the JSC members are unable to resolve such JSC Dispute before or at the next
regularly scheduled JSC meeting, such JSC Dispute shall be referred for resolution to the
Chief Scientific Officer (or person fulfilling the equivalent function) of each Party (each,
a “Head of Research”). Resolution of such JSC Dispute by the Heads of Research shall occur
within thirty (30) days after the date of referral to the Heads of Research. If the Heads
of Research are unable to reach consensus and resolve such JSC Dispute within such 30-day
period after good faith attempts to reach such consensus and resolution, then the JSC
Dispute shall be referred for final resolution to Athersys’ President (or other designated
executive level officer of Athersys), if the JSC Dispute relates to a Phase I Study
completion or earlier matter or issue, and to Angiotech’s CFO (or other designated executive
level officer of Angiotech), if the JSC Dispute relates to a post-Phase I Study (or later)
or commercialization matter or issue; provided that, when exercising such final,
decision-making authority, neither Party’s President, CFO (or other designated executive
level officer) shall be empowered to alter the Parties’ respective rights or obligations
under this Strategic Alliance Agreement; and provided further that neither Party’s
President, CFO (or other designated executive level officer) shall have final
decision-making authority with respect to approval or modification of (i) designation of any
Cell as a Clinical Development Candidate; (ii) any Pre-Clinical Development Plan or Clinical
Development Plan (but expressly excluding any immaterial modifications to such Pre-Clinical
Development Plan or Clinical Development Plan); (iii) any Clinical Development Plan budget
(but expressly excluding any immaterial modifications to such Clinical Development Plan
budget), (iv) any IND filing pertaining to a Clinical Development Candidate, (v) any NDA/BLA
filing pertaining to a Clinical Development Candidate; (vi) clinical trial design; or (vii)
termination, or advancement to the next stage, of development of a Clinical Development
Candidate; instead, such
designations, plans, budgets filings, designs, termination and advancements set forth
in (i-vii) shall be approved or modified only by consensus of the Parties and shall not be
subject to the dispute resolution process described in ARTICLE XVII.

ARTICLE IV.

PRE-CLINICAL DEVELOPMENT

     4.1 Existing Pre–Clinical Development Programs. Athersys shall conduct, and
shall be responsible for, the Pre-Clinical Development Programs in existence as of the
Effective Date within the Cardiovascular Indications. With respect to each such existing
Pre-Clinical Development Program, Athersys may modify its activities and undertake new
activities in connection with such Pre-Clinical Development Program, but only after
consultation with and approval of the JSC; provided that Athersys shall: (a) use its
Commercially Reasonable Efforts to make available the resources specified in the
Pre-Clinical Development Plan (or otherwise by mutual agreement of the Parties), (b) use its
Commercially Reasonable Efforts to undertake its obligations and responsibilities in the
Pre-Clinical Development Plan (or otherwise by mutual agreement of the Parties), (c) perform
its activities and discharge the responsibilities that will facilitate the ability of the
Parties to obtain Regulatory Approval to manufacture Cells to be used in Clinical
Development Candidates and in Cell Therapy Products in the United States and other countries
of the Territory, as determined by the JSC, and (d) manufacture the Cells in conformance
with the quantity and quality reasonably required for the conduct of the Pre-

 - 20 - 

 

Clinical
Development Programs. With respect to each such existing Pre-Clinical Development Program,
and subject to the foregoing sentence, Athersys shall consider in good faith any
recommendations and requests made by Angiotech and its representatives on the JSC concerning
the existing Pre-Clinical Development Program. Athersys may subcontract any of its
obligations under this Section 4.1, provided that it furnishes the JSC and Angiotech
with advance written notice thereof specifying the work to be subcontracted, and with an
opportunity to object to such subcontract for sound business reasons. Any dispute regarding
Athersys’ use of a subcontractor pursuant to the foregoing sentence shall be referred to the
JSC, and any corresponding JSC Dispute shall be resolved in accordance with Section
3.7. As of the Effective Date, Athersys has executed agreements related to the existing
Pre-Clinical Development Programs with the Third Parties listed on Schedule 4.1 of
this Strategic Alliance Agreement (each such agreement, an “Existing Third Party
Agreement”).

     4.2 Costs for Existing Pre-Clinical Development Programs. Athersys shall be
fully and solely responsible for all costs and expenses relating to the activities conducted
by or for Athersys in connection with the existing Pre-Clinical Development Programs.

     4.3 New Pre-Clinical Development Programs. During the Term, the Parties expect
to undertake additional Pre-Clinical Development Programs (“New Pre-Clinical Development
Programs”), and the Parties
acknowledge that Angiotech may assume certain responsibilities, and may conduct certain
activities, in connection with such New Pre-Clinical Development Programs. Irrespective of
Angiotech’s responsibilities or activities in connection with any New Pre-Clinical
Development Program, the JSC shall assume oversight and coordination of the Parties’
responsibilities and activities (if any), and shall recommend appropriate compensation to
Angiotech with respect to its activities under each New Pre-Clinical Development Program and
any Intellectual Property and materials (including without limitation biomaterials and
medical devices) contributed by Angiotech to such New Pre-Clinical Development Program.

ARTICLE V.

CLINICAL DEVELOPMENT

     5.1 Proposed Clinical Plans; Clinical Development Plans. Angiotech and/or
Athersys may prepare and submit a Proposed Clinical Plan to the JSC in accordance with
Section 3.5(c) for any Clinical Development Candidate. Each Proposed Clinical Plan
shall address the specific roles and responsibilities of each Party consistent with this
Strategic Alliance Agreement, shall address and/or incorporate any JSC recommendations, and
shall propose appropriate Clinical Development Programs for each stage of development set
out in such Proposed Clinical Plan. The responsibilities of the Parties set forth in this
ARTICLE V will apply only to those Clinical Development Plans approved by the
Parties in accordance with Section 3.5 and 3.7.

     5.2 Athersys Responsibilities. During each Clinical Development Program,
Athersys, after consulting with the JSC, shall direct all Clinical Development Program
activities through the completion of Phase I Studies. In this regard, Athersys’ President
shall have ultimate, final decision-making authority for JSC Disputes pertaining to Phase

 - 21 - 

 

I Study completion or earlier matters and issues, as described in Section 3.7(b).
During the Term, Athersys shall: (a) use its Commercially Reasonable Efforts to make
available the resources specified as the responsibility of Athersys in the Clinical
Development Plan (or otherwise by mutual agreement of the Parties), (b) use its Commercially
Reasonable Efforts to undertake the obligations and responsibilities assigned to Athersys in
the Clinical Development Plan (or otherwise by mutual agreement of the Parties), (c) perform
the activities and discharge the responsibilities that are required to obtain Regulatory
Approval to manufacture Cells that are used in Clinical Development Candidates and in Cell
Therapy Products in the United States and other countries of the Territory, as determined by
the JSC, and (d) manufacture the Cells in conformance with the quantity and quality
reasonably required for the conduct of the Clinical Development Programs, and supply such
Cells to Angiotech (or its designee) or to one or more Third Parties engaged by a Party to
perform clinical studies of Clinical Development Candidates and/or Cell Therapy Products in
accordance with this Strategic Alliance Agreement.

     5.3 Angiotech Responsibilities. During each Clinical Development Program, Angiotech shall direct all Clinical
Development Program activities after the completion of Phase I Studies. In this regard,
Angiotech’s CFO shall have ultimate, final decision-making authority for JSC Disputes
pertaining to post-Phase I Study (or later) matters and issues, as described in Section
3.7(b). During the Term, Angiotech shall: (a) use its Commercially Reasonable Efforts
to make available the resources specified as the responsibility of Angiotech in the
Clinical Development Plan (or otherwise by mutual agreement of the Parties), (b) use its
Commercially Reasonable Efforts to undertake the obligations and responsibilities assigned
to Angiotech in the Clinical Development Plan (or otherwise by mutual agreement of the
Parties), and (c) perform the activities and discharge the responsibilities that are
required to obtain Regulatory Approval to market and sell Cell Therapy Products in the
United States and the other countries of the Territory, as determined by the JSC (to the
extent such Regulatory Approval is not described as an obligation of Athersys pursuant to
Section 5.2).

     5.4 Subcontracting. Either Party may subcontract any of its obligations under
a Clinical Development Plan, provided that it furnishes the JSC and the other Party with
advance written notice thereof specifying the work to be subcontracted, and with an
opportunity to object to such subcontract for sound business reasons. Any dispute regarding
a Party’s use of a subcontractor pursuant to the foregoing sentence shall be referred to the
JSC, and any corresponding JSC Dispute shall be resolved in accordance with Section
3.7. In any subcontract agreement with a Third Party, the subcontracting Party shall
ensure that (a) such Third Party subcontractor is bound by obligations of confidentiality no
less stringent than those imposed on the Parties under this Strategic Alliance Agreement,
(b) all inventions, copyrightable subject matter, discoveries or materials created,
identified, conceived, reduced to practice or developed by the Third Party subcontractor in
the scope of its, his or her engagement with a Party in connection with the subcontract
agreement, and in furtherance of a Clinical Development Program or this Strategic Alliance
Agreement, are appropriately documented and disclosed to the subcontracting Party, and (c)
all such inventions, copyrightable subject matter, discoveries or materials directly related
to the Cells (and not related to Angiotech

 - 22 - 

 

Intellectual Property) shall be owned solely by
Athersys (or jointly with Angiotech in the case of Joint IP), or in the case of
subcontractors that are not-for-profit institutions, (i) either owned solely by Athersys (or
jointly with Angiotech in the case of Joint IP), (ii) jointly owned by Athersys and the
institution (and jointly with Angiotech in the case of Joint IP), or (iii) owned solely by
the institution, and in the case of (ii) or (iii), the institution’s right, title and
interest in such inventions, copyrightable subject matter, discoveries or materials related
to the Cells shall be either exclusively licensed to Athersys (and Angiotech in the case of
Joint IP) or the institution shall have granted to Athersys (and Angiotech in the case of
Joint IP) the exclusive option to obtain an exclusive license thereto; provided, however,
that the foregoing shall not require Athersys to modify the terms or conditions of any of
the Existing Third Party Agreements which the Parties recognize may not contain the terms
described in this sentence. Any subcontract agreement under this Section 5.4 shall
(w) grant to the subcontracting Party a right to inspect the subcontractor’s relevant
records and facilities; (x) require the subcontractor to be in good standing with all
applicable
regulatory authorities; (y) require the subcontractor to comply (as appropriate) with
current good laboratory practices, current good manufacturing laboratory practices and
applicable laws, regulations, rules and guidelines; and (z) require that the subcontractor
have no outstanding violations or citations that would or may impair the services or
deliverables to be provided to the subcontracting Party by such subcontractor; provided,
however, that the foregoing shall not require Athersys to modify the terms or conditions of
any of the Existing Third Party Agreements which the Parties recognize may not contain the
terms described in this sentence.

ARTICLE VI.

OPT-OUT RIGHTS

     6.1 Opt-Out Rights. Either Party may elect to discontinue (a “Discontinuing
Party”) joint research on, development and commercialization of a Clinical Development
Candidate or a Cell Therapy Product upon six (6) months prior written notice (“Opt-Out
Notice”) to the other Party; provided that the effective date of either Party’s election to
opt out shall not be prior to the completion of the first Phase I Study conducted by the
Parties hereunder, and provided further that neither Party shall be relieved of its
obligations to pay for its share of Clinical Development Costs for a clinical study that is
ongoing at the effective date of a Party’s election to opt-out with respect to the
applicable Clinical Development Candidate. Notwithstanding the foregoing, if a Party is
unable to pay any or all of its portion of Clinical Development Costs when due, such Party
shall be deemed to have delivered an Opt-Out Notice on the date such payment was due. Upon
delivery of the Opt-Out Notice, the subject Clinical Development Candidate or Cell Therapy
Product shall be deemed a “Rejected Product.” The Discontinuing Party shall be required to
continue co-funding all of its activities under this Strategic Alliance Agreement during
such six (6) month notice period (subject to the first sentence of this Section
6.1). Upon receipt of an Opt-Out Notice for a Clinical Development Candidate or Cell
Therapy Product, the non-discontinuing Party shall have the option (the “Sole Development
Option”), exercisable by providing written notice to the Discontinuing Party by the end of
such six (6) month period, to continue the development and commercialization of such
Rejected Product in the Therapeutic Field (and in such event,

 - 23 - 

 

such Rejected Product shall
thereafter be referred to as a “Sole Development Product”), at its own expense. Upon the
exercise of such option, the non-discontinuing Party shall be deemed the “Developing Party,”
and the Developing Party shall be released from its exclusivity obligations set forth in
Section 2.5 above with respect only to such Sole Development Product. The Parties
shall have the following rights and obligations upon exercise of the Sole Development
Option:

          (a) if Angiotech is the Developing Party, such Sole Development Product shall continue
to be considered a Clinical Development Candidate or Cell Therapy Product (as applicable)
for purposes of the Transaction Agreements; provided, however that (i) the provisions of
Section 2.4 and ARTICLES III, V, VII (other than Sections 7.5-7.10)
and IX (other than Sections 9.7 and 9.8) shall no longer apply to such Sole
Development Product; (ii) a Supply Disruption shall be deemed to have occurred
pursuant to Section 9.7 (and Section 9.7 shall apply in its entirety
with respect to such Supply Disruption), and Angiotech shall have the right to engage a
back-up supplier pursuant to Section 9.8 (and Section 9.8 shall apply in its
entirety with respect to engagement of such back-up supplier); and further provided that if
neither a Third-Party manufacturer nor a Third-Party back-up manufacturer of the Cells,
Clinical Development Candidates and/or Cell Therapy Products is reasonably available at the
effective date of Athersys’ opt-out, Athersys shall manufacture and supply Cells, Clinical
Development Candidates and/or Cell Therapy Products to Angiotech (as the supply chain for
each exists at such time) for the Territory for a period of up to twenty-four (24) months
after the effective date of such opt-out (during which Section 9.6 shall apply in its
entirety), wherein such Cells, Clinical Development Candidates and/or Cell Therapy Products
supply shall be provided by Athersys on commercially reasonable terms and conditions to be
discussed and agreed upon by Angiotech and Athersys at such time (which terms shall include
a reasonable price, and shall set forth any subsequent period (after such 24-month period)
during which Athersys is willing (in its sole discretion) to supply Cells, Clinical
Development Candidates and/or Cell Therapy Products to Angiotech); and (iii) Angiotech shall
be responsible for all activities described in ARTICLE X with respect to such Sole
Development Product;

          (b) if Athersys is the Developing Party, such Sole Development Product shall no longer
be considered a Clinical Development Candidate or Cell Therapy Product for purposes of the
License Agreement and Sublicense Agreement, but shall continue to be considered a Clinical
Development Candidate or Cell Therapy Product for purposes of this Strategic Alliance
Agreement; provided, however, that (i) the provisions of ARTICLES II, III, V, VII
(other than Sections 7.5-7.10), VIII and IX shall no longer apply to
such Sole Development Product, and (ii) Athersys shall be responsible for all activities
described in ARTICLE X with respect to such Sole Development Product;

          (c) any Regulatory Approvals filed, and clinical data owned or licensed, and any
product trademarks owned or licensed by the Discontinuing Party or its Affiliates relating
to the applicable Sole Development Product shall be (i) assigned or (ii) exclusively
licensed to the Developing Party or any Third Party or Affiliate designated by such Party,
until such time as the Developing Party or its designee is qualified to hold such Regulatory
Approvals or product trademarks under applicable laws and regulations,

 - 24 - 

 

and then shall be
transferred or assigned to the Developing Party or its designee, as appropriate, as soon as
practicable thereafter; provided, however, that in any country where such transfer or
assignment is not possible, the Discontinuing Party shall use Commercially Reasonable
Efforts to ensure that the Developing Party has the benefit of such Regulatory Approvals and
product trademarks, and to this end consents to any regulatory authority cross-referencing
to the data and information on file with any regulatory authority as may be necessary; and

          (d) the Developing Party shall pay a royalty on Sole Development Products to the
Discontinuing Party and shall share Sole Development Income with the Discontinuing Party in
accordance with Sections 7.5 through 7.10 below.

     6.2 Development Updates. At least every six (6) months during the Term, the Developing Party shall provide the
Discontinuing Party with a written update regarding the status of the Developing Party’s
efforts to develop and commercialize Sole Development Products. All information provided by
the Developing Party to the Discontinuing Party pursuant to this Section 6.2 shall
be considered Confidential Information (as defined in Section 13.1) of the
Developing Party.

     6.3 Failure to Exercise Sole Development Option. In the event the
non-discontinuing Party does not exercise the Sole Development Option within the six (6)
month time period set forth in Section 6.1 above, and if agreed upon in writing by
the Parties, the JSC may seek, or designate one of the Parties to seek, qualified Third
Party(ies) to develop the applicable Clinical Development Candidate or Cell Therapy Product.
Both Parties shall have the right to approve any such qualified Third Party(ies). The
Parties shall share equally all (a) income received from such Third Party(ies) and (b)
Clinical Development Costs, Commercialization Costs and Manufacturing Costs (as applicable)
associated with the wind-down of activities related to the applicable Clinical Development
Candidate or Cell Therapy Product.

     6.4 Diligence Requirement. The Developing Party’s right to exclusively develop
and commercialize a Sole Development Product is expressly conditioned on such Party’s
continuing effort to use Commercially Reasonable Efforts to develop such Sole Development
Product (the “Diligence Requirement”). The Diligence Requirement shall be conditioned upon
the continuing absence of any adverse condition or event that warrants a delay in the
development, clinical testing or commercialization of a particular Sole Development Product;
provided that a delay shall only be warranted for as long as the condition or event
preventing the performance continues and, upon cessation of such condition or event, the
Developing Party shall promptly resume performance hereunder. Such conditions and events
shall include, without limitation, the inability to produce preclinical or clinical
supplies, events that would cause delays in clinical studies (e.g., negative toxicological
or pharmacological test results or an adverse clinical event), challenges within the
regulatory process, or intellectual property impediments to developing a Sole Development
Product that the Developing Party could not reasonably have foreseen. If the Discontinuing
Party reasonably believes that the Developing Party has failed to satisfy the Diligence
Requirement with respect to a Sole Development Product, it shall so notify the Developing
Party in writing and the Developing Party shall

 - 25 - 

 

then have ninety (90) days to demonstrate to
the Discontinuing Party’s reasonable satisfaction that the Diligence Requirement for such
Sole Development Product has been satisfied. Any dispute regarding the satisfaction of the
Diligence Requirement shall be resolved by the Parties under the terms of ARTICLE
XVII below. If it is determined that the Diligence Requirement has not been satisfied
with respect to a Sole Development Product, then the Parties shall meet and discuss in good
faith a mutually agreeable process for development and commercialization of the Sole
Development Product.

ARTICLE VII.

COSTS, PAYMENTS AND FINANCIAL RECORD KEEPING

     7.1 Clinical Development Costs. All Clinical Development Costs incurred in
accordance with the corresponding Clinical Development Plan budget shall be borne by
Athersys and Angiotech in the following proportions:

          (a) Clinical Development Costs associated with the execution of any Phase I Study or
Phase II Study pursuant to any Clinical Development Plan shall be
shared [*] percent ([*%]) by Athersys and
[*] percent ([*%]) by Angiotech;

          (b) Clinical Development Costs associated with the execution of the first Phase III
Study conducted pursuant to this Strategic Alliance Agreement shall
be shared [*] percent ([*%]) by
Athersys and [*] percent ([*%]) by Angiotech; and

          (c) Clinical Development Costs associated with the execution of any Phase III Study
that is subsequent to the first Phase III Study trial described in clause (b) above shall be
shared [*] percent ([*%]) by Athersys and [*] percent ([*%]) by Angiotech.

     7.2 Development Costs Quarterly Reconciliation.

          (a) Within thirty (30) days following the end of each calendar quarter during the Term,
Athersys shall submit to Angiotech a written report setting forth in reasonable detail, and
separately with respect to each Clinical Development Plan and each of the categories of
Clinical Development Costs set forth in Section 7.1(a-c), all associated Clinical
Development Costs incurred by Athersys in the immediately preceding calendar quarter.

          (b) Within thirty (30) days following the end of each calendar quarter during the Term,
Angiotech shall submit to Athersys a written report setting forth in reasonable detail, and
separately with respect to each Clinical Development Plan and each of the categories of
Clinical Development Costs set forth in Section 7.1(a-c), all associated Clinical
Development Costs incurred by Angiotech in the immediately preceding calendar quarter.

 

			
	*	 	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.

 - 26 - 

 

          (c) Within forty-five (45) days following the end of each calendar quarter, Angiotech
shall submit to Athersys a written report (i) reconciling the Clinical Development Costs set
forth in the reports required under Section 7.2(a) and Section 7.2(b), and
(ii) setting forth the calculation of any net amount owed by Athersys to Angiotech, or by
Angiotech to Athersys (as the case may be) in order to ensure the sharing of such Clinical
Development Costs in accordance with Section 7.1. The net amount payable in
accordance with clause (ii) shall be paid by Angiotech or Athersys, as
the case may be, within ten (10) business days after Athersys’ receipt of such written
report, without regard to any dispute as to the amounts incurred by a Party or owed to a
Party under this Section 7.2(c) in accordance with the applicable budget. In the
event of such dispute under this Section 7.2(c), the disputing Party shall provide
written notice to the other Party within such ten (10)-business day period after receipt of
the written report in question, specifying in detail such dispute. The Chief Financial
Officers (“CFOs”) of the Parties shall promptly thereafter meet and shall negotiate in good
faith a final resolution to such dispute.

     7.3 Milestone Payments. Angiotech shall provide written notice to Athersys
within thirty (30) days of achievement of any milestone set forth on Schedule 7.3;
provided that such notice with respect to items 4 and 5 on Schedule 7.3 shall be
given within thirty (30) days following the calendar quarter in which such milestone
occurred. Angiotech shall pay to Athersys the corresponding amount set forth on
Schedule 7.3 within ten (10) business days following receipt of such written notice
by Athersys. An additional milestone payment is described in Section 2.4.

     7.4 Profit Sharing. Angiotech and Athersys shall share Profits from the sale
of Cell Therapy Products in accordance with Schedule 7.4.

     7.5 Royalties on Sole Development Products.

          (a) Royalty Amounts. During the Royalty Term for each Sole Development Product
commercialized by the Developing Party under ARTICLE VI, the Developing Party will
pay the Discontinuing Party a royalty on Net Sales of such Sole Development Product (except
to the extent otherwise provided under Section 7.5(b)) at the following rates:

          (i) if, as of the date the Opt-Out Notice is delivered, the first patient has
not yet been enrolled in a Phase II Study of such Sole Development Product, such
royalty shall be [*] percent ([*%]) with respect to Net Sales of Sole
Development Products for which Angiotech is the Developing Party, and no royalty
with respect to Net Sales of Sole Development Products for which Athersys is the
Developing Party;

          (ii) if, as of the date the Opt-Out Notice is delivered, the first patient has
been enrolled in a Phase II Study of such Sole Development Product

 

			
	*	 	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.

 - 27 - 

 

but the first patient has not yet been enrolled in a Phase III Study of such Sole
Development Product, such royalty shall be [*] percent ([*%]) with
respect to Net Sales of Sole Development Products for which Angiotech is the
Developing Party, and [*] percent ([*%]) with respect to Net Sales of Sole Development Products
for which Athersys is the Developing Party; and

          (iii) if, as of the date the Opt-Out Notice is delivered, the first patient has
been enrolled in a Phase III Study for such Sole Development Product and thereafter,
such royalty shall be [*] percent ([*%]) with respect to Net Sales of Sole Development Products
regardless of which Party is the Developing Party;

provided, however, that if it is unclear whether a clinical trial is in a particular phase,
the actual phase of such clinical trial shall be determined by reference to the next
following clinical trial for such Sole Development Product (e.g., a Phase I/II clinical
trial would be considered a Phase II Study if, following completion of such trial, the
Developing Party commences a Phase III Study of such Sole Development Product). If (xi)
Angiotech is the Discontinuing Party and has elected to decline payment of the Phase I
Milestone Fee pursuant to Section 2.4(b), and (xii) Athersys has elected to receive
a greater share of Profits pursuant to Section 2.4(b)(ii), then the royalty rate
payable to Angiotech pursuant to clause (ii) above shall be [*] percent [*%] and the
royalty rate payable to Angiotech pursuant to clause (iii) above shall be [*] percent
[*%]. The royalties payable pursuant to this Section 7.5(a) shall not be creditable
against any other payment by the Developing Party under this ARTICLE VII.

          (b) Licensee and Sublicensee Royalties on Sole Development Products. Any sales
of Sole Development Products by a licensee or sublicensee of a Developing Party or its
Affiliate shall be subject to royalties under Section 7.5(a) to the same extent as
if the sale had been made by the Developing Party; provided that the royalty payable to the
Discontinuing Party pursuant to (i) Section 7.5(a)(i) shall not exceed twenty-five
percent (25%) of the royalty revenue received by the Developing Party from such licensee or
sublicensee; (ii) Section 7.5(a)(ii) shall not exceed thirty percent (30%) of the
royalty revenue received by the Developing Party from such licensee or sublicensee; and
(iii) Section 7.5(a)(iii) shall not exceed thirty-five percent (35%) of the royalty
revenue received by the Developing Party from such licensee or sublicensee. The royalties
payable pursuant to this Section 7.3(b) shall not be creditable against any other
payment by the Developing Party under this ARTICLE VII.

          (c) Third Party Payments on Sole Development Products. The Developing Party
shall pay all Third Party Payments due as a result of any Sole Development Product sold by
the Developing Party. For the avoidance of doubt, such Third Party Payments shall be in
addition to any royalties that may be due pursuant to Sections 7.5(a) and
7.5(b).

 

			
	*	 	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.

 - 28 - 

 

          (d) Reduction due to Royalty Stacking. In the event the Developing Party
obtains or possesses a license to one or more Patent Rights of a Third Party in order to
make, have made, use, lease, offer to sell, sell, export or import a Sole Development
Product and is required to pay Third Party Payments with respect to the Sole Development
Product in connection with such license(s), then the Developing Party may deduct, from
royalties due the other Party pursuant to this Section 7.5(d), fifty percent (50%)
of the Third Party Payments that are actually paid and are attributable to such Sole
Development Product, but in no event may the royalties due to the other Party pursuant to
this Section 7.5(d) be reduced by more than fifty percent (50%) as a result of this
provision. Any amounts for which the Developing Party is entitled to receive credit, which
are not deducted as a result of the fifty percent (50%) cap, shall be carried forward and
credited against future royalties due to such Party.

     7.6 Calculation and Payment of Royalties.

          (a) Timing of Royalty Payments. A Party paying a royalty required under
Section 7.5 (the “Paying Party”) shall pay all such royalties to the other Party
(the “Royalty Recipient”) within forty-five (45) days after the last day of the calendar
quarter in which such royalties accrue; provided that the Paying Party shall be entitled to
offset any such royalty payment against amounts owed to the Paying Party by the Royalty
Recipient; and provided further that if: (i) Angiotech is the Royalty Recipient and has
elected to decline payment of the Phase I Milestone Fee pursuant to Section 2.4(b);
(ii) Athersys has elected to receive the Replacement Fee pursuant to Section
2.4(b)(i); and (iii) the Replacement Fee has not yet been paid, then before paying any
royalties to Angiotech under Section 7.5 or Sole Development Income to Angiotech
under Section 7.7, Athersys shall be entitled to withhold from such royalties and
Sole Development Income the Replacement Fee (plus interest) on the unpaid amount of the
Replacement Fee, at the rate set forth in Section 7.10, from the date of Successful
Completion of the first Phase III Study for a Clinical Development Candidate in the U.S. in
any Cardiovascular Indication(s), until the unpaid amounts of the Replacement Fee (plus
interest) are recovered by Athersys.

          (b) Payment Method. The Paying Party shall pay royalties hereunder in U.S.
dollars by wire transfer in immediately available funds to an account designated by the
Royalty Recipient.

          (c) Accrual of Royalties. Sales between a Party and its Affiliates or their
respective direct or indirect licensees, sublicensees or subcontractors , or between such
parties, shall not be subject to royalties, but in such cases royalties shall be calculated
upon the quarterly Net Sales of Sole Development Products by such parties to an independent
Third Party. Only one (1) royalty payment shall accrue with respect to the same unit of a
Sole Development Product. No royalties shall accrue on disposition of reasonable quantities
of Sole Development Products for no charge as samples, pursuant to an indigent patient
assistance program, or donations to Third Parties. Royalties shall accrue on Sole
Development Products distributed for free other than as described in the preceding sentence
based on average Net Sales for such Sole Development Product during the corresponding
period, excluding such free Sole Development Product.

 - 29 - 

 

          (d) Taxes. Any withholding of taxes levied by tax authorities on the payments
hereunder shall be deducted by the Paying Party from the sums otherwise payable by the
Paying Party hereunder for payment to the proper tax authorities on behalf of the Royalty
Recipient and shall be paid by the Paying Party to such proper tax authorities. The Parties
agree to cooperate with each other in the event the Royalty Recipient claims exemption from
such withholding or seeks deductions under any double taxation or other similar treaty or
agreement from time to time in force, such cooperation to consist of providing receipts of
payment of such withheld tax or other documents reasonably available to the Parties.

          (e) Royalty Reports. Within forty-five (45) days after the last day of each
calendar quarter in which royalties are due, the Paying Party shall deliver to the Royalty
Recipient a report setting forth in reasonable detail the calculation of Net Sales and of
royalties payable to the Royalty Recipient for such calendar quarter identifying, by
country, the Sole Development Products sold by the Paying Party and its Affiliates,
licensees, sublicensees and distributors. Such reports shall be considered Confidential
Information of the Paying Party subject to the terms of ARTICLE XII hereof.

     7.7 Sharing of Sole Development Income. The Developing Party shall pay to the
Discontinuing Party the following percentage share of all Sole Development Income received
by the Developing Party that is attributable to the rights owned by or granted to the
Developing Party hereunder: (i) if the royalty rate specified in Section 7.5(a)(i)
would be payable on Net Sales of such Sole Development Product, [*] percent ([*%]) of
all such Sole Development Income; (ii) if the royalty rate specified in Section
7.5(a)(ii) would be payable on Net Sales of such Sole Development Product, [*] percent ([*%]) of all
such Sole Development Income; or (iii) if the royalty rate specified in Section
7.5(a)(iii) would be payable on Net Sales of such Sole Development Product, [*] percent ([*%]) of all
such Sole Development Income. All such amounts owed by the Developing Party in accordance
with this Section 7.7 shall be due and payable to the Discontinuing Party within
thirty (30) days after receipt of such Sole Development Income by the Developing Party,
subject to any right of offset pursuant to Section 7.6(a). In the case of receipt
by the Developing Party of any non-cash consideration from a licensee or sublicensee in
consideration for the granting of a license or sublicense to a Sole Development Product that
is attributable to the rights owned by or granted to the Developing Party hereunder (but
excluding, for the avoidance of doubt, consideration received by the Developing Party that
is attributable to the items excluded from the definition of Sole Development Income, and
further excluding standard contractual benefits, such as indemnities, warranties, diligence
and confidentiality obligations and the like), Sole Development Income shall be calculated
based on the value of such non-cash consideration received by the Developing Party (and
shall be combined with the value of any cash consideration received for purposes of
determining the applicable percentage share above).

 

			
	*	 	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.

 - 30 - 

 

     7.8 Financial Record Keeping. During the Term and for seven (7) years
thereafter, each Party shall keep complete and accurate records of its Clinical Development
Costs, Manufacturing Costs, Commercialization Costs, Net Sales and other business and
financial data and information underlying the reconciliations, cost reports, calculation of
costs and Profits, and payments that are the subject of the Transaction Agreements.

     7.9 Audits. Upon at least forty-five (45) days prior written notice to the
other Party, a Party will have the right, once annually at its own expense, to have an
independent, certified public accounting firm, selected by such Party and reasonably
acceptable to the other Party, inspect relevant books and records of the other Party in the
location(s) where such books and records are maintained by the other Party. The written
notice from the auditing Party shall name the accounting firm and shall describe the scope
of the audit to be conducted and the records and statements sought to be verified. Such
audit shall be conducted during regular business hours and under obligations of strict
confidence, and shall be conducted for the sole purpose of verifying the basis and accuracy
of any report(s) submitted by the audited Party and the payment of costs and Profit-sharing
amounts hereunder, as applicable, all to ascertain that all costs charged and payments made
hereunder are correct in accordance with the Transaction Agreements, in each case with
respect to relevant books and records corresponding to the prior twenty-four (24) month
period. If such audit of such books and records concludes that the audited Party has failed
to accurately report any cost, Profit or payment information, then in the event of any
underpayment, the audited Party shall pay to the auditing Party any undisputed additional
amounts due within thirty (30) days after the date the audited Party receives such
accounting firm’s written report so concluding, together with interest calculated using the
prime rate (as published in The Wall Street Journal on the date when payment was due) plus
three percent (3%) for the time from which the amounts should have been paid until the time
of actual payment. If such undisputed underpayment exceeds seven and one-half percent
(7.5%) of the payments that were to be paid to the auditing Party during the period audited,
the audited Party also shall reimburse the auditing Party for the amounts (reasonable fees
and expenses) paid to the accounting firm in conducting the audit. If such accounting firm
concludes that the audited Party overpaid the auditing Party, the auditing Party shall
refund such undisputed overpayments to the audited Party within thirty (30) days after the
date the auditing Party receives such accounting firm’s report so concluding. If the
audited Party disputes the results of the audit, such dispute shall be resolved by the
Parties’ CFOs, and any purported underpayment shall be withheld until such dispute is
finally resolved.

     7.10 Late Payments. Interest will be assessed on any overdue payments at a
rate equal to the prime rate (as published in The Wall Street Journal on the date when
payment was due) plus three percent (3%) for the time from which the amounts should have
been paid until the time of actual payment, or at such lower maximum rate permitted by law.
The payment of such
interest will not prevent the Party to which such payment is due from exercising any
other rights it may have as a consequence of the lateness of any payment.

 - 31 - 

 

ARTICLE VIII.

COMMERCIALIZATION

     8.1 Commercialization of Cell Therapy Products. During the Term, Angiotech
shall have the sole authority and the exclusive right to commercialize Cell Therapy Products
(itself or through one or more Third Parties selected by Angiotech), and shall have sole
authority and responsibility in all matters relating to the commercialization of Cell
Therapy Products including, without limitation, the following activities (and other
associated activities) with respect to Cell Therapy Products: (a) executing product
promotion, marketing and sales activities; (b) booking sales; (c) handling all aspects of
order intake and processing, invoicing and collection, distribution, warehousing, inventory
and receivables, and collection of data of sales to hospitals and other end users (i.e.,
market research data); (d) handling all privacy and reimbursement-related activities; (e)
handling the logistics of all recalls; (f) handling all returns; (g) handling all other
customer service related functions; and (h) filing Cell Therapy Product promotional
materials with the relevant regulatory authority as permitted or required under applicable
law. Angiotech shall use Commercially Reasonable Efforts to commercialize at least one Cell
Therapy Product (at its discretion) for a myocardial infarction indication and a peripheral
vascular disease indication in countries of the Territory where Regulatory Approval has been
obtained for such Cell Therapy Product(s); provided that Angiotech shall consider in good
faith any recommendations and requests by Athersys’ representatives on the JSC regarding
commercialization of Cell Therapy Products.

ARTICLE IX.

MANUFACTURE AND SUPPLY OF CLINICAL DEVELOPMENT CANDIDATES AND CELL THERAPY PRODUCTS

     9.1 Athersys’ Manufacturing Obligation. Athersys shall be responsible for
manufacturing and supplying Clinical Development Candidates and Cell Therapy Products for
development and commercialization by the Parties in accordance with the Transaction
Agreements. In accordance with this ARTICLE IX, Athersys shall supply (or shall
engage a Third-Party manufacturer to supply) sufficient quantities of the Clinical
Development Candidates and Cell Therapy Products in final packaged form to the extent
reasonably required by Athersys and Angiotech to implement the Clinical Development Programs
and by Angiotech to commercialize the Cell Therapy Products in the Territory. The specific
terms and procedures by and upon which Athersys shall supply the Cell Therapy Products to
Angiotech hereunder shall be reasonably mutually determined by the Parties in good faith,
and shall be set forth in a separate manufacturing and supply agreement not less than twelve
(12) months prior to the anticipated First Commercial Sale of a Cell Therapy Product in the
Territory, such terms and procedures to be commercially
reasonable and consistent with the provisions of the Transaction Agreements. The
Parties also may agree to negotiate in good faith a separate quality agreement that sets
forth the Parties’ obligations with respect to current good manufacturing practices,
production, release and/or distribution of Clinical Development Candidates and Cell Therapy
Products in the Territory, the first draft of which shall be prepared collaboratively by the
quality departments of each Party. Unless otherwise provided herein, Athersys shall have
the exclusive right and obligation to manufacture

 - 32 - 

 

(itself and/or through Third Parties
selected by Athersys) and supply Clinical Development Candidates and Cell Therapy Products
for development and commercialization hereunder.

     9.2 Manufacturing Costs. Athersys shall keep, and shall require all
Third-Party manufacturers of the Clinical Development Candidates and/or Cell Therapy
Products to keep, accurate records in sufficient detail concerning the Manufacturing Costs.
Angiotech shall be entitled to engage an independent public accounting firm to audit the
Manufacturing Costs as provided in, and in accordance with, Section 7.6. For this
purpose, Athersys itself shall keep, and to the extent that Athersys has obtained records or
documents from its Third-Party manufacturers shall keep, such account books and related
records or documents for a period of at least seven (7) years after the end of the fiscal
year to which the Manufacturing Costs relate.

     9.3 Manufacturing Compliance. All Clinical Development Candidates and Cell
Therapy Products supplied hereunder shall be manufactured by or on behalf of Athersys in
compliance with current good manufacturing practices, other applicable requirements of
relevant regulatory authorities, and other applicable laws and regulations, including
applicable laws and regulations relating to the transportation, storage, use, handling and
disposal of waste materials and hazardous materials used to manufacture Clinical Development
Candidates and/or Cell Therapy Products. Athersys, at its expense, shall obtain and
maintain, and/or shall require that its Third-Party manufacturers obtain and maintain, for
so long as Athersys is supplying Clinical Development Candidates and/or Cell Therapy
Products hereunder, all facility licenses and government permits necessary to manufacture
and supply the Clinical Development Candidates and Cell Therapy Products.

     9.4 Product Conformity. Angiotech, in consultation with the JSC, shall
determine the Clinical Development Product and Cell Therapy Product specifications and
testing methods (“Product Specifications”) for the Clinical Development Products and Cell
Therapy Products to be supplied by Athersys hereunder, and such specifications and testing
methods shall be consistent with industry standards and applicable regulatory requirements.
When Regulatory Approval is obtained in any country of the Territory, the Product
Specifications shall be those specifications and testing methods which have been approved by
the regulatory authority in that country. The Product Specifications may be
amended from time to time by written mutual agreement of the Parties. Athersys shall,
and shall ensure that any Third-Party manufacturer shall, manufacture the Clinical
Development Products and Cell Therapy Products in conformance with the Product
Specifications and in compliance with the requirements set forth in Section 9.3.

     9.5 Ordering; Forecasting; Acceptance and Rejection. The terms and procedures
set forth in the manufacturing and supply agreement described in Section 9.1 may
include provisions related to Cell Therapy Product orders and forecasts, Cell Therapy
Product acceptance, and, subject to the provisions of this Section 9.5, Cell Therapy
Product rejection and remedies for defective Cell Therapy Product. Any dispute arising
between Athersys and Angiotech concerning a shipment of Cell Therapy Product that the
Parties do not resolve within thirty (30) days of Angiotech providing a notice of shipment
of

 - 33 - 

 

defective Cell Therapy Product shall be submitted to a reputable independent test
organization located in the Territory, to be mutually agreed upon by the Parties. Such
independent test organization shall determine whether the Cell Therapy Product in a given
shipment was defective, and the decision of said independent test organization shall be
final and binding on Athersys and Angiotech. If the defective Cell Therapy Product was
supplied by a Third-Party manufacturer or by Athersys, then any expenses actually incurred
by Athersys in connection with such defective Cell Therapy Product shall be borne solely by
Athersys, and shall not be included in Manufacturing Costs hereunder.

     9.6 Inspection. With respect to the manufacture of the Clinical Development
Candidates and Cell Therapy Products, Angiotech may, at its expense, upon reasonable notice
and during normal business hours, conduct appropriate review and inspection of the Clinical
Development Candidates and Cell Therapy Products manufacturing facilities, procedures and
related documentation to verify Athersys’ and/or its Third-Party manufacturer’s (as
applicable) compliance with current good manufacturing practices, other applicable
requirements of relevant regulatory authorities, and other applicable laws and regulations,
and conformity of Clinical Development Candidates and Cell Therapy Products with the
applicable Product Specifications.

     9.7 Supply Disruption. In the event that Athersys is materially unable, at any
time, to fulfill its obligation to supply Clinical Development Candidates or Cell Therapy
Products in a timely manner, as required hereunder, for any reason (a “Supply Disruption”),
Athersys shall promptly notify Angiotech of such Supply Disruption and the estimated extent
of such Supply Disruption (including the anticipated delay time and the quantity of Clinical
Development Candidate or Cell Therapy Product involved). Athersys shall use its
Commercially Reasonable Efforts to cure the Supply Disruption as soon as practicable. In
the event that such Supply Disruption is expected to continue for at least three (3) months
from the date of such notification, Angiotech shall have the right to have the Clinical
Development Candidate or Cell Therapy Product (as applicable) manufactured by itself or
by a Third-Party supplier/manufacturer, and Athersys shall cooperate and use its
Commercially Reasonable Efforts to transfer to Angiotech (or Angiotech’s designee) all
Athersys Intellectual Property (including, without limitation, Athersys Stem Cell Technology
and production and manufacturing technology) that is necessary or useful to enable Angiotech
to establish (or be) a source for supply of the Clinical Development Candidate or Cell
Therapy Product (as applicable). In addition, Athersys shall teach and instruct personnel
of Angiotech (or Angiotech’s designee) how to obtain appropriate raw materials and how to
reproduce the production and manufacturing processes and techniques used by Athersys for
production and manufacturing of the Clinical Development Candidate or Cell Therapy Product
(as applicable).

     9.8 Back-Up Supplier. If Angiotech, through exercise of reasonable business
judgment, determines that it is reasonable and prudent to obtain a back-up supplier to
prevent a Supply Disruption, then Athersys shall use its Commercially Reasonable Efforts to
identify, engage and qualify at least one back-up supplier for the Clinical Development
Candidate(s) or Cell Therapy Product(s). If a Third-Party is or will be the principal
manufacturer of the Clinical Development Candidate(s) or Cell Therapy Product(s), such
back-up supplier may be Athersys or its

- 34 -

 

Affiliate or Angiotech or its Affiliate. In a
manner similar to that described in Section 9.7 regarding a Supply Disruption,
Athersys shall transfer or license to each such back-up supplier such Athersys Intellectual
Property as is necessary or useful to permit such back-up supplier to implement and practice
processes related to manufacture and supply of Clinical Development Candidate(s) or Cell
Therapy Product(s), and/or to maintain its status as a qualified manufacturing entity under
any and all applicable laws and regulations with respect to such processes or Clinical
Development Candidate(s) or Cell Therapy Product(s). If Athersys decides to designate and
qualify a back-up supplier, Athersys agrees to consult with Angiotech in identifying and
selecting an appropriate Third Party as back-up supplier, and the Parties shall work
together to establish each selected Third Party back-up supplier as expeditiously as
reasonably possible, so as to minimize the period of absence of supply of Clinical
Development Candidate(s) and/or Cell Therapy Product(s), as the case may be.

ARTICLE X.

REGULATORY MATTERS

     10.1 Ownership of Regulatory Documentation and Reference Rights; Regulatory
Strategy. Athersys (in collaboration with Angiotech) shall prepare and file, in its own
name, all IND applications for Clinical Development Candidates throughout the Territory,
such filings to be consistent with the JSC’s regulatory strategy and decisions and subject
to Angiotech’s prior written approval. Upon Angiotech’s reasonable request and to the
extent permitted by applicable law, within thirty (30) days after the completion of each
such Phase I Study hereunder, Athersys shall assign and transfer to Angiotech Athersys’
entire right, title and interest in and to any corresponding IND and other regulatory
filings and documentation pertaining thereto. Angiotech shall own (a) all regulatory
filings and
documentation pertaining to all post-Phase I Studies of Clinical Development
Candidates, and all Regulatory Approvals and related regulatory documents prepared for
and/or submitted to the applicable regulatory authorities in the Territory for all Cell
Therapy Products. Upon the reasonable request of Angiotech, and within a time period that
is reasonable and appropriate in view of the nature and volume of documents so requested,
Athersys shall make available to Angiotech such regulatory filings and related regulatory
documents owned by Athersys (including a right to reference the foregoing) if and to the
extent necessary to enable Angiotech to fulfill its obligations and to exercise its rights
under the Transaction Agreements.

     10.2 Regulatory Communications. Athersys shall have the primary responsibility
for communicating with any regulatory authority regarding any IND application or other
regulatory filing pertaining to a Clinical Development Candidate that has not yet completed
a Phase I Study. Angiotech shall have the primary responsibility for communicating with any
regulatory authority regarding any IND application or other regulatory filing pertaining to
a Clinical Development Candidate that has completed a Phase I Study, and regarding any
Clinical Development Candidate or Cell Therapy Product that has been submitted for, or has
obtained, Regulatory Approval. Each Party shall reasonably advise, assist and cooperate
with the other Party with respect to regulatory communications within the primary
responsibility of the other Party. Each Party shall promptly notify the other Party in
writing of any material communications

- 35 -

 

with a regulatory authority regarding any Clinical
Development Candidate or any Cell Therapy Product in the Territory.

     10.3 Other Regulatory Responsibilities. At the time when the first Phase I
Study is completed for any Clinical Development Candidate, Angiotech thereafter shall be
responsible for (a) overseeing, monitoring and coordinating all regulatory actions,
communications and filings with, and submissions to, each regulatory authority with respect
to such Clinical Development Candidate and any resulting Cell Therapy Product(s); (b)
interfacing, corresponding and meeting with each regulatory authority; (c) maintaining all
regulatory filings; (d) responding to any action by a regulatory authority that would
prohibit the marketing or the continued marketing of a Cell Therapy Product, or that would
result in any shortage or projected shortage of a Cell Therapy Product; and (e) filing all
adverse event reports. Using its Commercially Reasonable Efforts, Athersys shall cooperate
with Angiotech and assist Angiotech in the performance of all such activities, and shall
provide Angiotech with any information in Athersys’ possession or control that Angiotech or
Athersys reasonably deems to be relevant to any such activities. To the extent either Party
or its Affiliate has or receives any information regarding any new adverse event or any
serious adverse event that may be relevant to the use of any Clinical Development Candidate
or Cell Therapy Product, such Party shall immediately contact the other Party and provide
the other Party with all such information in accordance with the adverse event reporting
procedures established by Angiotech from time to time.

     10.4 Cell Therapy Product Complaints and Recalls.
Angiotech shall be solely responsible for responding to any Cell Therapy Product
complaints. In the event (a) any governmental agency or regulatory authority issues a
request, directive or order that a Cell Therapy Product be recalled; (b) a court of
competent jurisdiction orders that Cell Therapy Product be recalled; or (c) Angiotech
reasonably determines that a Cell Therapy Product should be recalled or withdrawn from the
market by Angiotech, or that a “Dear Doctor” letter should be sent relating to use of a Cell
Therapy Product (wherein Angiotech shall determine the form and content of each such “Dear
Doctor” letter), then Angiotech shall take all appropriate remedial actions with respect
thereto. The cost of any recall, field alert, Cell Therapy Product withdrawal, or field
corrective action shall be considered a Commercialization Cost, unless such recall, field
alert, Cell Therapy Product withdrawal, or field corrective action is caused in material
part by a Party’s breach of its obligations under this Strategic Alliance Agreement
(including obligations regarding manufacturing, advertising, distribution and storage of the
Cell Therapy Products) or applicable laws, or by its willful misconduct; then such cost
shall be borne by the breaching Party to the extent such recall, field alert, Cell Therapy
Product withdrawal, or field corrective action was due to such causes.

     10.5 Compliance With All Applicable Laws and Regulations; Cooperation. Each
Party shall perform its obligations under the Transaction Agreements, and its
responsibilities and rights under the Clinical Development Plans and otherwise in
connection with the development and commercialization of Clinical Development
Candidates and Cell Therapy Products, in accordance with all applicable laws, rules and
regulations, including those of all regulatory authorities in the Territory, applicable

- 36 -

 

reporting obligations, applicable import and export laws and regulations, current good
clinical practices. Each Party shall fully cooperate with the other Party in all
reasonable respects useful or necessary to enable each to be and remain in compliance
with all such applicable laws, rules and regulations.

ARTICLE XI.

INTELLECTUAL PROPERTY

     11.1 Existing Intellectual Property Rights Retained. Angiotech and Athersys
shall each retain all of their respective ownership interests in their respective
Intellectual Property, as such exists as of the Effective Date. Nothing in this Strategic
Alliance Agreement or any Transaction Agreement shall be construed to transfer ownership of
any Intellectual Property rights existing as of the Effective Date from one Party to another
Party.

     11.2 Ownership Of New Intellectual Property. Ownership and treatment of
Intellectual Property resulting from the Parties’ activities under the Transaction
Agreements shall be as set forth in the License Agreement.

ARTICLE XII.

CLINICAL PROGRAM RECORD KEEPING

     12.1 Scientific, Patent and Regulatory Records. When performing its
responsibilities and activities under each Pre-Clinical Development Program, New
Pre-Clinical Development Program and Clinical Development Program or under any Transaction
Agreement, each Party shall maintain, and shall cause its employees and contractors to
maintain, scientific and regulatory records, in sufficient and reasonable detail and in good
scientific manner appropriate for patent and regulatory purposes, which shall fully and
properly reflect all work done and results achieved in the performance of such
responsibilities and activities by such Party.

     12.2 Review of Records. On reasonable advance written notice, and at
reasonable intervals, during normal business hours each Party shall have the right to
inspect and copy records of the other Party maintained in connection with the activities
conducted, work performed and results achieved in the performance of its responsibilities
and activities under each Pre-Clinical Development Program, New Pre-Clinical Development
Program and Clinical Development Program or under any Transaction Agreement, including,
without limitation, records reflecting inventions, ideas, information or data developed by a
Party in the course of or work done hereunder, to the extent such access is reasonably
necessary or useful for a Party to exercise its rights and perform its obligations under
this Strategic Alliance Agreement or other Transaction Agreements. Notwithstanding the
definition of “Confidential Information” all such records and the information disclosed
therein shall constitute Confidential Information of the Party creating such records, and
shall be maintained in confidence by the receiving Party in accordance with ARTICLE
XIII.

- 37 -

 

     12.3 Policies For Records. In order to protect each Party’s Patent Rights
under United States and foreign law in any inventions conceived or reduced to practice in
connection with any activities or work performed by the Parties under this Strategic
Alliance Agreement or any Transaction Agreement, each Party shall require its employees to
record and maintain data and information developed pursuant to the Transaction Agreements in
such a manner as to enable the Parties to use such records to establish inventorship and
corroborated and documented dates of conception, diligence to reduction to practice and/or
actual reduction to practice. Each Party shall require its employees engaged in activities
or work in connection with the Transaction Agreements to assign all Intellectual Property
created, conceived or reduced to practice in connection therewith to their respective
employer, and each Party shall ensure that each such employee has signed such an agreement
before any activities or work in connection with the Transaction Agreements commences.

ARTICLE XIII.

CONFIDENTIAL INFORMATION

     13.1 Confidential Information.
“Confidential Information” means all proprietary, non-public Intellectual Property and
other information, including, but not limited to, proprietary information and materials
(whether or not patentable) regarding a Party’s technology, products, business information
or objectives, that is communicated in any way or form by such Party (a “Disclosing Party”)
to the other Party (a “Receiving Party”), and all copies thereof made, in whole or in part,
by the Receiving Party in any form. Notwithstanding the foregoing, the term “Confidential
Information” shall not include any information of a Disclosing Party that: (a) was already
known by the Receiving Party, other than under an obligation of confidentiality, at the time
of disclosure by the Disclosing Party; (b) was generally available to the public or
otherwise part of the public domain at the time of its disclosure to the Receiving Party;
(c) became generally available to the public or otherwise part of the public domain after
its disclosure to the Receiving Party and other than through any act or omission of the
Receiving Party in breach of this Strategic Alliance Agreement or any Transaction Agreement;
(d) was subsequently lawfully disclosed to the Receiving Party by a Third Party on a
non-confidential basis; (e) can be shown by written records of the Receiving Party to have
been independently developed by the Receiving Party without reference to the Confidential
Information of the Disclosing Party, and without breach of any of the provisions of this
Strategic Alliance Agreement or any Transaction Agreement; or (f) is information that the
Disclosing Party has specifically agreed in writing that the Receiving Party may disclose.
The existence and terms of each of the Transaction Agreements, the transactions described
thereby and the performance of any Party’s rights or any Party’s obligations under them
shall be considered the Confidential Information of both of the Parties for which each of
the Parties are deemed to be the Disclosing Party.

     13.2 Confidentiality Obligations. For the Term and for five (5) years
thereafter:

          (a) Except as expressly permitted in the Transaction Agreements, the Receiving Party
shall keep completely confidential, and shall not publish or otherwise

- 38 -

 

disclose, and shall
not use for any purpose, any Confidential Information of the Disclosing Party; provided,
however, that the Receiving Party may disclose any Confidential Information of the
Disclosing Party to a Third Party to the extent necessary to allow the Receiving Party to
collaborate with such Third Party in performing any of its obligations or exercising any of
its rights under any Transaction Agreement or to allow the Disclosing Party to make the
regulatory filings with such Third Party as advisable or required to obtain approval to
conduct clinical trials or obtain Regulatory Approval for a Clinical Development Candidate
or Cell Therapy Product, and in each case then only after (i) first advising such Third
Party of the Receiving Party’s obligations under this Strategic Alliance Agreement and the
Transaction Agreements, and (ii) securing from such Third Party a written obligation of
confidentiality no less stringent than that imposed on the Receiving Party under this
Strategic Alliance Agreement and the Transaction Agreements (except when not possible with
regard to governmental authorities or agencies).

          (b) Except as expressly permitted in the Transaction Agreements, the Receiving Party
shall not disclose the Confidential Information of the Disclosing Party to any person or
entity except the Receiving Party, its Affiliates and their respective employees,
consultants and agents who have a need to know such Confidential Information of the
Disclosing Party to further the purposes of any of the Transaction Agreements, and then only
after (i) first advising such employees, consultants and agents of the Receiving Party’s
obligations under this Strategic Alliance Agreement and the Transaction Agreements, and (ii)
securing from such employees, consultants and agents a written obligation of confidentiality
no less stringent than that imposed on the Receiving Party under this Strategic Alliance
Agreement and the Transaction Agreements.

          (c) Except with the prior written consent of the other Party, a Party shall not make
any public announcement or press release concerning any of the Transaction Agreements, the
transactions contemplated by any of them, the rights or obligations of the Parties under any
of them, or any of the activities that have occurred or may occur thereunder.

          (d) The Parties agree on the importance of coordinating their public announcements
respecting the Transactional Agreements and the subject matter thereof (other than academic,
scientific or medical publications that are subject to the publication provision set forth
below). Angiotech and Athersys shall, from time to time, and at the request of the other
Party, discuss and agree on the general information content relating to the Transactional
Agreements which may be publicly disclosed (including, without limitation, by means of any
printed publication or oral presentation).

     13.3 Permitted Disclosures. Notwithstanding Section 13.2:

          (a) The Receiving Party may disclose Confidential Information of the Disclosing Party
to the extent the Receiving Party is compelled to disclose such information by a court or
other tribunal of competent jurisdiction; provided, however, that in such case the Receiving
Party shall immediately give notice to the Disclosing Party, so that the Disclosing Party
may seek a protective order or other remedy from said

- 39 -

 

court or tribunal. In any event, the
Receiving Party shall disclose only that portion of the Confidential Information of the
Disclosing Party that, in the opinion of its legal counsel, is legally required to be
disclosed, and will exercise reasonable efforts to ensure that any such Confidential
Information of the Disclosing Party so disclosed will be accorded confidential treatment by
said court or tribunal.

          (b) The Receiving Party may disclose the terms and conditions of this Strategic
Alliance Agreement or any Transaction Agreement (including providing a copy hereof or
thereof, redacted as appropriate) to any bona fide potential permitted assignee or successor
to a Party’s interest under this Strategic Alliance Agreement or any Transaction Agreement,
or to a bona fide potential lender from which a Party is considering borrowing money, or to
a bona fide potential collaborator in connection with the Transaction Agreements, or in the
case of Athersys, to any bona fide financial
investor from which it may take money; provided, however, in any such case such that
the Receiving Party shall first obtain a written obligation of confidentiality no less
stringent than that imposed on the Receiving Party under this Strategic Alliance Agreement
and the Transaction Agreements from the bona fide potential permitted assignee or successor,
bona fide potential lender, bona fide potential collaborator or bona fide financial
investor.

          (c) The Receiving Party may disclose the terms and conditions of this Strategic
Alliance Agreement and/or the Transaction Agreements (including providing a copy hereof,
redacted (as appropriate) with the prior written approval of the other Party, such approval
not to be unreasonably withheld or delayed) in connection with filings with the U.S.
Securities and Exchange Commission or otherwise pursuant to applicable securities laws and
regulations, filings with the Internal Revenue Service and otherwise pursuant to applicable
tax laws and regulations, and other filings required by law or regulation; provided,
however, that the Receiving Party shall provide to the other Party a copy of any such
proposed filing at least two (2) business days in advance of the filing, and shall consider
in good faith the other Party’s suggested redactions. In any event, the Receiving Party
shall disclose only that portion of the Confidential Information of the Disclosing Party
that, in the reasonable opinion of its legal counsel, is legally required to be disclosed by
law or regulation. Additionally, so long as Athersys’ securities are not publicly traded,
Athersys may disclose (including providing a copy hereof, redacted as appropriate) to any
bona fide potential purchaser of Athersys’ securities the foregoing information; provided,
however, that Athersys first obtains a written obligation of confidentiality from the
recipient that is no less stringent than Athersys’ obligations under this Strategic Alliance
Agreement and the Transaction Agreements.

          (d) The Third Party collaborators set forth on Schedule 4.1 with which Athersys
has executed an agreement as of the Effective Date, and which might be considered a
subcontractor of Athersys’ obligations under this Strategic Alliance Agreement and the
Transaction Agreements may have limited rights to publish their results obtained pursuant to
such agreements. Any publication by a Third Party collaborator in accordance with the terms
and conditions of its executed Existing Third Party Agreement with Athersys shall not be
considered a breach of Athersys’ obligations hereunder.

- 40 -

 

          (e) The Parties agree that the public announcement of the execution of this Strategic
Alliance Agreement shall be in the form of a press release to be mutually agreed upon within
five (5) business days after the Effective Date; provided that such press release shall not
be publicly disseminated by either Party prior to May 15, 2006. A Party may republish,
reuse or disclose the same content of any prior publication, press release or disclosure, if
such republication, reuse or disclosure is presented in substantially the same form in which
it was previously published, used or disclosed, without modification of the content that was
previously published, used or disclosed.

     13.4 Publication. Except as provided in Section 13.3(e), during the Term each Party will submit
to the other Party for review and approval all proposed academic, scientific and medical
publications and public presentations relating to the Pre-Clinical Development Programs, New
Pre-Clinical Development Programs, Clinical Development Programs, or the Transactional
Agreements, for review in connection with preservation of Patent Rights and/or to determine
whether any of such other Party’s Confidential Information should be modified or deleted.
Written copies of such proposed publications and presentations shall be submitted to the
non-publishing Party no later than thirty (30) days before submission for publication or
presentation, and the non-publishing Party shall provide its comments with respect to such
publications and presentations within fifteen (15) business days of its receipt of such
written copy. The review period may be extended for an additional thirty (30) days in the
event the non-publishing Party can demonstrate reasonable need for such extension,
including, but not limited to, the preparation and filing of patent applications. By mutual
agreement, this period may be further extended. Athersys and Angiotech will each comply
with standard academic practice regarding authorship of scientific publications and
recognition of contribution of other parties in any publications pursuant to this
Section 13.4. With regard to proposed publications and presentations by a Third
Party pursuant to an Existing Third Party Agreement, the time periods set forth above shall
be complied with by the Parties to the extent possible, taking into account the applicable
provisions of the subject Existing Third Party Agreement.

ARTICLE XIV.

REPRESENTATIONS AND WARRANTIES

     14.1 Authority. Each Party represents and warrants that, as of the Effective
Date, it has the full right, power and authority to enter into this Strategic Alliance
Agreement and the other Transaction Agreements, and that this Strategic Alliance Agreement
and the other Transaction Agreements have been duly executed by such Party and constitute
the legal, valid and binding obligations of such Party, enforceable in accordance with their
terms, subject to (a) the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights and remedies
generally, and (b) the effect of general equitable principles, regardless of whether
asserted in a proceeding in equity or at law.

     14.2 No Conflicts. Each Party represents and warrants that the execution,
delivery and performance of this Strategic Alliance Agreement and the other Transaction
Agreements do not conflict with, or constitute a breach or default under, any of its charter

- 41 -

 

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.

     14.3 Additional Representations and Warranties of Athersys. In addition to the representations and warranties made by Athersys in Sections
14.1 and 14.2, Athersys, subject to Section 14.6, hereby represents and
warrants that as of the Effective Date:

          (a) it has not granted to any Third Party any right or license which would conflict
with the rights granted by it to Angiotech under any of the Transaction Agreements;

          (b) except as disclosed in Schedule 14.3(b) attached hereto, Athersys is the
sole and exclusive owner of the Athersys Patent Rights set forth in Schedule 1.33,
and Athersys has not placed, or suffered to be placed, any liens, charges or encumbrances on
or against such Athersys Patent Rights;

          (c) Schedule 1.33 is a true and complete list of Athersys’ Patent Rights that
pertain to the subject matter of the Transaction Agreements.;

          (d) Athersys has submitted to the United States Patent and Trademark Office all
information related to the Cells, pre-clinical development candidates, Clinical Development
Candidates and Cell Therapy Products that is required to be submitted in accordance with 37
C.F.R. 1.56, 1.97 and 1.98;

          (e) the Athersys Intellectual Property that is the subject of the rights and licenses
granted to Angiotech under the Transaction Agreements constitutes all intellectual property
owned or controlled by Athersys that is necessary or useful to manufacture, research,
develop, use or commercialize the Cells, pre-clinical development candidates, Clinical
Development Candidates and Cell Therapy Products for the Cardiovascular Indications, and to
the knowledge of Athersys there is no other Intellectual Property necessary for such
purposes that is owned or controlled by Athersys;

          (f) the Athersys Patent Rights set forth in Schedule 1.33 are existing and
inventorship of the Athersys Patent Rights not licensed by Athersys from the University of
Minnesota has been properly determined and to Athersys’ knowledge inventorship of the
Athersys Patent Rights licensed from the University of Minnesota has been properly
determined, and to Athersys’ knowledge, no issued or granted patents within the Athersys
Patent Rights licensed or sublicensed to Angiotech under the Transaction Agreements are
invalid or unenforceable;

          (g) except as set forth in Schedule 14.3(g) attached hereto, no Athersys Patent
Rights listed in Schedule 1.33 are subject to any funding agreement with any
government or government agency;

          (h) Athersys has received no written notice alleging infringement of a Third Party
Patent Right in connection with its research and development of Cells, pre-clinical
development candidates, Clinical Development Candidates and/or Cell Therapy

- 42 -

 

Products, and
Athersys has disclosed to Angiotech all material information of which Athersys is aware as
to whether the research, development, manufacture, use, sale, offer for sale or importation
of Clinical Development Candidates or Cell Therapy Products
infringes or would infringe issued or granted patents owned by a Third Party as of the
Effective Date;

          (i) the Athersys Patent Rights licensed or sublicensed to Angiotech under the
Transaction Agreements are not subject to any litigation, judgments or settlements against
or owed by Athersys, nor has Athersys received written notice of any threats of such
litigation;

          (j) the Athersys Patent Rights licensed or sublicensed to Angiotech under the
Transaction Agreements are not the subject of any interference, opposition, reissue or
reexamination proceeding in the United States or, to the knowledge of Athersys, any
opposition proceeding outside of the United States;

          (k) Athersys has not knowingly used any Intellectual Property misappropriated from a
Third Party in connection with the subject matter of the Transactional Agreements, and
Athersys is not aware of any claim by a Third Party that Intellectual Property
misappropriated from such Third Party has been used by Athersys in its research and
development of Cells, pre-clinical development candidates, Clinical Development Candidates
and/or Cell Therapy Products;

          (l) except as set forth in Schedule 14.3(l) attached hereto, to Athersys’
knowledge, there is no unauthorized use, infringement or misappropriation of any of the
Intellectual Property that is the subject of the rights and licenses granted to Angiotech
under the Transaction Agreements by any Third Party, including any current or former
employee or consultant of Athersys and its Affiliates;

          (m) with respect to activities conducted by Athersys, and to Athersys’ knowledge with
respect to activities conducted by Third Parties on behalf of Athersys, there has not been
any scientific fraud regarding Cells, Clinical Development Candidates or Cell Therapy
Products or Intellectual Property of Athersys licensed to Angiotech under the Transaction
Agreements;

          (n) to Athersys’ knowledge, no employee or agent of Athersys or any of its Affiliates
has made an untrue statement of a material fact to any governmental authority with respect
to the Cells, pre-clinical development candidates, Clinical Development Candidates and/or
Cell Therapy Products (whether in any submission to such governmental authority or
otherwise), or failed to disclose a material fact required to be disclosed to any
governmental authority with respect to the Cells, pre-clinical development candidates,
Clinical Development Candidates and/or Cell Therapy Products;

          (o) none of it, its officers, directors, employees, or Affiliates is debarred under the
Generic Drug Enforcement Act or convicted of a crime which could lead to debarment, and it
has not knowingly utilized, and has not knowingly utilized, the services of any individual
or entity in conducting its manufacturing activities hereunder that has

- 43 -

 

been
debarred under the Generic Drug Enforcement Act or convicted of a crime that could lead to debarment;

          (p) that its employees have complied materially with all safety and environmental
procedures, protocols, systems, laws, rules and regulations applicable to or associated with
its Cell isolation, purification and production activities hereunder;

          (q) Athersys and its Affiliates have complied materially with all applicable laws,
rules, regulations, permits, governmental licenses, registrations, approvals, concessions,
franchises, authorizations, orders, injunctions and decrees, including the Federal Food,
Drug and Cosmetic Act, in the research, development, manufacture and use of the Cells,
pre-clinical development candidates, Clinical Development Candidates and/or Cell Therapy
Products, and neither Athersys nor any of its Affiliates has received any written notice
from any regulatory authority claiming that any such activities as conducted by them are not
in such compliance; and

          (r) that the Cells are not derived from embryonic sources (i.e., the Cells are not
embryonic stem cells).

     14.4 Additional Covenants of Athersys. In addition to the representations and
warranties made by Athersys in Sections 14.1, 14.2, and 14.3
Athersys, subject to Section 14.6, hereby covenants to Angiotech that during the
Term:

          (a) it will not grant to any Third Party any right or license which would conflict with
the rights granted by it to Angiotech under any of the Transaction Agreements;

          (b) Athersys will not place, or suffer to be placed, any liens, charges or encumbrances
on or against any Athersys Patent Rights that may have an adverse effect on Angiotech’s
rights or licenses with respect to Athersys Patent Rights licensed to Angiotech under the
Transaction Agreements;

          (c) Athersys will submit to the United States Patent and Trademark Office all
information related to the Cells, pre-clinical development candidates, Clinical Development
Candidates and Cell Therapy Products that is required to be submitted in accordance with 37
C.F.R. 1.56, 1.97 and 1.98;

          (d) the Athersys Intellectual Property that is the subject of the rights and licenses
granted to Angiotech under the Transaction Agreements constitutes all intellectual property
owned or controlled by Athersys that is necessary or useful to manufacture, research,
develop, use or commercialize the Cells, pre-clinical development candidates, Clinical
Development Candidates and Cell Therapy Products for the Cardiovascular Indications, and to
the knowledge of Athersys there is no other Intellectual Property necessary for such
purposes that is owned or controlled by Athersys;

          (e) Athersys will take all steps necessary to ensure that the Athersys Patent Rights
set forth in Schedule 1.33 are existing and that inventorship of the Athersys Patent
Rights is properly determined, and Athersys’ will promptly inform Angiotech in

- 44 -

 

writing if
any issued or granted patents within the Athersys Patent Rights licensed or
sublicensed to Angiotech under the Transaction Agreements become invalid or
unenforceable;

          (f) Athersys
will promptly inform Angiotech in writing of receipt of any written notice alleging infringement of a Third Party Patent Right in connection with Athersys’ research
and development of Cells, pre-clinical development candidates, Clinical Development
Candidates and/or Cell Therapy Products, and Athersys will disclose to Angiotech all
material information of which Athersys becomes aware as to whether the research,
development, manufacture, use, sale, offer for sale or importation of Clinical Development
Candidates or Cell Therapy Products might constitute infringement of issued or granted
patents owned by a Third Party;

          (g) Athersys will promptly inform Angiotech in writing if Athersys Patent Rights
licensed or sublicensed to Angiotech under the Transaction Agreements become subject to any
litigation, judgments or settlements against or owed by Athersys, or if Athersys receives
written notice of any threats of such litigation;

          (h) Athersys will promptly inform Angiotech in writing if the Athersys Patent Rights
licensed or sublicensed to Angiotech under the Transaction Agreements become the subject of
any interference, opposition, reissue or reexamination proceeding in the United States or,
if Athersys learns of any opposition proceeding outside of the United States with respect to
the Athersys Patent Rights licensed to Angiotech under the Transaction Agreements;

          (i) Athersys will not knowingly use any Intellectual Property misappropriated from a
Third Party in connection with the subject matter of the Transactional Agreements, and
Athersys will promptly inform Angiotech in writing of any claim by a Third Party that
Intellectual Property misappropriated from such Third Party has been used by Athersys in its
research and development of Cells, pre-clinical development candidates, Clinical Development
Candidates and/or Cell Therapy Products;

          (j) Athersys will promptly inform Angiotech in writing of any unauthorized use,
infringement or misappropriation of any of the Intellectual Property that is the subject of
the rights and licenses granted to Angiotech under the Transaction Agreements by any Third
Party, including any current or former employee or consultant of Athersys and its
Affiliates;

          (k) there will not be any scientific fraud by Athersys or its Affiliates regarding
Cells, Clinical Development Candidates or Cell Therapy Products or Intellectual Property of
Athersys licensed to Angiotech under the Transaction Agreements, and with respect to
activities conducted on behalf of Athersys, Athersys shall make Commercially Reasonable
Efforts to ensure that there will not be any scientific fraud by any such Third Party
regarding Cells, Clinical Development Candidates or Cell Therapy Products or Intellectual
Property of Athersys licensed to Angiotech under the Transaction Agreements;

- 45 -

 

          (l) no employee or agent of Athersys or any of its Affiliates will make an untrue
statement of a material fact to any governmental authority with respect to the Cells,
pre-clinical development candidates, Clinical Development Candidates and/or Cell Therapy
Products (whether in any submission to such governmental authority or otherwise), or fail to
disclose a material fact required to be disclosed to any governmental authority with respect
to the Cells, pre-clinical development candidates, Clinical Development Candidates and/or
Cell Therapy Products;

          (m) none of it, its officers, directors, employees, or Affiliates will be debarred
under the Generic Drug Enforcement Act or will be convicted of a crime which could lead to
debarment, and it will not knowingly utilize, the services of any individual or entity in
conducting its manufacturing activities hereunder that has been debarred under the Generic
Drug Enforcement Act or convicted of a crime that could lead to debarment;

          (n) that its employees will comply materially with all safety and environmental
procedures, protocols, systems, laws, rules and regulations applicable to or associated with
its Cell isolation, purification and production activities hereunder;

          (o) Athersys and its Affiliates will comply materially with all applicable laws, rules,
regulations, permits, governmental licenses, registrations, approvals, concessions,
franchises, authorizations, orders, injunctions and decrees, including the Federal Food,
Drug and Cosmetic Act, in the research, development, manufacture and use of the Cells,
pre-clinical development candidates, Clinical Development Candidates and/or Cell Therapy
Products, and Athersys will promptly inform Angiotech in writing if either Athersys or any
of its Affiliates receive any written notice from any regulatory authority claiming that any
such activities as conducted by them are not in such compliance; and

          (p) that the Cells will not be derived from embryonic sources (i.e., the Cells will not
be embryonic stem cells).

     14.5 Additional Covenants of Angiotech. In addition to the representations and
warranties made by Angiotech in Sections 14.1 and 14.2, Angiotech, subject
to Section 14.6, hereby covenants to Athersys that during the Term:

          (a) Angiotech will not knowingly use any Intellectual Property misappropriated from a
Third Party in connection with the subject matter of the Transactional Agreements, and
Angiotech will promptly inform Athersys in writing of any claim by a Third Party that
Intellectual Property misappropriated from such Third Party has been used by Angiotech in
its research and development of Cells, pre-clinical development candidates, Clinical
Development Candidates and/or Cell Therapy Products;

          (b) Angiotech will promptly inform Athersys in writing of any unauthorized use,
infringement or misappropriation of any of the Intellectual Property
that is the subject of the rights and licenses granted to Angiotech under the
Transaction Agreements by any Third Party;

- 46 -

 

          (c) there will not be any scientific fraud by Angiotech or its Affiliates regarding
Cells, Clinical Development Candidates or Cell Therapy Products licensed to Angiotech under
the Transaction Agreements, and with respect to activities conducted on behalf of Angiotech,
Angiotech shall make Commercially Reasonable Efforts to ensure that there will not be any
scientific fraud by any such Third Party regarding Cells, Clinical Development Candidates or
Cell Therapy Products licensed to Angiotech under the Transaction Agreements;

          (d) no employee or agent of Angiotech or any of its Affiliates will make an untrue
statement of a material fact to any governmental authority with respect to the Cells,
pre-clinical development candidates, Clinical Development Candidates and/or Cell Therapy
Products (whether in any submission to such governmental authority or otherwise), or fail to
disclose a material fact required to be disclosed to any governmental authority with respect
to the Cells, pre-clinical development candidates, Clinical Development Candidates and/or
Cell Therapy Products;

          (e) none of it, its officers, directors, employees, or Affiliates will be debarred
under the Generic Drug Enforcement Act or will be convicted of a crime which could lead to
debarment, and it will not knowingly utilize, the services of any individual or entity in
conducting its manufacturing activities hereunder that has been debarred under the Generic
Drug Enforcement Act or convicted of a crime that could lead to debarment; and

          (f) Angiotech and its Affiliates will comply materially with all applicable laws,
rules, regulations, permits, governmental licenses, registrations, approvals, concessions,
franchises, authorizations, orders, injunctions and decrees, including the Federal Food,
Drug and Cosmetic Act, in the research, development, manufacture and use of the Cells,
pre-clinical development candidates, Clinical Development Candidates and/or Cell Therapy
Products, and Angiotech will promptly inform Athersys in writing if either Angiotech or any
of its Affiliates receive any written notice from any regulatory authority claiming that any
such activities as conducted by them are not in such compliance.

     14.6 Disclaimer Of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS STRATEGIC
ALLIANCE AGREEMENT OR ANY TRANSACTION AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS NOR
EXTENDS ANY WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT
NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
NON-INFRINGEMENT.

ARTICLE XV.

INDEMNIFICATION AND INSURANCE

     15.1 Indemnification By Athersys. Athersys shall indemnify, defend and hold
Angiotech, its Affiliates and their permitted contractors and agents, employees, officers
and directors (the “Angiotech Indemnitees”) harmless from and against any and all

- 47 -

 

liability,
damage, loss, cost or expense (including reasonable attorneys’ fees) arising out of Third
Party claims or lawsuits related to (a) Athersys’ performance of its obligations under the
Transaction Agreements, (b) a breach by Athersys of any of its covenants, representations or
warranties set forth in the Transaction Agreements; (c) arising out of the use of the
Company Technology, Company Patents, University Technology, and/or University Patents and/or
the development, manufacture, use, storage, handling, distribution or sale of any Clinical
Development Candidates or Cell Therapy Products by or on behalf of Athersys or its
Affiliates (other than those Cell Therapy Products for which the Parties share Profits); or
(d) the failure of Clinical Development Candidates or Cell Therapy Products manufactured by
or on behalf of Athersys to meet the Clinical Development Candidate or Cell Therapy Product
(as applicable) specifications or to be manufactured in compliance with current Good
Manufacturing Practices or other applicable laws and regulations; provided, however, all of
the foregoing is only to the extent that such claims or suits do not result from a breach of
any of the provisions of the Transaction Agreements, gross negligence or willful misconduct
of any of the Angiotech Indemnitees. Upon the assertion of any such claim or suit,
Angiotech shall promptly notify Athersys thereof and Athersys shall appoint counsel
reasonably acceptable to the affected Angiotech Indemnitees to represent such Angiotech
Indemnitees with respect to any claim or suit for which indemnification is sought. Neither
Athersys nor the Angiotech Indemnitees shall enter into any settlement agreement with any
Third Party without the consent of the other Party, which consent shall not be unreasonably
withheld; provided that affected Angiotech Indemnitees shall be permitted in their sole
discretion to settle any such claim or suit if they have first waived their rights to
indemnification hereunder.

     15.2 Indemnification By Angiotech. Angiotech shall indemnify, defend and hold
Athersys, its Affiliates and their permitted contractors and agents, employees, officers and
directors (the “Athersys Indemnitees”) harmless from and against any and all liability,
damage, loss, cost or expense (including reasonable attorneys’ fees) arising out of Third
Party claims or lawsuits related to (a) Angiotech’s performance of its obligations under the
Transaction Agreements; (b) a breach by Angiotech of any of its covenants, representations
or warranties set forth in the Transaction Agreements; or (c) arising out of the use of the
Company Technology, Company Patents, University Technology, and/or University Patents and/or
the development, manufacture, use, storage, handling, distribution or sale of any Clinical
Development Candidates or Cell Therapy Products by or on behalf of Angiotech or its
Affiliates (other than those Cell Therapy Products for which the Parties share Profits);
provided, however, all of the foregoing is only to the extent that such claims or suits do
not result from a breach of any of the provisions of the Transaction Agreements, gross
negligence or willful misconduct of the Athersys Indemnitees. Upon the assertion of any
such claim or suit, Athersys shall promptly notify Angiotech thereof
and Angiotech shall appoint counsel reasonably acceptable to the affected Athersys
Indemnitees to represent such Athersys Indemnitees with respect to any claim or suit for
which indemnification is sought. Neither Angiotech nor the Athersys Indemnitees shall enter
into any settlement agreement with any Third Party without the consent of the other Party,
which consent shall not be unreasonably withheld; provided that affected Athersys
Indemnitees shall be permitted in their sole

- 48 -

 

discretion to settle any such claim or suit if
they have first waived their rights to indemnification hereunder.

     15.3 Insurance. During the Term and for a period of two (2) years thereafter,
each Party shall obtain and maintain commercial general liability insurance, including
products liability insurance, with reputable and financially secure insurance carriers with
respect to its obligations, responsibilities and activities under the Transaction
Agreements. Such insurance shall be in such amounts and subject to such deductibles as the
Parties may agree based upon standards prevailing in the industry at the time, but in each
case with limits of not less than Five Million Dollars ($5,000,000.00) per occurrence and in
the aggregate.

ARTICLE XVI.

TERM AND TERMINATION

     16.1 Term. This Strategic Alliance Agreement shall commence on the Effective
Date and, unless terminated earlier pursuant to Section 16.2, shall continue in full
force and effect until the earlier to occur of: (a) five (5) years after the Effective Date,
if the JSC has not approved any Clinical Development Program on or before such fifth year
anniversary; (b) if at least one Cell Therapy Product has obtained Regulatory Approval in
the Territory and the Parties have shared Profits with respect to at least one Cell Therapy
Product, on the date that there has been no sales for twelve (12) months of any Cell Therapy
Product that has been the subject of Profit-sharing, unless a Clinical Development Candidate
is in Phase III Studies or later; or (c) the later of (i) the expiration date of the
last-to-expire patent licensed to Angiotech under the Transaction Agreements, or (ii)
fifteen (15) years after the Effective Date. The period of time from the Effective Date
until expiration or early termination is the “Term.”

     16.2 Termination.

          (a) Uncured Breach of Athersys. The failure by Athersys to substantially
comply with any of the material obligations contained in this Strategic Alliance Agreement
or any Transaction Agreement shall entitle Angiotech to give written notice to have the
default cured. If such default is not cured within sixty (60) days after the receipt of
such written notice, or if by its nature such default is not capable of cure within such
sixty (60)-day period, then Angiotech shall be entitled, without prejudice to any of its
other rights conferred on it by this Strategic Alliance Agreement or any Transaction
Agreement, and in addition to any other remedies that may be available to it, to terminate
this Strategic Alliance Agreement; provided, however, that such right to terminate
shall be stayed in the event that, during such sixty (60)-day period, Athersys shall have:
(i) initiated dispute resolution in accordance with ARTICLE XVII below with respect
to the alleged default, and (ii) diligently and in good faith cooperated in the prompt
resolution of such dispute resolution process.

          (b) Uncured Breach of Angiotech. The failure by Angiotech to substantially
comply with any of the material obligations contained in this Strategic Alliance Agreement
or any Transaction Agreement shall entitle Athersys to give written

- 49 -

 

notice to have the
default cured. If such default is not cured within sixty (60) days after the receipt of
such written notice, or if by its nature such default is not capable of cure within such
sixty (60)-day period, then Athersys shall be entitled, without prejudice to any of its
other rights conferred on it by this Strategic Alliance Agreement or any Transaction
Agreement, and in addition to any other remedies that may be available to it, to terminate
this Strategic Alliance Agreement; provided, however, that such right to terminate shall be
stayed in the event that, during such sixty (60)-day period, Angiotech shall have: (i)
initiated dispute resolution in accordance with ARTICLE XVII below with respect to
the alleged default, and (ii) diligently and in good faith cooperated in the prompt
resolution of such dispute resolution process.

          (c) Insolvency of Athersys. In the event that Athersys has filed or instituted
bankruptcy, reorganization, liquidation or receivership proceedings, or has assigned a
substantial portion of its assets for the benefit of creditors during the Term, Angiotech
may immediately terminate the Transaction Agreements in their entirety upon written notice
of termination to Athersys; provided, however, that in the event of any involuntary
bankruptcy or receivership proceeding, such right of Angiotech to terminate the Transaction
Agreements shall only become effective if Athersys consents to the involuntary bankruptcy or
receivership or such proceeding is not dismissed within ninety (90) days after the filing
thereof; and further provided that, if the Transaction Agreements are terminated by
Angiotech due to the rejection of this Strategic Alliance Agreement or any Transaction
Agreement by or on behalf of Athersys under Section 365 of the United States Bankruptcy Code
(the “Code”), all licenses and rights to licenses granted under or pursuant to the
Transaction Agreements by Athersys to Angiotech are, and shall otherwise be deemed to be,
for purposes of Section 365(n) of the Code, licenses of rights to “intellectual property” as
defined under Section 1010(35A) of the Code. The Parties agree that Angiotech, as a
licensee of such rights under the Transaction Agreements, shall retain and may fully
exercise all of its rights and elections under the Code, and that upon commencement of a
bankruptcy proceeding by or against Athersys under the Code, Angiotech shall be entitled to
a complete duplicate of, or complete access to (as Angiotech deems appropriate), any such
intellectual property and all embodiments of such intellectual property. Such intellectual
property and all embodiments thereof shall be promptly delivered to Angiotech (a) upon any
such commencement of a bankruptcy proceeding and upon written request therefor by Angiotech,
unless Athersys elects to continue, and does continue, to perform all of its obligations
under the Transaction Agreements, or (b) if not delivered under (a) above, upon the
rejection of this Strategic Alliance Agreement or any Transaction Agreement by or on behalf
of Athersys and upon written request therefor by Angiotech. Athersys agrees not to
interfere with Angiotech’s
exercise under the Code of rights and licenses to intellectual property licensed
hereunder and embodiments thereof in accordance with this Section 16.2(c) and agrees
to use Commercially Reasonable Efforts to assist Angiotech to obtain such intellectual
property and embodiments thereof in the possession or control of Third Parties as are
reasonably necessary or useful for Angiotech to exercise such rights and licenses in
accordance with the Transaction Agreements. The foregoing provisions are without prejudice
to any rights Angiotech may have arising under the Code or other applicable law.

- 50 -

 

          (d) Termination for Cause. Angiotech shall have a right to terminate the
Transaction Agreements for cause (as set forth in (i) or (ii) below), which termination
right may be exercised at any time during the Term. Such termination shall require at least
one hundred twenty (120) days prior written notice by Angiotech that terminates for cause,
and during such 120-day period the Parties shall continue to share costs that are incurred
and Profit that is obtained in connection with activities under the Transaction Agreements
that have been commenced but not yet completed.

     (i) Grounds that Constitute “For Cause”. If Angiotech, using its
reasonable and sound business judgment, determines that (A) a primary endpoint(s) in
a clinical study within a Clinical Development Plan has not been fulfilled or met;
(B) at least one (1) IND has not been filed by the Parties within three (3) years
after the Effective Date; (C) clinical efficacy and/or safety with respect to Cells,
a Clinical Development Candidate or a Cell Therapy Product have not been
demonstrated; (D) applicable regulatory requirements for Cells, a Clinical
Development Candidate or a Cell Therapy Product in one or more Major Markets in the
Territory shall have a material adverse impact on the ability to obtain Regulatory
Approval for a Cell Therapy Product in such countries; (E) Athersys data regarding
Cells, a Clinical Development Candidate or a Cell Therapy Product were obtained, in
whole or in part, through scientific fraud; and/or (F) a Cell Therapy Product is not
(or is not expected to be) commercially viable or profitable for a Party in at least
one of the Major Market in the Territory, then any of the conditions (A-F) above
shall constitute a grounds for termination of the Transaction Agreements “for
cause.”

     (ii) Decision to Terminate For Cause. If Angiotech decides to
terminate the Transaction Agreements for cause, then Angiotech shall provide written
notice to Athersys of such decision (and this written notice shall also serve as a
notice of termination as specified in such written notice); provided that with
respect to each instance of an event giving rise to the applicable grounds for
termination, in order to be effective such written notice shall be provided to
Athersys within one hundred eighty (180) days after Angiotech, using its reasonable
and sound business judgment, makes a determination that such event has occurred.

          (e) Change of Control of Athersys. For purposes of this clause (e), “Change of
Control” means the consummation of a transaction during the Term in which a Third Party
acquires, merges or consolidates with Athersys; or possesses (directly or indirectly) the
power to direct or cause the direction of management or policies of
Athersys through ownership of a majority of securities, partnership, or other ownership
rights or agreements; or in which Athersys transfers or sells all or substantially all of
its assets or business to which the Transaction Agreements relate; provided, however, that
none of the following shall be considered a Change in Control: (i) a merger effected
exclusively for the purpose of changing the domicile of Athersys; (ii) an equity financing
in which Athersys is the surviving corporation; or (iii) a transaction in which the
stockholders of Athersys immediately prior to the transaction own fifty percent (50%) or
more of the voting power of the surviving corporation following the transaction. In the

- 51 -

 

event of a Change of Control of Athersys during the Term, Athersys shall provide written
notice of such Change of Control to Angiotech no later than ten (10) business days after the
occurrence of such event (“Change of Control Notice”). If the Change of Control results in
Athersys becoming controlled by a Local Therapeutic Company, or if Angiotech has other sound
business reasons, Angiotech may, in its sole discretion and at its election, terminate the
Transaction Agreements by giving Athersys and the Third Party successor to Athersys written
notice of termination within ninety (90) days after the later to occur of: (x) the date of
consummation of such transaction, or (xi) the date Angiotech received the Change of Control
Notice from Athersys. Any such notice of termination by Angiotech shall be effective sixty
(60) days after delivery of such notice to Athersys and the Third Party successor to
Athersys. If Angiotech does not exercise this right of termination, Angiotech, Athersys and
the Third Party successor to Athersys shall continue thereafter to fulfill their respective
rights and obligations under the Transaction Agreements.

     16.3 Effects of Termination.

          (a) Termination by Angiotech. Upon termination of the Transaction Agreements
by Angiotech pursuant to Section 16.2(a) or Section 16.2(c), Athersys shall
be deemed to be the Discontinuing Party and to have delivered an Opt-Out Notice on the
effective date of such termination with respect to all Clinical Development Candidates and
Cell Therapy Products pursuant to Section 6.1 (notwithstanding whether or not the
first Phase I Trial has been completed) and Angiotech shall be entitled to exercise the Sole
Development Option as described in Section 6.1. If Angiotech exercises the Sole
Development Option as described in the foregoing sentence, the Parties’ rights and
obligations set forth in the Transaction Agreements (including, without limitation,
Intellectual Property licenses) shall survive in perpetuity to the extent necessary for
Angiotech and Athersys to exercise their rights and obligations as Developing Party and
Discontinuing Party (respectively) pursuant to ARTICLE VI; provided, however, that
if Angiotech exercises the Sole Development Option as described in this Section
16.3(a): (i) the Replacement Fee (if any is outstanding at the time of termination)
shall remain payable to Athersys as described in Section 2.4, and (ii)
notwithstanding the provisions of Section 6.1(a), the achievement of each regulatory
approval or commercialization milestone pursuant to Section 7.3 (as described in
Schedule 7.3, Items 2-5) shall result in an amount payable to Athersys equal to (A)
twenty five percent (25%) of the amount described for such milestone in Schedule 7.3,
Items 2-5 (as applicable), if the Transaction Agreements are terminated by Angiotech
pursuant to Section 16.2(a), or (B) fifty percent (50%) of the amount described for
such milestone in Schedule 7.3, Items 2-5 (as
applicable), if the Transaction Agreements are terminated by Angiotech pursuant to
Section 16.2(c).

          (b) Termination by Athersys. Upon termination of the Transaction Agreements by
Athersys pursuant to Section 16.2(b), Angiotech shall be deemed to be the
Discontinuing Party and to have delivered an Opt-Out Notice on the effective date of such
termination with respect to all Clinical Development Candidates and Cell Therapy Products
pursuant to Section 6.1 (notwithstanding whether or not the first Phase I Trial has
been completed) and Athersys shall be entitled to exercise the Sole Development

- 52 -

 

Option as
described in Section 6.1. If Athersys exercises the Sole Development Option as
described in the foregoing sentence, the Parties’ rights and obligations set forth in the
Transaction Agreements (including, without limitation, Intellectual Property licenses) shall
survive in perpetuity to the extent necessary for Athersys and Angiotech to exercise their
rights and obligations as Developing Party and Discontinuing Party (respectively) pursuant
to ARTICLE VI.

     16.4 Survival Of Obligations. The termination or expiration of this Strategic
Alliance Agreement or any Transaction Agreement shall not relieve the Parties of any
obligations accruing prior to such expiration or termination, and any such expiration or
termination shall be without prejudice to the rights of any Party against another Party. In
addition, the provisions of Article I, to the extent definitions are embodied in the
following listed Articles and Sections of this Agreement; Articles VII (to the extent any
payments have accrued as of the effective date of expiration or termination, but have not
yet been paid), XI, XIII, XV and XVII (with respect to disputes arising during the Term that
have not been resolved); Sections 2.6, 2.7, 3.7 (with respect to disputes arising during the
Term that have not been resolved), 7.8, 7.9 (once within one year after termination), 7.10,
9.5 (with respect to rejection of any Cell Therapy Product), 12.2, 14.6, 16.3, this 16.4,
18.1, and 18.4-18.13, shall survive any expiration or termination of this Strategic Alliance
Agreement for any reason. In each situation, where one of the surviving provisions requires
action or review by the JSC, the JSC will also survive expiration or termination to the
extent necessary.

ARTICLE XVII.

DISPUTE RESOLUTION

     17.1 Dispute Resolution Process. The Parties acknowledge and agree that their
long-term mutual interests as of the Effective Date will be best served by effecting a rapid
and fair resolution of any claims or disputes which may arise out of this Strategic Alliance
Agreement or any Transaction Agreement. Therefore, the Parties agree to use their
commercially reasonable best efforts to resolve in good faith all such disputes as rapidly
as possible on a fair and equitable basis.

          (a) Except as set forth in Section 3.7, Section 5.2, Section
5.3 and Section 7.2(c), if any dispute, controversy or claim arising under this
Strategic Alliance
Agreement or any other Transaction Agreement cannot be readily resolved by the Parties,
then the Parties agree to refer the matter to a panel consisting of the President of
Angiotech and the President of Athersys for review and resolution. A copy of the terms of
this Strategic Alliance Agreement and the other Transaction Agreements, agreed-upon facts
(and areas of disagreement), and a concise summary of the basis for each Party’s position
and contentions will be provided to such Presidents, who shall review the same, confer in
good faith and reach a mutual resolution of the issue.

          (b) If a dispute, controversy or claim cannot be settled through negotiation of the
Presidents of the Parties pursuant to Section 17.1(a), then, except as otherwise
specified in any of the Transaction Agreements, the Parties agree to submit the dispute to

- 53 -

 

mediation under the Commercial Mediation Rules of the American Arbitration Association.

          (c) If efforts at mediation are unsuccessful within sixty (60) days after the date that
one Party notifies the other Party that it desires to resolve a dispute, controversy or
claim through mediation, any unresolved dispute, controversy or claim between the Parties
shall be resolved at the mutual agreement of the Parties by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration Association,
except as modified herein. Failing mutual agreement to submit such unresolved dispute,
controversy or claim to arbitration, either Party may resort to other legal remedies.

          (d) If the Parties mutually agree to submit an unresolved dispute, controversy or claim
to arbitration, each Party shall select one arbitrator and the two (2) arbitrators so
selected shall choose a third arbitrator to resolve the dispute. Prior to the commencement
of arbitration, each Party shall certify that its chosen arbitrator is competent to decide
such dispute and the two (2) arbitrators so certified shall jointly certify that their
chosen third arbitrator is likewise competent to decide such dispute. Such competence may
include the ability to understand disputes which are primarily scientific in nature or which
require expertise and knowledge of processes related to the commercial development of a
pharmaceutical/medical device product which is peculiar to persons in the
biotechnology/pharmaceutical industry. A reasoned arbitration decision shall be rendered in
writing within six (6) months of the conclusion of mediation and shall be binding and not be
appealable to any court in any jurisdiction. The prevailing Party may enter such decision
in any court having competent jurisdiction. The mediation and arbitration proceedings shall
be conducted in the English language and shall be held in New York, New York, U.S.A. The
Parties agree that they shall share equally the cost of the mediation and arbitration filing
and hearing fees, and the cost of the mediator/arbitrator. Each Party must bear its own
attorneys’ fees and associated costs and expenses with respect to any such mediation and
arbitration proceedings.

     17.2 Injunctive Relief. Each Party acknowledges that (a) the covenants and the
restrictions of the other Party that are contained in this Strategic Alliance Agreement and
the other Transaction Agreements are an inducement to enter into this Strategic Alliance
Agreement and the
other Transaction Agreements, and are necessary and required for the protection of the
Parties, (b) such covenants and restrictions may relate to matters that are of a special,
unique and extraordinary character that may give each of such covenants a special, unique
and extraordinary value, and (c) a material breach of any of such covenants and restrictions
may result in irreparable harm and damages to a Party in an amount that may be difficult to
ascertain, and which may not be adequately compensated by a monetary award. Accordingly,
in addition to any of the relief to which a Party may be entitled under this Strategic
Alliance Agreement or any other Transaction Agreement, at law or in equity, such Party shall
be entitled to seek temporary and permanent injunctive relief from any such breach or
threatened breach of such covenants or restrictions without proof of actual damages that
have been or may be caused to such Party by such breach or threatened breach. In the event
an action for injunctive relief is

- 54 -

 

brought by a Party, the other Party waives any right to
require the Party bringing such action to post any bond or other security with the court in
connection therewith.

ARTICLE XVIII.

MISCELLANEOUS PROVISIONS

     18.1 Governing Law. The Transaction Agreements 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.

     18.2 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), 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.

     18.3 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 Term to
enable the requesting Party to comply with the requirements of any United States or foreign
federal, state, and/or government agency.

     18.4 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.

     18.5 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.

- 55 -

 

     18.6 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.

     18.7 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.

     18.8 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.

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

     18.10 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 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

- 56 -

 

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.

     18.11 No Consequential Damages. EXCEPT IN CONNECTION WITH A PARTY’S
OBLIGATIONS UNDER ARTICLE XV, 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.

     18.12 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 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.

     18.13 Complete Agreement. This Strategic Alliance Agreement, together with its
Schedules and Exhibits, and any Pre-Clinical Development Plans and Clinical Development
Plans approved by the Parties, the 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.

- 57 -

 

[Signature page follows]

- 58 -

 

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

	 	 	 	 	 	 	 
	 	 	ATHERSYS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	ANGIOTECH PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

[Signature page to Strategic Alliance Agreement]

 

 

Schedule 1.13

Cost Definitions

	1.	 	“Clinical Development Costs” means, with respect to each Clinical Development Plan, all of
the external and internal costs and expenses (including applicable overhead costs and
expenses, including applicable general and administrative expenses, but excluding any
Commercialization Costs and Commercial Manufacturing Costs) incurred or paid by a Party and
its Affiliates in connection with the clinical development of Clinical Development Candidates
or Cell Therapy Products, including, without limitation, the following costs to the extent
such costs are actually incurred by a Party, accounted for in accordance with U.S. GAAP as
consistently applied by such Party and attributable to the activities assigned to it under the
Clinical Development Plan (except to the extent such costs constitute Commercialization Costs
or Commercial Manufacturing Costs):

	 	(a)	 	All direct costs of preparing and conducting clinical trials that is/are
subject of the Clinical Development Plan, including all direct costs related to site
recruitment, enrollment, project management, site management and monitoring,
biostatistics, clinical event classification, medical communication, data management,
outcome studies, regulatory submissions and compliance, safety surveillance, clinical
monitoring and all Clinical Manufacturing Costs; and
	 
	 	(b)	 	A reasonable allocation of indirect costs associated with the foregoing.

	2.	 	“Commercialization Costs” means, with respect to each Cell Therapy Product, all of the
external and internal costs and expenses (including applicable overhead costs and expenses,
including applicable general and administrative expenses, but excluding any Clinical
Development Costs and Commercial Manufacturing Costs) incurred or paid by Angiotech and its
Affiliates in connection with the commercialization of Cell Therapy Products, including,
without limitation, the following costs to the extent such costs are actually incurred by a
Party, accounted for in accordance with U.S. GAAP as consistently applied by such Party and
attributable to the promotion, marketing, advertising, sale, or distribution of the Cell
Therapy Product and preparing and conducting Phase IV Studies:

	 	(a)	 	All direct costs of promoting, marketing, advertising and selling the Cell
Therapy Product, including sales commissions, product labels, marketing brochures,
graphic and media design, website modification and license fees (if any);
	 
	 	(b)	 	All Third Party Payments; and
	 
	 	(c)	 	A reasonable allocation of indirect costs associated with the foregoing;
	 
	 	 	 	provided that any costs described above incurred or paid by Angiotech and its Affiliates in
connection with the preparation for commercialization of a Clinical Development Candidate
that Angiotech reasonably believes will obtain Regulatory Approval for at least one
Cardiovascular Indication (and thereby become a “Cell Therapy Product” hereunder) shall also
be deemed to be “Commercialization Costs”.

- 1 -

 

	3.	 	“Manufacturing Costs” means, with respect to each Clinical Development Candidate (the
“Clinical Manufacturing Costs”) and Cell Therapy Product (the “Commercial Manufacturing
Costs”), all of the external and internal costs and expenses (including applicable overhead
costs and expenses, including applicable general and administrative expenses, but excluding
any Clinical Development Costs) incurred or paid by Athersys and its Affiliates (or Angiotech
and its Affiliates if Angiotech has acquired manufacturing rights hereunder) in connection
with the manufacturing of Clinical Development Candidates or Cell Therapy Products (as
applicable), including, without limitation, the following costs to the extent such costs are
actually incurred by the manufacturing Party, accounted for in accordance with U.S. GAAP as
consistently applied by the manufacturing Party and attributable to the manufacture and supply
of the Clinical Development Candidate or Cell Therapy Product (as applicable) to Angiotech or
any Third Party:

	 	(a)	 	All direct costs of manufacturing and supply the Clinical Development Candidate
or Cell Therapy Product (as applicable), including all direct costs of raw materials,
labor, license fees (if any), maintenance and repair of equipment used to manufacture
the Clinical Development Candidate or Cell Therapy Product (as applicable), storage and
packaging and shipping costs; and
	 
	 	(b)	 	A reasonable allocation of indirect costs associated with the foregoing,
including depreciation associated with the cost of capital for equipment used to
manufacture the Clinical Development Candidate or Cell Therapy Product (as applicable).

- 2 -

 

Schedule 1.14

Clinical Development Plans

[Each Clinical Development Plan to be developed by the Parties in accordance with the

Strategic Alliance Agreement and attached hereto]

 

 

Schedule 1.33

Patent Rights Related To MAPCs

[attached]

 

 

Schedule 1.45

Pre-Clinical Development Plans

[Each Pre-Clinical Development Plan to be developed by the Parties in accordance with the

Strategic Alliance Agreement and attached hereto]

 

 

Schedule 2.2

Equity Valuation 

	1.	 	For the purpose of any Athersys capital stock issued to Angiotech pursuant to this Strategic
Alliance Agreement, the price per share of such Athersys capital stock shall be calculated as
follows:

	 	(a)	 	If at the time of issuance Athersys common stock is publicly traded, the
capital stock shall be Athersys common stock and the price per share of Athersys common
stock shall be equal to (i) the Average Closing Price (as defined below) plus
(ii) 12.5% of the Average Closing Price.
	 
	 	(b)	 	If at the time of issuance Athersys common stock is not publicly traded, the
capital stock shall be Athersys common stock and the price per share of Athersys common
stock shall be equal to the price per share for the purchase of common stock during the
last round of funding by Athersys from any Third Party financial investor plus
12.5% of such amount and.

	2.	 	For purposes of this Schedule, the following terms shall have the meanings indicated below:

	 	(a)	 	“Average Closing Price” shall mean the arithmetic mean of the Closing Prices
(as defined below) for the twenty (20) days immediately preceding the fifth trading day
prior to the date of issuance.
	 
	 	(b)	 	“Closing Price” shall mean the price per share of the last sale of Athersys
common stock, as reported on the relevant national exchange on which the Athersys
common stock is publicly traded, at the close of the trading day.

 

 

Schedule 4.1

Existing Third Party Agreement

[attached]

 

 

Schedule 7.3

Milestone Payments

	1.	 	Upon first Successful Completion of a Phase II Study for a Clinical Development Candidate in
the U.S. (or foreign equivalent trial) in any of the Cardiovascular Indications, one of the
following shall occur:

	 	(a)	 	If both Athersys and Angiotech agree that such Clinical Development Candidate
should proceed to a Phase III Study, then the following shall apply:

	 	(i)	 	Angiotech shall pay to Athersys a one-time milestone payment in
cash equal to $[*]; and
	 
	 	(ii)	 	Angiotech shall enter into a securities purchase agreement, in
substantially the form of the Purchase Agreement (except for necessary
adaptations for a securities purchase instead of a note purchase), pursuant to
which Angiotech shall make a one-time purchase of $[*]of capital stock of
Athersys, of the class and at the per share price determined in accordance with
Schedule 2.2, on the terms and conditions set forth therein.

	 	(b)	 	If both Athersys and Angiotech agree that an additional Phase II Study needs to
be conducted for such Clinical Development Candidate, then the following shall apply:

	 	(i)	 	Angiotech shall pay to Athersys a one-time milestone payment in
cash equal to $[*]; and
	 
	 	(ii)	 	Upon next Successful Completion of a Phase II Study for any
Clinical Development Candidate in any Cardiovascular Indication, and a mutual
determination that such Clinical Development Candidate should proceed to a
Phase III Study, Angiotech shall enter into a securities purchase agreement, in
substantially the form of the Purchase Agreement (except for necessary
adaptations for a securities purchase instead of a note purchase), pursuant to
which Angiotech shall make a one-time purchase of $[*]of capital stock of
Athersys, of the class and at the per share price determined in accordance with
Schedule 2.2, on the terms and conditions set forth therein.

	 	(c)	 	If Angiotech believes that the Clinical Development Candidate should proceed to
a Phase III Study and Athersys does not agree with Angiotech then, if such disagreement
persists after attempts at resolution by the Heads of Research and the Party’s
President, CFO (or other designated executive level officer) pursuant to Section
3.7(b), the following shall apply:

 

			
	*	 	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.

- 1 -

 

	 	(i)	 	Angiotech shall pay to Athersys a one-time milestone payment in cash equal
to $[*];
	 
	 	(ii)	 	Athersys shall be deemed to have delivered an Opt-Out Notice
with respect to such Clinical Development Candidate pursuant to ARTICLE
VI and all such provisions in ARTICLE VI shall apply; and
	 
	 	(iii)	 	Upon the next Successful Completion of a Phase II Study for
any Clinical Development Candidate in any Cardiovascular Indication, and a
mutual determination that such Clinical Development Candidate should proceed to
a Phase III Study, Angiotech shall enter into a securities purchase agreement,
in substantially the form of the Purchase Agreement (except for necessary
adaptations for a securities purchase instead of a note purchase), pursuant to
which Angiotech shall make a one-time purchase of $[*]of capital stock of
Athersys, of the class and at the per share price determined in accordance with
Schedule 2.2, on the terms and conditions set forth therein.

	 	(d)	 	If Athersys believes that the Clinical Development Candidate should proceed to
a Phase III Study and Angiotech does not agree with Athersys then, if such disagreement
persists after attempts at resolution by the Heads of Research and the Party’s
President, CFO (or other designated executive level officer) pursuant to Section
3.7(b), the following shall apply:

	 	(i)	 	No milestone payment shall be paid by Angiotech to Athersys
with respect to such Phase II Study;
	 
	 	(ii)	 	Angiotech shall be deemed to have delivered an Opt-Out Notice
with respect to such Clinical Development Candidate pursuant to ARTICLE
VI and all such provisions in ARTICLE VI shall apply; and
	 
	 	(iii)	 	Upon the next Successful Completion of a Phase II Study for
any Clinical Development Candidate in any Cardiovascular Indication, and a
mutual determination that such Clinical Development Candidate should proceed to
a Phase III Study, the following shall apply:

	 	(A)	 	Angiotech shall pay to Athersys a one-time
milestone payment in cash equal to $[*]; and
	 
	 	(B)	 	Angiotech shall enter into a securities
purchase agreement, in substantially the form of the Purchase Agreement
(except for necessary adaptations for a securities purchase instead of
a note purchase), pursuant to which Angiotech shall make a one-time
purchase of $[*]of capital stock of Athersys, of the class and at the
per share price determined in accordance with Schedule 2.2, on
the terms and conditions set forth therein.

 

	*	 	 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.

- 2 -

 

	 	(e)	 	If both Athersys and Angiotech agree that such Clinical Development Candidate
should NOT proceed to a Phase III Study and that an additional Phase II should NOT be
conducted for such Clinical Development Candidate, then the following shall apply:

	 	(i)	 	No milestone payment shall be paid by Angiotech to Athersys
with respect to such Phase II Study; and
	 
	 	(ii)	 	The provisions of this Schedule 7.3, Item 1 shall apply to
future Phase II Studies with respect to other Clinical Development Candidates
in any Cardiovascular Indications as if such prior Phase II Studies had not
been conducted.

     For the avoidance of doubt, in no event shall Angiotech be obligated to pay to Athersys during
the Term more than $[*]in the aggregate under this Schedule 7.3, Item 1.

	2.	 	Upon the approval of the first NDA/BLA for the first Clinical Development Candidate in the
U.S. in any of the Cardiovascular Indications, Angiotech shall pay to Athersys a one-time
milestone payment in cash equal to $[*].

	3.	 	Upon the approval of the first NDA/BLA equivalent application for the first Clinical
Development Candidate in Europe for any of the Cardiovascular Indications, Angiotech shall pay
to Athersys a one-time milestone payment in cash equal to $[*].

	4.	 	For Net Sales (of all Cell Therapy Products in the aggregate on a worldwide basis) reaching
$500,000,000.00, Angiotech shall pay to Athersys a one-time milestone payment in cash equal to
$[*].

	5.	 	For Net Sales (of all Cell Therapy Products in the aggregate on a worldwide basis) reaching
$1,000,000,000.00, Angiotech shall pay to Athersys a one-time milestone payment in cash equal
to $[*].

     For the avoidance of doubt, for purposes of this Schedule 7.3 and the milestone payment
obligations described herein, “Cell Therapy Products” shall not include Sole Development Products,
except as and to the extent specifically provided in Section 16.3(a).

 

			
	*	 	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

- 3 -

 

Schedule 7.4

Profit Sharing

	1.	 	“Profits” means, with respect to any calendar quarter, the aggregate of all Net Sales of all
Cell Therapy Products in such quarter minus the aggregate of all Commercial Manufacturing
Costs and Commercialization Costs incurred in such quarter.

	2.	 	Profits from the commercialization of a Cell Therapy Product, whether such calculation leads
to a positive or negative number, will be split [*]% by Athersys and [*]% by Angiotech
(subject to modification pursuant to Section 2.4(b)) according to the following
procedure:

	 	(a)	 	Within forty-five (45) following the end of each calendar quarter, Angiotech
shall submit to Athersys a written report setting forth in reasonable detail:

	 	(i)	 	separately with respect to each Cell Therapy Product on a
country by country basis, all Net Sales of Cell Therapy Products in the
immediately preceding calendar quarter and the basis for such calculation; and
	 
	 	(ii)	 	all Commercialization Costs in the immediately preceding
calendar quarter and the basis for such calculation.

	 	(b)	 	Within forty-five (45) days following the end of each calendar quarter,
Athersys shall submit to Angiotech a written report setting forth in reasonable detail
all Commercial Manufacturing Costs for the immediately preceding calendar quarter.
	 
	 	(c)	 	Within sixty (60) days following the end of each calendar quarter, Angiotech
shall submit to Athersys a written report setting forth the calculation of Profits and
the amount to be paid by one Party to the other Party to split Profits in accordance
with this Schedule. The net amount payable by a Party shall be paid by Angiotech or
Athersys, as the case may be, to the other Party within ten (10) business days after
receipt of such written report, without regard to any dispute as to the amount to be
paid thereunder. In the event of a dispute, the disputing Party shall provide written
notice within such ten (10) business day period after receipt of the written report in
question, specifying in detail such dispute. The Parties shall promptly thereafter
meet and negotiate in good faith a resolution to such dispute. In the event that the
Parties are unable to resolve such dispute within thirty (30) days after notice by the
disputing Party, the CFOs of the Parties shall resolve such dispute.

 

			
	*	 	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

 

 

Schedule 14.3(b)

Ownership or Liens, Charges or Encumbrances

 

 

Schedule 14.3(g)

Government Funding

 

 

Schedule 14.3(l)

Unauthorized Use, Infringement or Misappropriation of Intellectual Property

 

 

Exhibit A

Note Purchase Agreement

 

 

Exhibit B

License Agreement

 

 

Exhibit C

Sublicense Agreement

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00124-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00124-of-00352.parquet"}]]