UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported):
June 8, 2007
BTHC VI, Inc.
(Exact Name of Registrant as Specified in Charter)
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Delaware
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0-52108
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20-4494098
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(State or Other
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(Commission File
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(I.R.S. Employer
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Jurisdiction
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Number)
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Identification No.)
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of Incorporation)
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3201 Carnegie Avenue, Cleveland, Ohio
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44115-2634
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
(216) 431-9900
12890 Hilltop Road, Argyle, Texas 76226
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
CURRENT REPORT ON FORM 8-K
BTHC VI, INC.
TABLE OF CONTENTS
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements relate to, among other things, the expected
timetable for development of our product candidates, our growth strategy, and our future financial
performance, including our operations, economic performance, financial condition, prospects, and
other future events. We have attempted to identify forward-looking statements by using such words
as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,”
“plans,” “potential,” “should,” “will,” or other similar expressions. These forward-looking
statements are only predictions and are largely based on our current expectations. These
forward-looking statements appear in a number of places in this Current Report.
In addition, a number of known and unknown risks, uncertainties, and other factors could affect the
accuracy of these statements, including the risks outlined under “Risk Factors” and elsewhere in
this Current Report. Some of the more significant known risks that we face are the risks and
uncertainties inherent in the process of discovering, developing, and commercializing products that
are safe and effective for use as human therapeutics, including the uncertainty regarding market
acceptance of our product candidates and our ability to generate revenues. These risks may cause
our actual results, levels of activity, performance, or achievements to differ materially from any
future results, levels of activity, performance, or achievements expressed or implied by these
forward-looking statements.
Other important factors to consider in evaluating our forward-looking statements include:
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the possibility of delays in, adverse results of, and excessive costs of the development process;
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changes in external market factors;
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changes in our industry’s overall performance;
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changes in our business strategy;
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our ability to protect our intellectual property portfolio;
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our possible inability to realize commercially valuable discoveries in our
collaborations with pharmaceutical and other biotechnology companies;
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our possible inability to execute our strategy due to changes in our industry or the
economy generally;
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changes in productivity and reliability of suppliers; and
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the success of our competitors and the emergence of new competitors.
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Although we currently believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee our future results, levels of activity or performance. We do not
expect to update any of the forward-looking statements after the date of this Current Report or to
conform these statements to actual results, except as may be required by law. You should not place
undue reliance on forward-looking statements contained in this report.
INDUSTRY AND MARKET DATA
Information about market and industry statistics contained in this report is included based on
information available to Athersys that it believes is accurate in all material respects. It is
generally based on academic and other publications that are not produced for purposes of securities
offerings or economic analysis. We have not reviewed or included data from all sources, and we
cannot assure potential investors of the accuracy or completeness of the data included in this
report. Forecasts and other forward-looking information obtained from these sources, including
estimates of future market size, revenue and market acceptance of products and services, are
subject to the same qualifications and the additional uncertainties accompanying any
forward-looking statements.
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EXPLANATORY NOTE
Unless otherwise indicated or the context otherwise requires, all references below in this Current
Report to “we,” “us” or the “Company” are to BTHC VI, Inc., a Delaware corporation, together with
its wholly owned subsidiary, Athersys, Inc., a Delaware corporation. Specific discussions or
comments relating only to BTHC VI, Inc. prior to the Merger (described below) reference “BTHC VI”
or “PubCo,” while those relating only to Athersys, Inc. prior to the Merger reference “Athersys.”
Item 1.01. Entry into a Material Definitive Agreement.
SUMMARY OF MERGER
On May 24, 2007, BTHC VI, Inc., a Delaware corporation (“BTHC VI” or “PubCo”), and its wholly owned
subsidiary, B-VI Acquisition Corp., a Delaware corporation (“Merger Sub”), entered into an
Agreement and Plan of Merger (the “Merger Agreement”), with Athersys, Inc., a Delaware corporation
(“Athersys”). Pursuant to the terms of the Merger Agreement, Merger Sub, which BTHC VI recently
had incorporated in the state of Delaware for the purpose of completing the transaction described
in this Current Report, merged with and into Athersys (the “Merger”) on June 8, 2007 (the “Closing”
or the “Closing Date”), with Athersys continuing as the surviving entity in the Merger. As a
result of the Merger, Athersys became our wholly owned subsidiary, and the business of Athersys
became our sole operations. After receiving the requisite approval of the stockholders of Athersys
pursuant to a written consent of stockholders, a Certificate of Merger was filed with the Secretary
of State of the State of Delaware on June 8, 2007, at which time the Merger was deemed effective
(the “Effective Time”). At the Effective Time, each share of common stock of Athersys was
converted into 0.0358493 shares of Company common stock, par value $0.001 per share (the “Common
Stock”).
Prior to the Merger, BTHC VI effected a 1-for-1.67 reverse stock split (the “Reverse Stock Split”)
of the shares of its Common Stock. Following the Reverse Stock Split, 299,622 shares of our Common
Stock were issued and outstanding. BTHC VI amended its certificate of incorporation to effect the
Reverse Stock Split and to increase the number of authorized shares of Common Stock to 100,000,000.
As of the Closing Date, we acquired ownership of all of the outstanding capital stock of Athersys.
In return, we issued 3,210,697 shares of Common Stock, resulting in a change in control of the
Company. As further described below, Athersys is a biopharmaceutical company engaged in the
discovery and development of therapeutic product candidates designed to extend and enhance the
quality of human life. Following the Merger, the business of Athersys constitutes our only
operations. We experienced, as of the Closing Date, a change in control of our ownership,
management and Board of Directors (the “Board of Directors” or “Board”). The sole officer and
director of BTHC VI resigned immediately prior to the closing of the Merger and, immediately
following the Merger, Athersys’ existing officers were elected as our officers, and certain members
of Athersys’ board of directors and other individuals selected by Athersys were appointed to the
Board of Directors.
We believe that the issuances of our Common Stock in connection with the Merger were exempt from
registration under Section 4(2) of the Securities Act. A copy of the Merger Agreement was filed as
Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on May 24, 2007.
SUMMARY OF OFFERING
On June 8, 2007, we entered into a Securities Purchase Agreement by and among BTHC VI, Athersys and
the investors party thereto pursuant to which we completed an offering of 13,000,000 shares of our
Common Stock (the “Offering”). Investors in the Offering also received five-year warrants to
purchase an aggregate of 3,250,000 shares of Common Stock with an exercise price of $6.00 per
share. The lead investor in the Offering, Radius Venture Partners II, L.P., Radius Venture
Partners III, L.P. and certain of their respective affiliates (together, “Radius”), invested
$10,000,000 in the Offering and received additional five-year warrants to purchase an aggregate of
500,000 shares of Common Stock with a cash or cashless exercise price of $6.00 per share. We
received gross proceeds of $65 million from the Offering. Cowen & Co., LLC and National Securities
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Corporation acted as placement agents for the Offering and Punk Ziegel & Company, L.P. and Halter
Financial Group, LP provided financial advice. The placement agents received five-year warrants to
purchase an aggregate of 1,093,525 shares of Common Stock with a cash or cashless exercise price of
$6.00 per share.
We believe that the issuances of our Common Stock and warrants to purchase Common Stock in
connection with the Offering were exempt from registration under Section 4(2) of the Securities
Act.
Item 2.01. Completion of Acquisition or Disposition of Assets.
As disclosed in this Current Report, on June 8, 2007, a new, wholly owned subsidiary of BTHC VI,
Merger Sub, merged with and into Athersys, with Athersys continuing as the surviving entity in the
Merger. As a result of the Merger, Athersys became our wholly owned subsidiary. Item 2.01(f) of
Form 8-K provides that if a registrant is a shell company immediately before a transaction
disclosed under Item 2.01, then the registrant must disclose the information that would be required
if the registrant were filing a general form for registration of securities on Form 10.
BTHC VI was a shell company immediately before the Merger. Accordingly, we are providing
below the information that would be included in a Form 10 if we were to file a Form 10. Please
note that the information provided below relates to the Company after the Merger, except that
information relating to periods prior to the date of the Merger only relate to the party
specifically indicated.
DESCRIPTION OF BUSINESS
Company Overview
We are a biopharmaceutical company engaged in the discovery and development of therapeutic product
candidates designed to extend and enhance the quality of human life. Through the application of
our proprietary technologies, we have established a pipeline of therapeutic product development
programs in multiple disease areas that we intend to advance into clinical trials in 2007 and 2008.
Our lead product candidate is ATHX-105, which is a novel treatment for obesity that acts by
stimulating the 5HT2c receptor, a key neurotransmitter receptor in the brain, which regulates
appetite. ATHX-105 has been shown in preclinical testing in animal models to reduce food intake
and body weight by suppressing appetite without appearing to cause the adverse side effects that
have been observed with other weight loss drugs.
ATHX-105 has been approved to enter a Phase I clinical trial in the United Kingdom, which we intend
to initiate as soon as possible using a portion of the net proceeds that we received in the
Offering. The primary objective of the Phase I clinical trial is to assess the short-term safety
of ATHX-105 and to establish an appropriate dose range for subsequent clinical studies that will be
conducted in order to assess safety and effectiveness. Following successful completion of the Phase
I clinical trial and concurrent non-clinical studies that must be completed, we intend to initiate
a Phase II clinical trial in the United States that will examine safety and effectiveness in
clinically overweight or obese patients. In addition to ATHX-105, we have a portfolio of other
compounds that we are developing as potential treatments for obesity.
We are also developing novel orally active pharmaceutical products for the treatment of central
nervous system disorders, including sleep disorders such as narcolepsy or excessive daytime
sleepiness, and other potential indications such as attention deficit hyperactivity disorder and
other cognitive disorders. These compounds are designed to act by elevating levels of
neurotransmitters in the sleep and cognitive centers of the brain and stimulating neurological
tone, resulting in an enhanced state of wakefulness and cognition, without causing hyperactivity or
addiction.
In addition to our pharmaceutical development programs, we are developing MultiStem
®
, a
proprietary nonembryonic stem cell product for the treatment of multiple disease indications. In
May 2006, we entered into a product co-development collaboration with Angiotech Pharmaceuticals,
Inc. (“Angiotech”) to jointly develop and ultimately market MultiStem for the treatment of damage
caused by myocardial infarction and peripheral vascular disease. We are also independently
developing MultiStem for bone marrow transplant/oncology support, ischemic stroke and potentially
other disease indications. We retain the commercial rights to these programs and other potential
applications of MultiStem.
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In addition to our current product development programs, we have developed our Random Activation of
Gene Expression (“RAGE”) technology, a patented technology that provides us with the ability to
produce human cell
lines that express specific, biologically well validated drug targets without relying upon cloned
and isolated gene sequences. This technology provides us with broad freedom to work with targets
that may be inaccessible to most other companies as a result of intellectual property restrictions
on the use of specific cloned and isolated genes. Over the past several years, we have produced
cell lines that express drug targets in a range of disease areas such as metabolic disease,
infectious disease, oncology, cardiovascular disease, inflammation, and central nervous system
disorders. Many of these were produced for drug development programs at major pharmaceutical
companies that we have collaborated with, such as our ongoing collaboration with Bristol-Myers
Squibb, and some have been produced for our internal drug development programs.
Business Strategy
Our principal business objective is to discover, develop, and commercialize novel therapeutic
products for disease indications that represent significant areas of clinical need and commercial
opportunity. The key elements of our strategy are outlined below.
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Apply our proprietary technologies toward the rapid identification, validation, and
development of therapeutic product candidates.
We will continue to use our proprietary
technologies to identify and validate therapeutic product candidates. We believe our
technologies, including RAGE and MultiStem, provide us a competitive advantage in drug
discovery and product development by allowing us to move products quickly from the
discovery phase into clinical trials using a “fast follower” approach, thereby
mitigating risk and reducing costs.
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Enter into licensing or co-development arrangements for certain product candidates.
We intend to license certain of our product candidates to, or co-develop them with,
qualified collaborators to broaden and accelerate our product development efforts. In
order to enhance the value of our product candidates in these potential licensing or
collaboration arrangements, we plan to internally develop our product candidates
through at least Phase II clinical trials whenever possible. We anticipate that this
strategy will help us to enhance our return on product candidates for which we enter
into collaborations through the receipt of strategic equity investments, license fees,
milestone payments, and profit sharing or royalties.
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Internally develop, manufacture, and market other therapeutic products.
We will
apply the capital we obtain from financing and collaborating activities toward the
development of our other therapeutic product candidates. Our intention is to
ultimately manufacture, market, and distribute these product candidates on our own
after they have received FDA approval. We will select candidates for internal
development based on several factors, including the required regulatory approval
pathway and the potential market into which the product can be sold, and our ability to
feasibly fund development activities through commercialization and marketing of the
approved product.
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Continue to expand our intellectual property portfolio.
Our intellectual property
is important to our business and we take significant steps to protect its value. We
have an ongoing research and development effort, both through internal activities and
through collaborative research activities with others, which aims to develop new
intellectual property and enable us to file patent applications that cover new
applications of our existing technologies or product candidates, including MultiStem.
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Out-license non-core applications of our technologies.
Certain elements of our
technologies, such as their application toward the development of novel diagnostics or
their use for the analysis and characterization of therapeutic product candidates, may
not be relevant to the key elements of our corporate strategy. We believe these
applications may have significant potential value, however, and can provide capital to
us that can be applied to our other development efforts. Where appropriate, we may
seek to license non-core applications of our technologies to others to realize this
value.
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Our Current Programs
By applying our core technologies and capabilities, we have established preclinical drug
development programs in the areas of obesity and central nervous system disorders. In addition,
applying our proprietary cell therapy platform, MultiStem, we have established therapeutic product
development programs in the areas of
cardiovascular disease, oncology support and stroke. We currently intend to advance multiple
programs into clinical development in 2007 and 2008.
Pharmaceutical Programs
ATHX-105 for Obesity
Obesity is a substantial contributing factor to a range of diseases that represent the major causes
of death and disability in the developed world today. Individuals that are clinically obese have
elevated rates of cardiovascular disease, stroke, certain types of cancer and diabetes. The
percentage of individuals who are defined as clinically obese has risen dramatically over the past
several decades. According to the United States Centers for Disease Control and Prevention
(“CDC”), the incidence of obesity in the United States has increased at an epidemic rate during the
past 20 years. CDC now estimates that 66% of all Americans are overweight and more than 30% are
obese. This increase is not limited to adults. The percentage of young people who are overweight
has more than tripled since 1980. Among children and teens aged six to 19 years, 16% (over nine
million young people) are considered overweight. There has been a similar dramatic rise in the
rate of obesity in Europe and Asia. Furthermore, the cost of this epidemic is significant. The
FDA estimates that the total economic cost of obesity is currently about $117 billion per year in
the United States, including more than $50 billion in avoidable medical costs. Despite the
magnitude of this problem, current approaches to clinical obesity are largely ineffective, and we
are aware of relatively few new therapeutic approaches in clinical development.
We are developing novel pharmaceutical treatments for obesity. Our most advanced drug development
candidate is ATHX-105, a compound we discovered internally and have extensively analyzed and
validated in preclinical studies. We believe that ATHX-105 represents a potential “best-in-class”
obesity drug, based on its well validated mechanism of action, as well as the potency and overall
safety profile we have observed in preclinical studies. We are developing ATHX-105 as a
once-per-day orally administered pill to regulate appetite and reduce food intake in clinically
obese individuals, defined as those individuals with a body mass index greater than 30. In
addition to ATHX-105, we are developing a diverse portfolio of back-up compounds that act by the
same mechanism as ATHX-105, as well as complementary obesity programs that act according to
different biological mechanisms of action.
ATHX-105 is designed to act by stimulating a key receptor in the brain that regulates appetite and
food intake – the 5HT2c receptor. The role of this receptor in regulating food intake is well
understood in both animal models and humans. In 1996, Wyeth Pharmaceuticals launched the
anti-obesity drug Redux
®
(dexfenfluramine), a non-specific serotonin receptor agonist that was used
with the stimulant phentermine in a combination commonly known as “fen-phen.” This diet drug
combination gained rapid and widespread acceptance in the clinical marketplace, and was shown to be
highly effective at regulating appetite, reducing food intake, and causing weight loss.
Unfortunately, in addition to stimulating the 5HT2c receptor, fen-phen also stimulated the 5HT2b
receptor that is found in the heart. The activation of 5HT2b by fen-phen is believed to have
caused significant cardiovascular problems in a number of patients and, as a result, Redux
®
was
withdrawn from the market in 1997. In 1996, doctors wrote 18 million monthly prescriptions for
drugs constituting the fen/phen combination. In that same year, these drugs generated sales of
greater than $400 million, serving as a benchmark for the substantial market opportunity for an
effective drug to treat clinical obesity.
Since the withdrawal of Redux from the market, several groups have published research that
implicates stimulation of the 5HT2b receptor as the underlying cause of the cardiovascular
problems. These findings suggest that highly selective compounds that stimulate the 5HT2c
receptor, but that do not appreciably stimulate the 5HT2b receptor, could be developed that
maintain the desired appetite suppressive effects without the cardiovascular toxicity. Recently,
Arena Pharmaceuticals developed a selective 5HT2c agonist, Lorcaserin, which exhibits significant
selectivity for the 5HT2c receptor relative to the 5HT2b receptor. In a Phase II clinical trial
recently conducted by Arena Pharmaceuticals, Lorcaserin was demonstrated to reduce appetite and
cause
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statistically significant weight loss in patients that were administered the drug for a
period of three months, without causing any apparent cardiovascular effects. However, at higher
doses the drug has been shown to cause dizziness, nausea and headaches, which is believed to be a
consequence of its apparently more limited selectivity for the 5HT2c receptor relative to another
serotonin receptor expressed in the brain, the 5HT2a receptor. Currently, Lorcaserin is undergoing
a large scale, two-year Phase III clinical study that is designed to evaluate safety, including
cardiovascular safety, and effectiveness at causing weight loss in patients that are administered
Lorcaserin for a period of one year. Lorcaserin is being administered twice per day at a dosage
level that is half the level previously observed to cause unacceptable levels of dizziness, nausea
and headaches in prior clinical studies.
We initiated a drug development program focused on creating potent and selective compounds that
stimulate the 5HT2c receptor, but that avoid the 5HT2b receptor and other receptors, such as 5HT2a.
Our specific goal is to develop a once-per-day orally administered pill that reduces appetite by
stimulating the 5HT2c receptor, but that does not stimulate the 5HT2b receptor, the 5HT2a receptor,
or other receptors that could cause adverse side effects. Based on extensive preclinical studies
that we have conducted with ATHX-105, it has been shown to be a highly potent and selective
compound that fulfills all of our criteria. We believe that the superior selectivity displayed by
ATHX-105 for the 5HT2c receptor relative to both the 5HT2b receptor and the 5HT2a receptor will
result in a cleaner safety profile in clinical studies, and may allow us to achieve better
efficacy, as well as a more convenient dosing schedule than other 5HT2C agonist programs.
In preclinical testing in rodents, obese animals that received once-daily doses of ATHX-105
exhibited a 57% reduction in daily food intake as compared to animals receiving placebo alone. In
addition, after receiving once-daily doses of ATHX-105 for two weeks, these animals weighed 10%
less than the animals that were treated with placebo alone. The effect was dose proportional, and
animals that received increasing doses of ATHX-105 showed progressively greater weight loss.
In dogs, oral administration of a low dose (0.1mg/kg) of ATHX-105 resulted in a short-term
reduction of food intake of approximately 50%, while animals receiving a 10-fold higher dose (1.0
mg/kg) of ATHX-105 exhibited a complete cessation of short-term food intake that resolved over time
as the drug cleared. Based upon these results, and the results of other studies that we have
conducted, we calculate the effective dose range in dogs to be approximately 0.1 to 0.2 mg/kg.
In extensive preclinical testing in both dogs and monkeys, ATHX-105 appeared to be safe and well
tolerated, even when administered at doses substantially higher than those that caused a
significant reduction in food intake. In dogs, the MTD was established at 36 mg/kg, a dose level
approximately 180 to 360 times higher than the effective dose range observed in short-term food
intake studies. We also studied the safety profile of ATHX-105 in cynomolgous monkeys,
administering doses for two weeks that are 40 to 50 times greater than the expected effective dose
levels in humans, which were well tolerated with no signs of adverse effects.
We submitted a CTA and intend to conduct a Phase I clinical trial in the United Kingdom for
ATHX-105. This application was approved in the third quarter of 2006. We intend to initiate the
Phase I clinical trial as soon as possible. The Phase I clinical trial will have a standard design
evaluating single dose administration, dose escalation, and maximum tolerated dose, followed by a
one-week study examining the effect of administration of multiple doses of ATHX-105 to healthy
overweight or obese individuals, with a body mass index of 25 to 35 at several different dose
levels. Safety monitoring will include the assessment of various cardiovascular parameters. We
believe that the Phase I clinical trial can be completed within approximately six months from the
time we begin enrollment. Concurrent with the Phase I clinical trial, we will also conduct certain
non-clinical studies that must be completed prior to the commencement of subsequent clinical
studies.
In addition, we are developing other compounds that are designed to stimulate the 5HT2c receptor
with greater potency and/or specificity than ATHX-105. Some of these compounds have demonstrated
significant reductions in food intake in rodent models. We plan to subject these compounds to
further safety and efficacy testing in animals while we continue to develop ATHX-105. Furthermore,
we have created cell lines that express obesity targets that are distinct from 5HT2c by utilizing
our other technologies and have screened for compounds using our compound library that are designed
to significantly reduce food intake by acting against these targets. Although these compounds are
at earlier stages of preclinical development, we believe they represent promising opportunities for
future development.
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H
3
Antagonists for the Treatment of Sleep Disorders and Certain Other Cognitive
Disorders
In addition to our obesity program, we are developing a novel class of pharmaceuticals that are
designed to enhance wakefulness and promote cognitive abilities. Individuals that suffer from
narcolepsy or other conditions that result in excessive daytime sleepiness (“EDS”) may experience
persistent tiredness and lack of energy. As a result, such individuals may experience significant
difficulty in performing certain tasks, and may suffer an
impaired quality of life. More than 100,000 individuals in the U.S. suffer from narcolepsy or EDS.
Historically, narcoleptics were treated with amphetamines and related stimulants that had
substantial side-effects, but more recently have been prescribed Provigil (modafinil). This
compound works by an unknown mechanism, but appears to be relatively free of the stimulant
side-effects of amphetamines. In addition to its use for narcolepsy, Provigil is also approved for
the treatment of shift work sleep disorder (“SWSD”) and sleep apnea. Sales of Provigil in 2006
were reported to be over $700 million. Although Provigil appears to be an improvement over
previous narcolepsy drugs, certain safety concerns were raised by the FDA when Cephalon, Inc.
attempted to gain approval of modafinil for attention deficit hyperactivity disorder (“ADHD”), and
the company subsequently abandoned efforts in this market.
Similarly, individuals with attention or cognitive disorders may suffer from an inability to focus,
solve problems, process information, communicate, and may have memory impairment. Attention and
cognitive disorders include ADHD, Alzheimer’s disease and other forms of dementia. Datamonitor
estimates that 23 million children in the seven major pharmaceutical markets (United States,
France, Germany, Italy, Spain, United Kingdom and Japan) that suffer from ADHD. Research also
shows that 60% of children with ADHD maintain the disorder into adulthood. Despite the low rate of
diagnosis, ADHD drug revenues reached $2.5 billion in 2004, 97% of which was generated within the
United States. Currently available treatments cause side effects and do not adequately address the
clinical need. Ritalin
®
(methylphenidate) is the most widely prescribed ADHD therapy. As a
stimulant with abuse potential, it has been classified as a controlled substance by the FDA and the
U.S. Drug Enforcement Agency. We believe there exists a tremendous market opportunity as diagnosis
and awareness of ADHD is improved.
We are developing multiple classes of highly selective and potent compounds designed to block the
H
3
receptor and have established a program to develop non-stimulant, non-addictive,
orally administered drugs for the treatment of narcolepsy or other conditions related to excessive
daytime sleepiness.
Our histamine H
3
receptor antagonists represent a new class of drugs that could have an
improved efficacy and safety profile relative to existing drugs used for the treatment of
narcolepsy and related sleep disorders. The H
3
receptor regulates levels of histamine
and other neurotransmitters in certain areas of the brain that play a direct role in regulating
sleep and cognitive function. In animal models, H
3
receptor antagonists have been shown
to increase histamine release in the brain and improve wakefulness, attention and learning. In a
preclinical study recently conducted at an independent lab, we have tested one of our more advanced
compounds in a well validated rodent sleep model. During the study, this compound significantly
enhanced wakefulness without causing apparent adverse events. In comparison to modafinil or
caffeine, this compound was far more potent, achieving a comparable or better effect on wakefulness
at substantially lower doses. In addition, this compound did not appear to cause the excessive
rebound sleepiness that is a characteristic of other agents used to promote wakefulness, such as
amphetamines.
We intend to continue the study of this compound for potential applications in treating narcolepsy,
excessive daytime sleepiness, and certain attention or cognitive disorders. In addition, we intend
to conduct additional pharmacology and safety testing. If these studies are successful, and
depending on the availability of capital resources, we would consider filing an IND for the
initiation of clinical trials. Recently, pharmaceutical companies such as Glaxo-SmithKline and
Johnson & Johnson have advanced H
3
antagonists into clinical trials for the treatment of
conditions such as narcolepsy and dementia, respectively.
Regenerative Medicine Programs
MultiStem — A Novel Approach to Stem Cell Therapy
In addition to our pharmaceutical programs, we are developing a novel, proprietary nonembryonic
stem cell product candidate, MultiStem, that we believe has potential utility for treating a broad
range of diseases and could
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have widespread application in the field of clinical regenerative
medicine such as in the treatment of damage from heart attack, bone marrow transplant support and
graft versus host disease (“GVHD”), stroke, and potentially other areas. We believe that MultiStem
represents a significant advancement in the field of stem cell therapy.
The therapeutic benefit of bone marrow transplantation has been recognized for decades, and its
clinical use has grown since Congress passed the National Organ Transplant Act in 1984, and the
National Marrow Donor Registry was established in 1990. However, for several reasons, widespread
bone marrow or stem cell
transplantation has yet to become a reality. Some of the limitations that have prevented broader
clinical application of bone marrow or stem cell transplantation include the requirement for tissue
matching between donor and recipient, the inability to efficiently produce significant quantities
of stem cells, and a range of potential safety issues. While the field of stem cell therapy is very
promising, it is also highly controversial and fraught with challenges.
A stem cell therapy that has the potential to address the challenges mentioned above could
represent a breakthrough in the field of regenerative medicine, since it could greatly expand the
clinical areas that utilize stem cell therapy or other forms of regenerative medicine. In 2002,
Dr. Catherine Verfaillie and her team published research first describing a rare and novel stem
cell, the MAPC, which may be isolated from adult bone marrow as well as other nonembryonic tissues.
In their potential product form, we refer to these cells as MultiStem. These cells exhibit
several important biological properties, including:
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Broad plasticity and multiple potential mechanisms of action.
MultiStem cells have
a demonstrated ability in animal models to form multiple cell types and appear to be
able to deliver therapeutic benefit through multiple mechanisms, such as producing
factors that protect tissues against damage and inflammation, as well as enhancing or
playing a direct role in revascularization or tissue regeneration.
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Large scale production.
Unlike conventional stem cells, such as blood-forming or
hematopoietic stem cells, MultiStem cells may be produced on a large scale, processed,
and cryogenically preserved, and then used clinically in a rapid and efficient manner.
Material obtained from a single donor may be used to produce hundreds of thousands or
even millions of individual doses.
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“Off-the-shelf” utility.
Unlike traditional bone marrow or hematopoietic stem cell
transplants, which require extensive genetic matching between donor and recipient,
MultiStem cells do not appear, based on preclinical testing in animals, to require
extensive tissue matching prior to administration. MultiStem treatment may be
allogeneic, meaning that these cells do not need to be genetically matched between
donor and recipient. This feature, combined with the ability to establish large
MultiStem banks, could make it practical for clinicians to efficiently deliver stem
cell therapy to a large number of patients.
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Safety.
Other stem cell types, such as embryonic stem cells, can pose serious
safety risks, such as the formation of tumors or ectopic tissue. In contrast,
MultiStem cells have an outstanding safety profile that has been compiled over several
years of preclinical study in a range of animal models by a variety of investigators.
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At each step of the MultiStem production process, cells are analyzed and qualified according to
pre-established criteria to ensure that a consistent, well characterized product candidate is
produced. Cells are harvested from a pre-qualified donor and then expanded to form a Master Cell
Bank. In March 2007, we and our manufacturing partner, Lonza, announced the successful
establishment of a Master Cell Bank produced under Good Manufacturing Practices (“GMP”) and the
production of clinical grade material for our initial clinical trials.
MultiStem allows us to pursue multiple high value commercial opportunities from a single product
platform, since we believe it has potential application in a range of disease states and
therapeutic areas. For example, based on numerous preclinical discussions with the FDA, we believe
that we will be able to use data and information from preclinical safety studies for the
development of MultiStem for treating multiple distinct diseases in parallel. This will be
achieved by establishing a central file with the FDA, also known as a Master File, that contains
data from multiple safety studies as well as information related to product manufacturing and
characterization. As a result, we expect to be able to efficiently add additional clinical
indications as we further expand the scope of
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potential applications for MultiStem, enabling us to
reduce costs and shorten development timelines in comparison to traditional single-use drug
development programs.
MultiStem for Heart Disease, Stroke & Bone Marrow Transplant Support/GVHD
Working with independent investigators at a number of leading institutions, such as the University
of Minnesota, the Cleveland Clinic, the National Institutes of Health, the Medical College of
Georgia, and the University of Oregon Health Sciences Center, we have studied MultiStem in a range
of animal models that reflect various types of human disease or injury, such as myocardial
infarction, stroke, brain damage due to restricted blood flow in
newborns, vascular disease, and bone marrow transplant support/GVHD. In addition, we are
exploring, or intend to explore, the potential application of MultiStem in the treatment of a range
of other conditions such as certain blood or immune deficiencies and various autoimmune diseases.
As stated above, we have consistently observed that MultiStem is safe and effective in animal
models. As a result, we initially plan, subject to the availability of adequate resources, to
advance MultiStem into clinical development in three areas: damage caused by myocardial infarction;
support in the oncology setting to reduce certain complications associated with bone marrow
transplantation; and for stroke caused by a blockage of blood flow in the brain. For these areas,
we intend to use one MultiStem cell product, produced and validated with a single manufacturing
platform.
Heart Disease
Myocardial infarction is one of the leading causes of death and disability in the United States.
Myocardial infarction is caused by the blockage of one or more arteries that supply blood to the
heart. Such blockages can be caused, for example, by the rupture of an atherosclerotic plaque.
According to the American Heart Association 2007 Statistical Update, there were approximately
865,000 cases of myocardial infarction that occurred in the United States in 2004 and approximately
7.9 million individuals living in the United States that had previously suffered a heart attack.
In addition, there were more than 452,000 deaths that occurred from various forms of ischemic heart
disease, and 156,000 deaths due directly to myocardial infarction in 2004. A variety of risk
factors are associated with an elevated risk of myocardial infarction or atherosclerosis, including
age, high blood pressure, smoking, sedentary lifestyle, and genetics. While advances in the
diagnosis, prevention, and treatment of heart disease have had a positive impact, there is clearly
room for improvement – myocardial infarction remains a leading cause of death and disability in the
United States and the rest of the world.
MultiStem has been studied in validated animal models of acute myocardial infarction at both the
Cleveland Clinic and the University of Minnesota. Investigators demonstrated that the
administration of allogeneic MultiStem into the hearts of animals damaged by experimentally induced
heart attacks resulted in significant functional improvement in cardiac output and other functional
parameters compared with animals that received placebo or no treatment. Further, the
administration of the immunosuppressive drug was not required and provided no additional benefit in
this study, and supports the concept of potentially using MultiStem as an allogeneic product.
Working with a qualified contract research organization, we have initiated additional preclinical
studies in established pig models of acute myocardial infarction, examining various factors such as
the route and method of MultiStem administration, dose ranging, and timing of treatment. Pending
the results of these and other studies, we intend to file an IND for the use of MultiStem for the
treatment of acute myocardial infarction.
Oncology Support
A second focus of our regenerative medicine program is the use of MultiStem for bone marrow
transplant and oncology support. For many types of cancer, such as leukemia or other blood-borne
cancers, treatment typically involves radiation therapy or chemotherapy, alone or in combination.
Such treatment can substantially deplete the cells of the blood and immune system, by reducing the
number of stem cells in the bone marrow from which they arise. The more intense the radiation
treatment or chemotherapy, the more severe the resulting depletion of the bone marrow, blood, and
immune system. However, other tissues may also be affected, such as cells in the digestive tract
and in the pulmonary system. The result may be severe anemia, immunodeficiency, significant
reduction in digestive capacity, and other problems, which may result in significant disability or
death.
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One strategy for treating the depletion of bone marrow is to perform a bone marrow transplant.
This approach may augment the patient’s ability to form new blood and immune cells and provide a
significant survival advantage. However, finding a closely matched donor is frequently difficult
or even impossible. Even when such a donor is found, in many cases there are immunological
complications, such as GVHD, which may result in death or serious disability.
Working with leading experts in the stem cell and bone marrow transplantation field, we have
studied MultiStem in animal models of radiation therapy and GVHD. In multiple animal models,
MultiStem has been shown to be non-immunogenic, even when administered without the genetic matching
that is typically required for conventional bone marrow or stem cell transplantation. Furthermore,
in animal model systems testing immune
reactivity of T-cells against unrelated donor tissue, MultiStem has been shown to suppress the
T-cell-mediated immune responses that are an important factor in causing GVHD. MultiStem-treated
animals also displayed a significant increase in survival relative to controls. As a result, we
believe that the administration of MultiStem in conjunction with standard bone marrow
transplantation may have the potential to reduce the incidence or severity of complications and may
enhance other important functions.
Several of our collaborators are leading experts in the field of bone marrow transplantation,
including Dr. Richard Maziarz from Oregon Health Sciences University, Dr. John Wagner from the
University of Minnesota and Dr. Hillard Lazarus from University Hospitals of Cleveland. We plan to
initiate a company-sponsored Phase I/II clinical trial with these clinical investigators to
evaluate MultiStem administration in support of bone marrow transplantation for the treatment of
certain cancers of the blood and immune system. We are currently completing the preclinical
requirements that we believe will enable us to file an IND for this indication.
Stroke
A third focus of our regenerative medicine program is the use of MultiStem for the treatment of
neurological injury as a result of ischemic stroke, which accounts for 80% of all strokes. Recent
progress toward the development of safer and more effective treatments for ischemic stroke has been
disappointing. Despite the fact that stroke is one of the leading causes of death and disability
in the United States, affecting more than 700,000 new patients annually according to the CDC, there
has been little progress toward the development of treatments that improve the prognosis for stroke
victims. The only FDA-approved drug currently available for ischemic stroke is the anti-clotting
factor, tPA, which must be administered to the patient within three to six hours of the onset of
the stroke. Administration of tPA after this time frame is not recommended, since it can cause
bleeding or even death. Given this limited therapeutic window, it is estimated that less than 5%
of ischemic stroke victims currently receive treatment with tPA.
In preclinical studies conducted by investigators at both the University of Minnesota and the
Medical College of Georgia, significant functional improvements have been observed in rodents that
have undergone an experimentally induced stroke, or that have incurred significant neurological
damage as a result of neonatal hypoxic ischemia, and then received treatment with MultiStem.
Through research conducted by collaborators at the Medical College of Georgia and presented at the
annual American Academy of Neurology meeting in April 2006, we observed that administration of
MultiStem even one week after a surgically induced stroke results in substantial long-term
therapeutic benefit, as evidenced by the improvement of treated animals compared with controls in a
battery of tests examining mobility, strength, fine motor skills, and other aspects of neurological
functional improvement. These results have been confirmed in subsequent studies that demonstrate
MultiStem treatment is well tolerated, does not require immunosuppression, and results in a robust
and durable therapeutic benefit even when administered one week after the initial stroke event.
Upon completion of remaining preclinical safety studies, we intend to submit an IND for this
application. The initiation of the initial clinical study will depend on the availability of
capital resources.
We believe that MultiStem could have broad potential to treat a range of conditions. In addition
to the above programs, we are actively collaborating or intend to collaborate with other highly
qualified investigators to evaluate the potential benefits of MultiStem in other disease
indications, such as various blood and immune deficiencies, certain autoimmune diseases, and other
potential indications.
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Other Key Technologies
In addition to our product development programs, we have developed RAGE, a patented technology that
provides us with the ability to produce human cell lines that express specific, biologically well
validated drug targets without relying upon cloned and isolated gene sequences. This technology
platform provides us with broad freedom to work with drug targets that may be inaccessible to most
other companies as a result of intellectual property restrictions on the use of specific cloned and
isolated genes. Over the past several years, we have produced cell lines that express drug targets
in a range of disease areas such as metabolic disease, infectious disease, oncology, cardiovascular
disease, inflammation, and central nervous system disorders. Many of these were produced for drug
development programs at major pharmaceutical companies that we have collaborated with, and some
have been produced for our internal drug development programs.
Competition
We face significant competition with respect to the various dimensions of our business. With
regards to our efforts to develop ATHX-105 or other compounds for the treatment of obesity, there
are already approved therapeutic products on the market, such as Xenical, which is marketed by
Roche, and Meridia, which is marketed by Abbott Pharmaceuticals. However, both of these drugs can
have side effects that we believe have limited their adoption by patients and clinicians. For
example, potential side effects associated with taking Xenical include cramping, intestinal
discomfort, flatulence, diarrhea, and leakage of oily stool. Potential side effects associated
with taking Meridia include increased blood pressure and heart rate, headache, dry mouth,
constipation, and insomnia. Individuals with high blood pressure, heart disease, irregular heart
beat, or a history of stroke are cautioned not to take Meridia.
In addition to these products, other companies are actively developing novel therapeutic products
for the treatment of obesity, including Sanofi-Aventis, which is developing the drug Rimonabant,
which acts by suppressing appetite by blocking the CB1 receptor, also known as the marijuana
receptor for its recognized role as the site of action of the cannabinoids found in marijuana that
can stimulate appetite. In February 2006, an FDA advisory panel issued a recommendation for
approval of Rimonabant for use in treating obesity. In Phase III clinical trials, patients taking
Rimonabant exhibited statistically significant weight loss. Notable adverse events among some
patients taking the drug included respiratory infection, dizziness, nausea, anxiety, and
depression, which were observed at higher frequency among patients taking the drug relative to
those taking placebo in the control group.
Other companies are also attempting to develop novel 5HT2c agonists. One company, Arena
Pharmaceuticals, recently completed a Phase II clinical trial with its novel product candidate
APD356, also referred to as Lorcaserin. Clinically obese patients taking 10 mg of the drug twice
per day exhibited statistically significant weight loss over the three-month study period,
exhibiting an average loss of 7.9 lbs, compared to those taking the placebo, who lost an average of
0.7 lbs. All patients on the study underwent cardiovascular safety monitoring both during and
after the study, and there were no reported adverse events with respect to cardiovascular safety
according to the company. Potential side effects observed among patients taking the drug at 10 mg
dose twice per day included headache (26.7% vs. 17.8% in the placebo group), dizziness (7.8% vs. 0%
in the placebo group), nausea (11.2% vs. 3.4% in the placebo group), and vomiting (5.2% vs. 0.8% in
the placebo group).
In February 2007, Arena Pharmaceuticals announced that it had completed enrollment of 3,182
patients in a double blind, randomized and placebo controlled Phase III study of Lorcaserin
designed to evaluate safety and efficacy of twice daily 10 mg doses of Lorcaserin administered for
one year. The primary efficacy endpoint is the percentage of patients exhibiting greater than 5%
weight loss over baseline at 52 weeks. An independent Data Safety Monitoring Board will evaluate
cardiovascular safety in all patients at 6, 12, 18 and 24 months after initiation of the trial.
The results of the initial six-month review are expected in the third quarter of 2007.
There are many other companies attempting to develop novel treatments for obesity, and a wide range
of approaches are being taken. Some of these companies include large, multinational pharmaceutical
companies such as Pfizer Inc, Bristol-Myers Squibb, Merck & Co., Inc., Roche, Sanofi-Aventis,
GlaxoSmithKline, and others. There are also a variety of biotechnology companies developing
treatments for obesity, including Amgen, Inc., Regeneron, Nastech Pharmaceutical Company, Alizyme,
Amylin Pharmaceuticals, Neurocrine Biosciences, Shionogi & Co., Ltd., Metabolic Pharmaceuticals,
Kyorin Pharmaceutical Co., Ltd., VIVUS, Inc., and others. It
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is likely that, given the magnitude
of the market opportunity, many companies will continue to focus on the obesity area, and that
competition will remain high. If we are successful at developing ATHX-105 or another compound as a
safe and effective treatment for obesity, it is likely that other companies will attempt to develop
safer and more effective 5HT2c agonists, or will attempt to combine therapies in an effort to
establish a safer and more effective therapeutic product.
We also face significant competition with respect to our efforts to develop MultiStem as a novel
stem cell therapy. Currently, there are a number of companies that are actively developing stem
cell products, which encompass a range of different cell types, including embryonic stem cells,
umbilical cord stem cells, adult-derived stem cells, and processed bone marrow derived cells.
These include both public companies, such as Osiris, Genzyme, Geron, Genentech Inc., Aastrom
Biosciences, Inc., Stem Cells Inc., Cell Genesys, Inc., Viacell, Celgene Corporation, Advanced Cell
Technology, CRYO-CELL International, Mesoblast Limited, and Cytori Therapeutics, and private
companies, such as Cognate Therapeutics, Neuronyx, Inc., Gamida Cell, Arteriocyte, Plureon
Corporation, and
others. Given the magnitude of the potential opportunity for stem cell therapy, we expect
competition in this area to intensify in the coming years.
Finally, we face competition with respect to our ability to produce drug targets for our drug
development programs. There are many companies with established intellectual property that seek to
restrict or protect the use of specific drug targets, including Incyte Corporation, Millennium
Pharmaceuticals, Human Genome Sciences, Lexicon Genetics, CuraGen Corporation, Exelixis, Myriad
Genetics, Sangamo BioSciences, and others.
We believe our most significant competitors are fully integrated pharmaceutical companies and more
established biotechnology companies that have substantially greater financial, technical, sales,
marketing, and human resources than we do. These companies may succeed in obtaining regulatory
approval for competitive products more rapidly than we can for our products. In addition, our
competitors may develop technologies and products that are cheaper, safer or more effective than
those being developed by us or that would render our technology obsolete. Furthermore, some of
these companies may feel threatened by our activities, and attempt to delay or impede our efforts
to develop our products, or apply our technologies.
Intellectual Property
We rely on a combination of patent applications, patents, trademarks, and contractual provisions to
protect our proprietary rights. We believe that to have a competitive advantage, we must develop
and maintain the proprietary aspects of our technologies. Currently, we require our officers,
employees, consultants, contractors, manufacturers, outside scientific collaborators and sponsored
researchers, and other advisors to execute confidentiality agreements in connection with their
employment, consulting, or advisory relationships with us, where appropriate. We also require our
employees, consultants, and advisors who we expect to work on our products to agree to disclose and
assign to us all inventions conceived during the work day, developed using our property, or which
relate to our business.
We have established a broad intellectual property portfolio related to our key functional genomics
technologies and product candidates. We have a broad patent estate with claims directed to
compositions, methods of making, and methods of using our small molecule drug candidates. In our
5HT2c program, we have filed four patent applications with broad claims directed to ATHX-105,
related compounds in the same chemical series from which ATHX-105 was derived, and back-up and
second generation compounds from distinct chemical series. In our Histamine H
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program,
we have filed four patent applications with broad claims directed to compounds from two distinct
chemical series. All compounds described in these patent applications were discovered at Athersys.
In addition, we currently have twelve issued U.S. patents and various issued international patents
relating to compositions and methods for the RAGE technology. These patents will expire in 2017.
In addition, we have five U.S. and various pending international patents relating to the RAGE
technology. There are also several patent applications relating to human proteins and candidate
drug targets that we have identified through the application of RAGE and our other technologies.
We have a broad patent estate with claims directed to compositions, methods of production, and
methods of use of MultiStem and related technologies. We acquired the stem cell technology for our
MultiStem product candidate, MAPCs, as a result of our 2003 acquisition of a holding company for
the intellectual property related to stem cells originally discovered at the University of
Minnesota. We have one issued U.S. patent related to this
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technology, and three U.S. patent
applications, as well as many corresponding international patent applications. We also have an
exclusive license to additional MAPC-related inventions made by the University of Minnesota
including 16 pending patent applications related to these inventions. The exclusive license
expires in May 2009, and the University of Minnesota is entitled to a royalty on net sales of
products developed from the MAPC technology. In addition, there are five pending applications
related to research conducted by Athersys and its collaborators.
We believe that we have broad freedom to use and commercially develop our technologies and product
candidates. However, if successful, a patent infringement suit brought against us may force us or
any of our collaborators or licensees to stop or delay developing, manufacturing, or selling
potential products that are claimed to infringe a third party’s intellectual property, unless that
party grants us rights to use its intellectual property. In such cases, we may be required to
obtain licenses to patents or proprietary rights of others to continue to commercialize our
products. However, we may not be able to obtain any licenses required under any patents or
proprietary rights of third parties on acceptable terms, or at all. Even if we were able to obtain
rights to
the third party’s intellectual property, these rights may be non-exclusive, thereby giving our
competitors access to the same intellectual property. Ultimately, we may be unable to
commercialize some of our potential products or may have to cease some of our business operations
as a result of patent infringement claims, which could severely harm our business.
Government Regulation
Any products we may develop and our research and development activities are subject to stringent
government regulation in the United States by the FDA and, in many instances, by corresponding
foreign and state regulatory agencies. The European Union (“EU”) has vested centralized authority
in the European Medicines Evaluation Agency and Committee on Proprietary Medicinal Products to
standardize review and approval across EU member nations.
These regulatory agencies enforce comprehensive statutes, regulations, and guidelines governing the
drug development process. This process involves several steps. Initially, the company must
generate preclinical data to show safety before human testing may be initiated. In the United
States, the drug company must submit an IND to the FDA prior to securing authorization for human
testing. The IND must contain adequate data on product candidate chemistry, toxicology and
metabolism and, where appropriate, animal research testing to support initial safety.
A CTA is the European equivalent of the U.S. IND. CTA requirements are issued by the Medicines and
Healthcare Products Regulatory Agency, the United Kingdom’s health authority and were enacted
through the U.K. Medicines for Human Use (Clinical Trials) Regulations 2004, which implemented the
EU Clinical Trials Directive in the United Kingdom.
Any of our product candidates will require regulatory approval and compliance with regulations made
by U.S. and foreign government agencies prior to commercialization in such countries. The process
of obtaining FDA or foreign regulatory agency approval has historically been extremely costly and
time consuming. The FDA regulates, among other things, the development, testing, manufacture,
safety, efficacy, record keeping, labeling, storage, approval, advertising, promotion, sale, and
distribution of biologics and new drugs.
The standard process required by the FDA before a pharmaceutical agent may be marketed in the
United States includes:
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preclinical tests in animals that demonstrate a reasonable likelihood of safety and
effectiveness in human patients;
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submission to the FDA of an IND, which must become effective before clinical trials
in humans can commence. If Phase I clinical trials are to be conducted initially
outside the United States, a different regulatory filing is required, depending on the
location of the study;
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adequate and well controlled human clinical trials to establish the safety and
efficacy of the drug or biologic in the intended disease indication;
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for drugs, submission of a New Drug Application (“NDA”) or a Biologic License
Application (“BLA”), with the FDA; and
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FDA approval of the NDA or BLA before any commercial sale or shipment of the drug.
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Preclinical studies can take several years to complete, and there is no guarantee that an IND based
on those studies will become effective to permit clinical trials to begin. Once clinical trials
are initiated, they generally take five to seven years, or longer, to complete. After completion
of clinical trials of a new drug or biologic product, FDA approval of the NDA or BLA must be
obtained. This process requires substantial time and effort and there is no assurance that the FDA
will accept the NDA or BLA for filing and, even if filed, that the FDA will grant approval. In the
past, the FDA’s approval of an NDA or BLA has taken, on average, one to two years, but in some
instances may take substantially longer. If questions regarding safety or efficacy arise,
additional studies may be required, followed by a resubmission of the NDA or BLA. Review and
approval of an NDA or BLA can take up to several years.
In addition to obtaining FDA approval for each product, each drug manufacturing facility must be
inspected and approved by the FDA. All manufacturing establishments are subject to inspections by
the FDA and by other
federal, state, and local agencies, and must comply with GMP requirements. We do not currently
have any GMP manufacturing capabilities, and will rely on contract manufacturers to produce
ATHX-105 or MultiStem for any clinical studies that we may conduct.
We must also obtain regulatory approval in other countries in which we intend to market any drug.
The requirements governing conduct of clinical trials, product licensing, pricing, and
reimbursement vary widely from country to country. FDA approval does not ensure regulatory
approval in other countries. The current approval process varies from country to country, and the
time spent in gaining approval varies from that required for FDA approval. In some countries, the
sale price of the drug must also be approved. The pricing review period often begins after market
approval is granted. Even if a foreign regulatory authority approves a drug product, it may not
approve satisfactory prices for the product.
In addition to regulations enforced by the FDA, we are also subject to regulation under the
Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control
Act, the Resource Conservation and Recovery Act, and other present and potential future federal,
state, or local regulations. Our research and development involves the controlled use of hazardous
materials, chemicals, biological materials, and various radioactive compounds. Although we believe
that our safety procedures for handling and disposing of such materials currently comply in all
material respects with the standards prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be completely eliminated. In the
event of such an accident, we could be held liable for any damages that result and any such
liability could exceed our available resources.
Employees
We believe that our success will be based on, among other things, the quality of our science, our
ability to invent and develop superior and innovative technologies and products, and our ability to
attract and retain capable management and other personnel. We have assembled a high quality team
of scientists and executives with significant experience in the biotechnology and pharmaceutical
industries.
As of
March 31, 2007, we employed 30 individuals, of whom 12 hold Ph.D. degrees and four hold other
advanced degrees. In addition to our employees, we also use the service and support of several
outside consultants and advisors. None of our employees is represented by a union, and we believe
relationships with our employees are good.
Collaborations and Partnerships
Angiotech
In May 2006, we established a collaboration with Angiotech that is focused on co-developing
MultiStem for the treatment of damage caused by myocardial infarction or peripheral vascular
disease. In support of the collaboration, Angiotech purchased $10,000,000 in aggregate principal
amount of subordinated convertible
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promissory notes, the principal amount of which was
automatically converted along with accrued interest into our Common Stock upon the closing of the
Offering. We may also receive additional equity investments and cash payments based upon the
successful achievement of specified clinical development and commercialization milestones. Under
the terms of the collaboration, the parties will jointly fund clinical development activity with
Angiotech paying for the majority of any Phase III trial costs. We will have lead responsibility
for preclinical and early clinical development and manufacturing of the MultiStem product.
Angiotech will take the lead on pivotal and later clinical trials and commercialization. The
parties will share net profits from the sale of any approved products. In addition, we will retain
the commercial rights to MultiStem for all other therapeutic applications, including treatment of
stroke, bone marrow transplantation and oncology support, blood and immune system disorders,
autoimmune disease, and other indications that we may elect to pursue.
Bristol-Myers Squibb
In December 2000, we entered into a collaboration with Bristol-Myers Squibb to provide cell lines
expressing well validated drug targets produced using our RAGE technology for compound screening
and development. This initial collaboration was expanded in 2002 and again in 2006. Bristol-Myers
Squibb uses the cell lines in its
internal drug development programs and, in exchange, we receive license fee and milestone payments
and will be entitled to receive royalties on the sale of any approved products.
RISK FACTORS
Risks Related To Our Business and Our Industry
We have incurred losses since inception and expect to incur significant net losses in the
foreseeable future and may never become profitable.
Since Athersys’ inception in 1995, it has incurred significant losses and negative cash flows from
operations. Athersys has incurred net losses of $15.2 million in 2004, $14.6 million in 2005 and
$10.6 million in 2006. As of December 31, 2006, Athersys had an accumulated deficit of $141.6
million, and anticipates incurring additional losses for at least the next several years. We
expect to spend significant resources over the next several years to enhance our technologies and
to fund research and development of our pipeline of potential products. To date, substantially all
of Athersys’ revenue has been derived from corporate collaborations, license agreements, and
government grants. In order to achieve profitability, we must develop products and technologies
that can be commercialized by us or through future collaborations. Our ability to generate
revenues and become profitable will depend on our ability, alone or with potential collaborators,
to timely, efficiently and successfully complete the development of our product candidates. We
have never earned revenue from selling a product and we may never do so, as none of our product
candidates have been tested yet in humans. We cannot assure you that we will ever earn revenue or
that we will ever become profitable. If we sustain losses over an extended period of time, we may
be unable to continue our business.
We will need substantial additional funding to develop our products and for our future
operations. If we are unable to obtain the funds necessary to do so, we may be required to delay,
scale back or eliminate our product development or may be unable to continue our business.
The development of our product candidates will require a commitment of substantial funds to conduct
the costly and time-consuming research, which may include preclinical and clinical testing,
necessary to obtain regulatory approvals and bring our products to market. Net cash used in
Athersys’ operations was $11.7 million in 2004, $12.1 million in 2005 and $8.4 million in 2006. We
anticipate the amount of operating funds that we use will continue to increase along with our
operating expenses over at least the next several years as we plan to begin costly clinical trials
of ATHX-105 and MultiStem, as well as continue to advance our various research and product
development activities. We believe that our planned capital needs will be met for approximately
three years. Our future capital requirements will depend on many factors, including:
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the progress and costs of our research and development programs, including
our ability to develop our current portfolio of therapeutic products, or
discover and develop new ones;
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our ability, or our partners ability and willingness, to advance partnered
products or programs;
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the cost of prosecuting, defending and enforcing patent claims and other
intellectual property rights;
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the progress, scope, costs, and results of our preclinical and clinical
testing of any current or future pharmaceutical or MultiStem related products;
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the time and cost involved in obtaining regulatory approvals;
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the cost of manufacturing our product candidates;
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expenses related to complying with GMP manufacturing of therapeutic product
candidates;
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costs of financing the purchases of additional capital equipment and
development technologies;
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competing technological and market developments;
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our ability to establish and maintain collaborative and other arrangements
with third parties to assist in bringing our products to market and the cost of
such arrangements.
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the amount and timing of payments or equity investments that we receive from
collaborators or changes in or terminations of future or existing collaboration
and licensing arrangements
and the timing and amount of expenses we incur to supporting these collaborations
and license agreements;
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costs associated with the integration of any new operation, including costs
relating to future mergers and acquisitions with companies that have
complementary capabilities;
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expenses related to the establishment of sales and marketing capabilities for
products awaiting approval or products that have been approved;
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the level of our sales and marketing expenses; and
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our ability to introduce and sell new products.
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We cannot assure you that we will not need additional capital sooner than currently anticipated.
We will need to raise substantial additional capital to fund our future operations. We cannot be
certain that additional financing will be available on acceptable terms, or at all. In recent
years, it has been difficult for companies to raise capital due to a variety of factors, which may
or may not continue. To the extent we raise additional capital through the sale of equity
securities, the ownership position of our existing stockholders could be substantially diluted. If
additional funds are raised through the issuance of preferred stock or debt securities, these
securities are likely to have rights, preferences and privileges senior to our Common Stock.
Fluctuating interest rates could also increase the costs of any debt financing we may obtain.
Failure to successfully address ongoing liquidity requirements will have a material adverse effect
on our business. If we are unable to obtain additional capital on acceptable terms when needed, we
may be required to take actions that harm our business and our ability to achieve cash flow in the
future, including possibly the surrender of our rights to some technologies or product
opportunities, delaying our clinical trials or curtailing or ceasing operations.
We are heavily dependent on the successful development and commercialization of our two key
product candidates, ATHX-105 and MultiStem, and if we encounter delays or difficulties in the
development of either or both candidates, our business would be harmed.
We are developing multiple therapeutic product candidates, but we are heavily dependent upon the
successful development of two particular product candidates: ATHX-105 for the treatment of obesity
and MultiStem initially for the treatment of damage caused by certain cardiovascular disorders and
for the treatment of bone marrow transplant support and GVHD. Our business would be materially
harmed if we encounter difficulties in the development of either of these product candidates, such
as: delays in the ability to make either product in quantities or in a form that is suitable for
any required preclinical studies or clinical trials; delays in the design, enrollment,
implementation or completion of required preclinical studies and clinical trials; an inability to
follow our current development strategy for obtaining regulatory approval from the FDA because of
changes in the regulatory approval process; less than desired or complete lack of efficacy or
safety in preclinical studies or
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clinical trials; and intellectual property constraints that
prevent us from making, using, or commercializing either product candidate.
The results seen in animal testing of our product candidates may not be replicated in humans.
This Current Report discusses the safety and efficacy seen in preclinical testing of our lead
product candidates, including ATHX-105 and MultiStem, in animals, but we may not see positive
results when ATHX-105, MultiStem or any of our other product candidates undergo clinical testing in
humans in the future. Preclinical studies and Phase I clinical trials are not primarily designed
to test the efficacy of a product candidate in humans, but rather to test safety, to study
pharmacokinetics and pharmacodynamics, and to understand the product candidate’s side effects at
various doses and schedules. Success in preclinical studies or completed clinical trials does not
ensure that later studies or trials, including continuing preclinical studies and large-scale
clinical trials, will be successful nor does it necessarily predict future results. The rate of
failure is quite high, and many companies in the biotechnology and pharmaceutical industries have
suffered significant setbacks in advanced clinical trials, even after promising results in earlier
trials. Product candidates may fail to show desired safety and efficacy in larger and more diverse
patient populations in later stage clinical trials, despite having progressed through early stage
trials. Negative or inconclusive results from any of our ongoing preclinical studies or clinical
trials could result in delays, modifications, or abandonment of ongoing or future clinical trials
and the termination
of our development of a product candidate. Additionally, even if we are able to successfully
complete pivotal Phase III clinical trials, the FDA still may not approve our product candidates.
Our products are in an early stage of development and we currently have no therapeutic
products approved for sale. Our product candidates require additional research, development,
testing, expert reviews and/or regulatory approvals before marketing. We may be unable to develop,
obtain regulatory approval or market any of our product candidates. If our product candidates are
delayed or fail, our financial condition will be negatively affected, and we may have to curtail or
cease our operations.
We are in the early stage of product development, and we are dependent on the application of our
technologies to discover or develop therapeutic product candidates. We currently do not sell any
approved therapeutic products and do not expect to have any products commercially available for
several years, if at all. You must evaluate us in light of the uncertainties and complexities
affecting an early stage biotechnology company. Our product candidates require additional research
and development, preclinical testing, clinical testing and regulatory review and/or approvals
clearances before marketing. Our strategy of using our technologies for the development of
therapeutic products involves new approaches, some of which are unproven. To date, no one to our
knowledge has developed or commercialized any therapeutic products using our technologies and we
might never commercialize any product using our technologies and strategy. There are many reasons
that our product candidates may fail or not advance to commercialization, including the possibility
that our product candidates may be ineffective, unsafe or associated with unacceptable side
effects; our product candidates may fail to receive the necessary regulatory approvals or otherwise
fail to meet applicable regulatory standards; our product candidates may be too expensive to
develop, manufacture or market; other parties may hold or acquire proprietary rights that could
prevent us or our potential collaborators from developing or marketing our product candidates;
physicians, patients, third-party payers or the medical community in general may not accept or use
our contemplated pharmaceutical products; our potential collaborators may withdraw support for or
otherwise impair the development and commercialization of our product candidates; or others may
develop equivalent or superior products.
In addition, we may not succeed in developing new product candidates as an alternative to our
existing portfolio of product candidates. If our current product candidates are delayed or fail,
or we fail to successfully develop and commercialize new product candidates, our financial
condition may be negatively affected, and we may have to curtail or cease our operations.
We may not successfully maintain our existing collaborative and licensing arrangements, or
establish new ones, which could adversely affect our ability to develop and commercialize our
product candidates.
A key element of our business strategy is to commercialize some of our product candidates through
collaborations with other companies. Our pharmaceutical strategy includes establishing
collaborations and licensing agreements
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with one or more pharmaceutical, biotechnology or device
companies, preferably after we have advanced product candidates through the initial stages of
clinical development. However, we may not be able to establish or maintain such licensing and
collaboration arrangements necessary to develop and commercialize our product candidates, or do so
on terms that are acceptable to us. Even if we are able to maintain or establish licensing or
collaboration arrangements, these arrangements may not be on favorable terms and may contain
provisions that will restrict our ability to develop, test and market our product candidates. Any
failure to maintain or establish licensing or collaboration arrangements on favorable terms could
adversely affect our business prospects, financial condition or ability to develop and
commercialize our product candidates.
We expect to rely at least in part on third party collaborators to perform a number of activities
relating to the development and commercialization of our product candidates, including the
manufacturing of product materials, the design and conduct of clinical trials for our
pharmaceutical formulations, and potentially the obtaining of regulatory approvals and marketing
and distribution of any successfully developed products. Our collaborative partners may also have
or acquire rights to control aspects of our product development and clinical programs. As a result,
we may not be able to conduct these programs in the manner or on the time schedule we currently
contemplate. In addition, if any of these collaborative partners withdraw support for our programs
or product candidates or otherwise impair their development, our business could be negatively
affected. To the extent we undertake any of these activities internally, our expenses may increase.
In addition, our success depends on the performance of our collaborators of their responsibilities
under these arrangements. Some potential collaborators may not perform their obligations in a
timely fashion or in a manner satisfactory to us. Because such agreements may be exclusive, we may
not be able to enter into a collaboration agreement with any other company covering the same
product field during the applicable collaborative period. In addition, our collaborators’
competitors may not wish to do business with us at all due to our relationship with our
collaborators. If we are unable to enter into additional product discovery and development
collaborations, our ability to sustain or expand our business will be significantly diminished.
Additionally, our agreements with our collaborators and licensees may have provisions that give
rise to disputes regarding the rights and obligations of the parties. These and other possible
disagreements could lead to termination of the agreement or delays in collaborative research,
development, supply, or commercialization of certain product candidates, or could require or result
in litigation or arbitration. Moreover, disagreements could arise with our collaborators over
rights to intellectual property or our rights to share in any of the future revenues of products
developed by our collaborators. Conflicts of interest may develop between us and our collaborators
concerning competing programs or product development efforts, which may prompt them to terminate
certain development activities that relate to our products or programs, and potentially resulting
in unexpected funding limitations. These kinds of disagreements could also result in costly and
time-consuming litigation. Any such conflicts with our collaborators could reduce our ability to
obtain future collaboration agreements and could have a negative impact on our relationship with
existing collaborators, adversely affecting our reputation and revenues.
If our collaborators do not devote sufficient time and resources to successfully carry out
their contracted duties or meet expected deadlines, we may not be able to advance our product
candidates in a timely manner or at all.
Typically, we cannot control the amount of resources or time our collaborators may devote to our
programs or potential products that may be developed in collaboration with us. We are currently
involved in multiple research and development collaborations with academic and research
institutions. These collaborators frequently depend on outside sources of funding to conduct or
complete research and development, such as grants or other awards. In addition, our academic
collaborators may depend on graduate students, medical students, or research assistants to conduct
certain work, and such individuals may not be fully trained or experienced in certain areas, or
they may elect to discontinue their participation in a particular research program, creating an
inability to complete ongoing research in a timely and efficient manner. As a result of these
uncertainties, we are unable to control the precise timing and execution of any experiments that
may be conducted. In addition, if a corporate collaborator is involved in a business combination,
such as a merger or acquisition, or if a collaborator changes its business focus, its performance
under its agreement with us may suffer.
Additionally, our current or future corporate collaborators will retain the ability to pursue other
research, product development or commercial opportunities that may be directly competitive with our
programs. If these
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collaborators elect to prioritize or pursue other programs in lieu of ours, we
may not be able to advance product development programs in an efficient or effective manner, if at
all. If a collaborator is pursuing a competitive program and encounters unexpected financial or
capability limitations, they may be motivated to reduce the priority placed on our programs or
delay certain activities related to our programs or be unwilling to properly fund their share of
the development expenses for our programs. Any of these developments could harm our product and
technology development efforts, which could seriously harm our business.
If our current or future collaborators delay, abandon, or do not devote sufficient resources to
their efforts to develop our product candidates, we may not be able to adequately support the
further development of those product candidates or programs, and we may not be able to establish
new collaborations that provide support for those programs. Furthermore, any action by our
collaborators to delay or abandon development activities may cause a delay in the receipt of or
loss of anticipated equity investments, milestones, or other forms of consideration, including
royalties or potential revenue from product sales under the terms of some of our collaborative
agreements.
Under the terms of our collaboration agreement with Angiotech, either party may choose, following
the completion of Phase I studies, to opt-out of its obligation to fund further product development
on a product-by-product basis, provided no clinical studies concerning such product candidate are
currently ongoing. If Angiotech should decide to opt-out of funding the development of any of the
product candidates for the covered indications,
for any reason, we may be unable to fund the development on our own and could be forced to halt one
or more MultiStem development programs.
Even if we or our collaborators receive regulatory approval for our products, those products
may never be commercially successful.
Even if we develop pharmaceuticals or MultiStem related products that obtain the necessary
regulatory approval, and we have access to the necessary manufacturing, sales, marketing and
distribution capabilities that we need, our success depends to a significant degree upon the
commercial success of those products. If these products fail to achieve or subsequently maintain
market acceptance or commercial viability, our business would be significantly harmed because our
future royalty revenue or other revenue would be dependent upon sales of these products. In
addition we could be unable to maintain our existing collaborations or attract new product
discovery and development collaborators. Many factors may affect the market acceptance and
commercial success of any potential products that we may discover, including health concerns,
whether actual or perceived, or unfavorable publicity regarding our obesity drugs, stem cell
products or those of our competitors; the timing of market entry as compared to competitive
products; the rate of adoption of products by our collaborators and other companies in the
industry; any product labeling that may be required by the FDA or other United States or foreign
regulatory agencies for our products or competing or comparable products; convenience and ease of
administration; pricing; perceived efficacy and side effects; marketing; availability of
alternative treatments; levels of reimbursement and insurance coverage; and activities by our
competitors.
We may experience delays in clinical trials and regulatory approval relating to our products
that could adversely affect our financial results and our commercial prospects for our
pharmaceutical or stem cell products.
In addition to the regulatory requirements for our pharmaceutical programs, we will also require
regulatory approvals for each distinct application of our stem cell product. In each case, we will
be required to conduct clinical trials to demonstrate safety and efficacy of MultiStem, or various
products that incorporate or use MultiStem. For product candidates that advance to clinical
testing, we cannot be certain that we or a collaborator will successfully complete the clinical
trials necessary to receive regulatory product approvals. This process is lengthy and expensive.
We intend to seek approval for our pharmaceutical formulations through the FDA approval process.
To obtain regulatory approvals, we must, among other requirements, complete clinical trials showing
that our products are safe and effective for a particular indication. Under the approval process,
we must submit clinical and non-clinical data to demonstrate the medication is safe and effective.
For example, we must be able to provide data
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and information, including extended pharmacology,
toxicology, reproductive toxicology, bioavailability and genotoxicity studies to establish
suitability for Phase II or large scale Phase III clinical trials.
All of our product candidates, including ATHX-105 and MultiStem, are at an early stage of
development, and none have yet been tested in humans. An indication of a lack of safety or lack of
efficacy may result in the early termination of an ongoing trial, or may cause us or any of our
collaborators to forego further development of a particular product candidate or program. The FDA
or other regulatory agencies may require further clinical trials prior to granting approval, which
could be costly and time consuming to conduct. Any of these developments would hinder, and
potentially prohibit, our ability to commercialize our product candidates.
Other than the Phase I study for ATHX-105, which we intend to commence shortly, we do not know
precisely when clinical trials for our products will commence or whether we will initiate or
complete any of our clinical trials on schedule or at all. We cannot assure you that clinical
trials will in fact demonstrate that our products are safe or effective.
Additionally, we may not be able to find acceptable patients or may experience delays in enrolling
patients for our clinical trials. The FDA or we may suspend our clinical trials at any time if
either believes that we are exposing the subjects participating in the trials to unacceptable
health risks. The FDA or institutional review boards and/or institutional biosafety committees at
the medical institutions and healthcare facilities where we seek to sponsor clinical trials may not
permit a trial to proceed or may suspend any trial indefinitely if they find deficiencies in the
conduct of the trials.
Product development costs to us and our potential collaborators will increase if we have delays in
testing or approvals or if we need to perform more or larger clinical trials than planned. We
expect to continue to rely on third party clinical investigators at medical institutions and
healthcare facilities to conduct our clinical trials, and, as a result, we may face additional
delaying factors outside our control. Significant delays may adversely affect our financial
results and the commercial prospects for our product candidates and delay our ability to become
profitable.
If our pharmaceutical product candidates do not successfully complete the clinical trial
process, we will not be able to partner or market them. Even successful clinical trials may not
result in a partnering transaction or a marketable product and may not be entirely indicative of a
product’s safety or efficacy.
Many factors, known and unknown, can adversely affect clinical trials and the ability to evaluate a
product’s efficacy. During the course of treatment, patients can die or suffer other adverse
events for reasons that may or may not be related to the proposed product being tested. Even if
unrelated to our product, certain events can nevertheless adversely impact our clinical trials. As
a result, our ability to ultimately develop and market the products and obtain revenues would
suffer.
Even promising results in preclinical studies and initial clinical trials do not ensure successful
results in later clinical trials, which test broader human use of our products. Many companies in
our industry have suffered significant setbacks in advanced clinical trials, despite promising
results in earlier trials. Even successful clinical trials may not result in a marketable product
or be indicative of the efficacy or safety of a product. Many factors or variables could affect the
results of clinical trials and cause them to appear more promising than they may otherwise be.
Product candidates that successfully complete clinical trials could ultimately be found to be
unsafe or ineffective.
In addition, our ability to complete clinical trials depends on many factors, including obtaining
adequate clinical supplies and having a sufficient rate of patient recruitment. For example,
patient recruitment is a function of many factors, including the size of the patient population;
the proximity of patients to clinical sites; the eligibility criteria for the trial; the
perceptions of investigators and patients regarding safety; and the availability of other treatment
options.
Even if patients are successfully recruited, we cannot be sure that they will complete the
treatment process. Delays in patient enrollment or treatment in clinical trials may result in
increased costs, program delays or both.
With respect to markets in other countries, we or a partner will also be subject to regulatory
requirements governing clinical trials in those countries. Even if we complete clinical trials, we
may not be able to submit a
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marketing application. If we submit an application, the regulatory
authorities may not review or approve it in a timely manner, if at all.
Even if we obtain regulatory approval of any of our product candidates, the approved products
may be subject to post-approval studies and will remain subject to ongoing regulatory requirements.
If we fail to comply, or if concerns are identified in subsequent studies, our approval could be
withdrawn and our product sales could be suspended.
If we are successful at obtaining regulatory approval for ATHX-105, MultiStem or any of our other
product candidates, regulatory agencies in the United States and other countries where a product
will be sold may require extensive additional clinical trials or post-approval clinical studies
that are expensive and time consuming to conduct. In particular, therapeutic products administered
for the treatment of persistent or chronic conditions, such as ATHX-105 for obesity, are likely to
require extensive follow-up studies and close monitoring of patients after regulatory approval has
been granted, for any signs of adverse effects that occur over a long period of time. These
studies may be expensive and time consuming to conduct and may reveal side effects or other harmful
effects in patients that use our therapeutic products after they are on the market, which may
result in the limitation or withdrawal of our drugs from the market. Alternatively, we may not be
able to conduct such additional trials, which might force us to abandon our efforts to develop or
commercialize certain product candidates. Even if post-approval studies are not requested or
required, after our products are approved and on the market, there might be safety issues that
emerge over time that require a change in product labeling or that require withdrawal of the
product from the market, which would cause our revenue to decline.
Additionally, any products that we may successfully develop will be subject to ongoing regulatory
requirements after they are approved. These requirements will govern the manufacturing, packaging,
marketing, distribution, and use of our products. If we fail to comply with such regulatory
requirements, approval for our products may be withdrawn, and product sales may be suspended. We
may not be able to regain compliance, or we may only be able to regain compliance after a lengthy
delay, significant expense, lost revenues and damage to our reputation.
We will rely on third parties to manufacture our pharmaceutical product candidates and our
MultiStem product candidate. There can be no guarantee that we can obtain sufficient and acceptable
quantities of our pharmaceutical product candidates of our MultiStem product candidate on
acceptable terms, which may delay or impair our ability to develop, test and market such products.
Our business strategy relies on third parties to manufacture and produce our pharmaceutical product
candidates and MultiStem product candidate in accordance with good manufacturing practices
established by the FDA, or similar regulations in other countries. Our pharmaceutical product
candidates or MultiStem product may be in competition with other products or companies for access
to these facilities and may be subject to delays in manufacture if third parties give other
products greater priority than our product candidates. These third parties may not deliver
sufficient quantities of our pharmaceutical or MultiStem product candidates, manufacture our
pharmaceutical and MultiStem product candidates in accordance with specifications, or comply with
applicable government regulations. Additionally, if the manufactured products fail to perform as
specified, our business and reputation could be severely impacted.
We expect to enter into additional manufacturing agreements for the production of product
materials. If any manufacturing agreement is terminated or any third party collaborator
experiences a significant problem that could result in a delay or interruption in the supply of
product materials to us, there are very few contract manufacturers who currently have the
capability to produce our pharmaceutical product candidates or MultiStem product on acceptable
terms, or on a timely and cost-effective basis. We cannot assure you that manufacturers on whom we
will depend will be able to successfully produce our pharmaceutical product candidates or MultiStem
product on acceptable terms, or on a timely or cost-effective basis. We cannot assure you that
manufacturers will be able to manufacture our products in accordance with our product
specifications or will meet FDA or other requirements. We must have sufficient and acceptable
quantities of our product materials to conduct our clinical trials and to market our product
candidates, if and when such products have been approved by the FDA for marketing. If we are unable
to obtain sufficient and acceptable quantities of our product material, we may be required to delay
the clinical testing and marketing of our products.
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If our contract manufacturers are not satisfying our needs and we decide not to establish our own
manufacturing capabilities, it could be difficult and very expensive to change suppliers. Any
change in the location of manufacturing would require FDA inspection and approval, which could
interrupt the supply of products and may be time-consuming and expensive to obtain. If we are
unable to identify alternative contract manufacturers that are qualified to produce our products,
we may have to temporarily suspend the production of products, and would be unable to generate
revenue from the sale of products.
If we do not comply with applicable regulatory requirements in the manufacture and
distribution of our product candidates, we may incur penalties that may inhibit our ability to
commercialize our products and adversely affect our revenue.
Our failure or the failure of our potential collaborators or third party manufacturers to comply
with applicable FDA or other regulatory requirements including manufacturing, quality control,
labeling, safety surveillance, promoting and reporting may result in criminal prosecution, civil
penalties, recall or seizure of our products, total or partial suspension of production or an
injunction, as well as other regulatory action against our product candidates or us. Discovery of
previously unknown problems with a product, supplier, manufacturer or facility may result in
restrictions on the sale of our products, including a withdrawal of such products from the market.
The occurrence of any of these events would negatively impact our business and results of
operations.
If we are unable to create and maintain sales, marketing and distribution capabilities or
enter into agreements with third parties to perform those functions, we will not be able to
commercialize our product candidates.
We currently have no sales, marketing or distribution capabilities. Therefore, to commercialize our
product candidates, if and when such products have been approved and are ready for marketing, we
expect to collaborate with third parties to perform these functions. We will either need to share
the value generated from the sale of any products and/or pay a fee to the contract sales
organization. If we establish any such relationships, we will be dependent upon the capabilities
of our collaborators or contract service providers to effectively market, sell, and distribute our
product. If they are ineffective at selling and distributing our product, or if they choose to
emphasize other products over ours, we may not achieve the level of product sales revenues that we
would like. If conflicts arise, we may not be able to resolve them easily or effectively, and we
may suffer financially as a result. If we cannot rely on the sales, marketing and distribution
capabilities of our collaborators or of contract service providers, we may be forced to establish
our own capabilities. We have no experience in developing, training or managing a sales force and
will incur substantial additional expenses if we decide to market any of our future products
directly. Developing a marketing and sales force is also time consuming and could delay launch of
our future products. In addition, we will compete with many companies that currently have extensive
and well-funded marketing and sales operations. Our marketing and sales efforts may be unable to
compete successfully against these companies.
If we are unable to attract and retain key personnel and advisors, it may adversely affect our
ability to obtain financing, pursue collaborations or develop our product candidates.
We are highly dependent on Gil Van Bokkelen, Ph.D., our Chief Executive Officer, as well as other
executive and scientific officers, including William Lehmann, J.D., M.B.A., President and Chief
Operating Officer, John Harrington, Ph.D., Chief Scientific Officer and Executive Vice President,
Robert Deans, Ph.D., Senior Vice President, Regenerative Medicine, and Laura Campbell, C.P.A., Vice
President of Finance.
These individuals are integral to the development and integration of our technologies and to our
present and future scientific collaborations, including managing the complex research processes and
the product development and potential commercialization processes. Given their leadership,
extensive technical, scientific and financial expertise and management and operational experience,
these individuals would be difficult to replace. Consequently, the loss of services of one or more
of these individuals could result in product development delays or the failure of our
collaborations with current and future collaborators, which, in turn, may hurt our ability to
develop and commercialize products and generate revenues. Additionally, Kurt R. Brunden, Ph.D.,
Senior Vice President of Biopharmaceuticals, has indicated to us that he may return to a faculty
position. If Dr. Brunden leaves us and does not continue his involvement with us as a consultant,
we may have to hire another individual to replace him or contract for services.
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Our future success depends on our ability to attract, retain and motivate highly qualified
management and scientific, development and commercial personnel and advisors. If we are unable to
attract and retain key personnel and advisors, it may negatively affect our ability to successfully
develop, test and commercialize our product candidates.
We may not have adequate protection for our unpatented proprietary information, which could
adversely affect our competitive position.
In addition to patents, we will substantially rely on trade secrets, know-how, continuing
technological innovations and licensing opportunities to develop and maintain our competitive
position. However, others may independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade secrets or disclose our
technology. To protect our trade secrets, we may enter into confidentiality agreements with
employees, consultants and potential collaborators. However, these agreements may not provide
meaningful protection of our trade secrets or adequate remedies in the event of unauthorized use or
disclosure of such information. Likewise, our trade secrets or know-how may become known through
other means or be independently discovered by our competitors. Any of these events could prevent us
from developing or commercializing our product candidates.
Our ability to compete in the biopharmaceutical market may decline if we do not adequately
protect our proprietary technologies.
Our success depends in part on our ability to obtain and maintain intellectual property that
protects our technologies and our pharmaceutical products. Patent positions may be highly
uncertain and may involve complex legal and factual questions, including the ability to establish
patentability of sequences relating to chemical synthesis techniques, compounds and methods for
using them for which we seek patent protection. We cannot predict the breadth of claims that will
ultimately be allowed in our patent applications, if any, including those we have in-licensed or
the extent to which we may enforce these claims against our competitors. The degree of future
protection for our proprietary rights is therefore highly uncertain and we cannot assure you that
we were the first to file patent applications or to invent the subject matter claimed in patent
applications relating to the technologies or product candidates upon which we rely; others will not
independently develop similar or alternative technologies or duplicate any of our technologies;
others did not publicly disclose our claimed technology before we conceived the subject matter
included in any of our patent applications; any of our pending or future patent applications will
result in issued patents; any of our patent applications will not result in interferences or
disputes with third parties regarding priority of invention; any patents that may be issued to us,
our collaborators or our licensors will provide a basis for commercially viable products or will
provide us with any competitive advantages or will not be challenged by third parties; we will
develop additional proprietary technologies that are patentable; the patents of others will not
have an adverse effect on our ability to do business; or new proprietary technologies from third
parties, including existing licensors, will be available for licensing to us on reasonable
commercial terms, if at all.
In addition, patent law outside the United States is uncertain and in many countries intellectual
property laws are undergoing review and revision. The laws of some countries do not protect
intellectual property rights to the same extent as domestic laws. It may be necessary or useful for
us to participate in opposition proceedings to determine the validity of our competitors’ patents
or to defend the validity of any of our or our licensor’s future patents, which could result in
substantial costs and would divert our efforts and attention from other aspects of our business.
With respect to certain of our inventions, we have decided not to pursue patent protection outside
the United States, both because we do not believe it is cost effective and because of
confidentiality concerns. Accordingly, our international competitors could develop and receive
foreign patent protection for gene sequences and functions for which we are seeking U.S. patent
protection, enabling them to sell products that we have developed.
Technologies licensed to us by others, or in-licensed technologies, are important to our business.
The scope of our rights under our licenses may be subject to dispute by our licensors or third
parties. Our rights to use these technologies and to practice the inventions claimed in the
licensed patents are subject to our licensors abiding by the terms of those licenses and not
terminating them.
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In particular, we depend on certain technologies relating to our MultiStem technology licensed from
the University of Minnesota. As a result of this license, we have agreed to use commercially
reasonable efforts to develop and commercialize this technology. If we fail to comply with those
obligations, we may lose some of the rights that enable us to utilize this technology, and our
ability to develop products based on MultiStem could be seriously hampered.
In addition, we may in the future acquire rights to additional technologies by licensing such
rights from existing licensors or from third parties. Such in-licenses may be costly. Also, we
generally do not control the patent prosecution, maintenance or enforcement of in-licensed
technologies. Accordingly, we are unable to exercise the same degree of control over this
intellectual property as we do over our internally developed technologies. Moreover, some of our
academic institution licensors, collaborators and scientific advisors have rights to publish data
and information to which we have rights. If we cannot maintain the confidentiality of our
technologies and other confidential information in connection with our collaborations, our ability
to protect our proprietary information or obtain patent protection in the future may be impaired,
which could have a significant adverse effect on our business, financial condition and results of
operations.
Many of the patent applications we and our licensors have filed have not yet been
substantively examined and may not result in patents being issued or enforced.
Many of the patent applications filed by us and our licensors were filed recently with the United
States Patent and Trademark Office (“U.S. PTO”), and most have not been substantively examined and
may not result in patents being issued. It is difficult to predict whether any of our or our
licensors’ applications will ultimately be found to be patentable or, if so, to predict the scope
of any allowed claims. In addition, the disclosure in our or our licensors’ patent applications,
particularly in respect of the utility of our claimed inventions, may not be sufficient to meet the
statutory requirements for patentability in all cases. As a result, it is difficult to predict
whether any of our or our licensors’ applications will be allowed, or, if so, to predict the scope
of any allowed claims or the enforceability of the patents. Even if enforceable, others may be
able to design around any patents or develop similar technologies that are not within the scope of
such patents. Others may discover uses for compounds, cells, genes, or proteins other than those
uses covered in our patents, and these other uses may be separately patentable. Even if we have a
patent claim on a particular compound, cell, or gene sequence, the holder of a patent covering the
use of that compound, cell, or gene sequence could exclude us from selling a product that is based
on the same use of the patented material. Our and our licensors’ patent applications may not issue
as patents that will provide us with any protection or competitive advantage.
In some cases, we have been issued patents that relate to technologies and product candidates that
we believe provide us with certain proprietary rights. However, the fact that we have filed a
patent application or that a patent has issued does not ensure that we will have meaningful
protection from competition with regard to the underlying technology or product. Patents, if
issued, may be challenged, invalidated, declared unenforceable, or circumvented. If such an event
were to occur, out ability to compete could be severely diminished.
If patent applications for our owned, licensed, or future developed therapeutic products or
technologies do not result in issued patents containing sufficiently broad claims, we may be
limited in our ability to prevent competition and earn revenues using our products or technologies.
We cannot predict which of our patent applications or our licensor’s applications will result in
the granting of patents, the scope of claims in any patent that is granted, or the timing of the
granting of patents. During examination, the U.S. PTO might conclude that the claimed technology
in our patent applications does not meet statutory requirements for patentability. Even if our
claims are found to be patentable, if the same or similar claims are also granted to a third party,
we may not be established as first to invent, in which case we would not be granted a patent. In
this event, a prevailing party may require us or our collaborators to stop pursuing a potential
product or to negotiate a costly license arrangement to pursue the potential product. We may not
be able to obtain a license from the prevailing party on acceptable terms, or at all.
Our patent applications include multiple full-length human genes and partial gene sequences
discovered with our RAGE technology. No clear policy has emerged from the U.S. PTO regarding the
patentability of partial or full-length gene sequences. The U.S. PTO has taken an increasingly
restrictive view as to whether a gene sequence
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has sufficient utility to be patentable. Other
companies or institutions have filed and are likely to file patent applications that attempt to
patent full-length genes or partial gene sequences that may be the same as or similar to some of
those in our patent applications. In addition, the Human Genome Project and many companies and
institutions have identified genes and deposited partial gene sequences in public databases and are
continuing to do so. These public disclosures might limit the scope of our claims or make
unpatentable subsequent patent applications on full-length genes.
If we are unsuccessful in obtaining further issued patents on our RAGE, MultiStem, or other
technologies, genes and gene sequences discovered with RAGE, and additional patents on other
inventions, then products and inventions resulting from these technologies could potentially be
exploited by others without any compensation to us and we may not be able to realize revenues from
these products or technologies. We have filed patent applications that seek to protect the
composition of matter and method of use related to ATHX-105, as well as other compounds that we
have identified. If we are unsuccessful in obtaining these patents, we may ultimately be unable to
commercialize ATHX-105, or other compounds that we are developing or may elect to develop in the
future.
Disputes concerning the infringement or misappropriation of our proprietary rights or the
proprietary rights of others could be time consuming and extremely costly and could delay our
research and development efforts.
Our commercial success, if any, will be significantly harmed if we infringe the patent rights of
third parties or if we breach any license or other agreements that we have entered into with regard
to our technology or business.
We are aware of other companies and academic institutions that have been performing research in the
areas of adult derived stem cells. In particular, other companies and academic institutions have
announced that they have identified nonembryonic stem cells isolated from bone marrow or other
tissues that have the ability to form a range of cell types, or display the property of
pluripotency. To the extent any of these companies or academic institutions currently have, or
obtain in the future, broad patent claims, such patents could block our ability to use various
aspects of our discovery and development process and might prevent us from developing or
commercializing newly discovered applications of our MultiStem technology, or otherwise conducting
our business. In addition, it is possible that some of the pharmaceutical product candidates we
are developing may not be patentable or may be covered by intellectual property of third parties.
We are not currently a party to any litigation, interference, opposition, protest, reexamination or
any other potentially adverse governmental, ex parte or inter-party proceeding with regard to our
patent or trademark positions. However, the life sciences and other technology industries are
characterized by extensive litigation regarding patents and other intellectual property rights.
Many life sciences and other technology companies have employed intellectual property litigation as
a way to gain a competitive advantage. If we become involved in litigation, interference
proceedings, oppositions, reexamination, protest or other potentially adverse intellectual property
proceedings as a result of alleged infringement by us of the rights of others or as a result of
priority of invention disputes with third parties, we might have to spend significant amounts of
money, time and effort defending our position and we may not be successful. In addition, any
claims relating to the infringement of third-party proprietary rights or proprietary
determinations, even if not meritorious, could result in costly litigation, lengthy governmental
proceedings, divert management’s attention and resources, or require us to enter into royalty or
license agreements that are not advantageous to us. If we do not have the financial resources to
support such litigation or appeals, we may forfeit or lose certain commercial rights. Even if we
have the financial resources to continue such litigation or appeals, we may lose. In the event
that we lose, we may be forced to pay very substantial damages; we may have to obtain costly
license rights, which may not be available to us on acceptable terms, if at all; or we may be
prohibited from selling products that are found to infringe the patent rights of others.
Should any person have filed patent applications or obtained patents that claim inventions also
claimed by us, we may have to participate in an interference proceeding declared by the relevant
patent regulatory agency to determine priority of invention and, thus, the right to a patent for
these inventions in the United States. Such a proceeding could result in substantial cost to us
even if the outcome is favorable. Even if successful on priority grounds, an interference action
may result in loss of claims based on patentability grounds raised in the interference action.
Litigation, interference proceedings or other proceedings could divert management’s time
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and
efforts. Even unsuccessful claims could result in significant legal fees and other expenses,
diversion of management’s time and disruption in our business. Uncertainties resulting from
initiation and continuation of any patent proceeding or related litigation could harm our ability
to compete and could have a significant adverse effect on our business, financial condition and
results of operations.
An adverse ruling arising out of any intellectual property dispute, including an adverse decision
as to the priority of our inventions, could undercut or invalidate our intellectual property
position. An adverse ruling could also subject us to significant liability for damages, including
possible treble damages, prevent us from using technologies or developing products, or require us
to negotiate licenses to disputed rights from third parties. Although patent and intellectual
property disputes in the technology area are often settled through licensing or similar
arrangements, costs associated with these arrangements may be substantial and could include license
fees and ongoing royalties. Furthermore, necessary licenses may not be available to us on
satisfactory terms, if at all. Failure to obtain a license in such a case could have a significant
adverse effect on our business, financial condition and results of operations.
Many potential competitors, including those who have greater resources and experience than we
do, may develop products or technologies that make ours obsolete or noncompetitive.
Many companies are engaged in the pursuit of safe and effective obesity drugs. Our future success
will depend on our ability to maintain a competitive position with respect to technological
advances. Technological developments by others may result in our MultiStem product platform and
technologies, as well as our pharmaceutical formulations, such as ATHX-105, becoming obsolete.
We are subject to significant competition from pharmaceutical, biotechnology and diagnostic
companies, academic and research institutions, and government or other publicly funded agencies
that are pursuing the development of therapeutic products and technologies that are substantially
similar to our proposed therapeutic products and technologies, or that otherwise address the
indications we are pursuing. Most of our current and potential competitors have substantially
greater research and development capabilities and financial, scientific, regulatory, manufacturing,
marketing, sales, human resources, and experience than we do. Many of our competitors have several
therapeutic products that have already been developed, approved and successfully commercialized, or
are in the process of obtaining regulatory approval for their therapeutic products in the United
States and internationally.
Many of these companies have substantially greater capital resources, research and development
resources and experience, manufacturing capabilities, regulatory expertise, sales and marketing
resources, established relationships with consumer products companies and production facilities.
Universities and public and private research institutions are also potential competitors. While
these organizations primarily have educational objectives, they may develop proprietary
technologies related to stem cells or secure patent protection that we may need for the development
of our technologies and products. We may attempt to license these proprietary technologies, but
these licenses may not be available to us on acceptable terms, if at all.
Our competitors, either alone or with their collaborative partners, may succeed in developing
technologies or products that are more effective, safer, more affordable or more easily
commercialized than ours, and our competitors may obtain intellectual property protection or
commercialize products sooner than we do. Developments by others may render our product candidates
or our technologies obsolete.
Our current product discovery and development collaborators are not prohibited from entering into
research and development collaboration agreements with third parties in any product field. Our
failure to compete effectively would have a significant adverse effect on our business, financial
condition and results of operations.
We expect that our results of operations will fluctuate from period to period, and this
fluctuation could cause our stock price to decline, causing investor losses.
Our operating results have fluctuated in the past and are likely to vary significantly in the
future based upon a number of factors, many of which we have little or no control over. Therefore,
period-to-period comparisons of our operating results are not necessarily a good indication of our
future performance. Some of the factors that could cause our operating results to fluctuate
include our ability to discover and develop new products; our ability
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or the ability of our product
discovery and development collaborators to incorporate our technology into pharmaceutical products;
our receipt of milestone payments in any particular period; the ability and willingness of
collaborators to commercialize products incorporating our products on expected timelines, or at
all; our ability to enter into product discovery and development collaborations and technology
collaborations, or to extend the terms of any existing collaboration agreements, and our payment
obligations, expected revenue and other terms of any other agreements of this type; our ability, or
our collaborators’ ability, to successfully satisfy all pertinent regulatory requirements; the
demand for our future products and our collaborators’ products containing our technology; and
general and industry specific economic conditions, which may affect our collaborators’ research and
development expenditures.
We will use hazardous and biological materials in our business. Any claims relating to
improper handling, storage or disposal of these materials could be time consuming and costly.
Our products and processes will involve the controlled storage, use and disposal of certain
hazardous and biological materials and waste products. We and our suppliers and other
collaborators are subject to federal, state
and local regulations governing the use, manufacture, storage, handling and disposal of materials
and waste products. Even if we and these suppliers and collaborators comply with the standards
prescribed by law and regulation, the risk of accidental contamination or injury from hazardous
materials cannot be completely eliminated. In the event of an accident, we could be held liable for
any damages that result, and any liability could exceed the limits or fall outside the coverage of
any insurance we may obtain and exceed our financial resources. We may not be able to maintain
insurance on acceptable terms, or at all. We may incur significant costs to comply with current or
future environmental laws and regulations.
If we acquire products, technologies or other businesses, we will incur a variety of costs,
may have integration difficulties and may experience numerous other risks that could adversely
affect our business.
To remain competitive, we may decide to acquire additional businesses, products and technologies.
We currently have no commitments or agreements with respect to, and are not actively seeking, any
material acquisitions. We have limited experience in identifying acquisition targets, successfully
acquiring them and integrating them into our current infrastructure. We may not be able to
successfully integrate any businesses, products, technologies or personnel that we might acquire in
the future without a significant expenditure of operating, financial and management resources, if
at all. In addition, future acquisitions could require significant capital infusions and could
involve many risks, including, but not limited to:
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we may have to issue convertible debt or equity securities to complete an
acquisition, which would dilute our stockholders and could adversely affect the
market price of the Common Stock;
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an acquisition may negatively impact our results of operations because it may
require us to incur large one-time charges to earnings, amortize or write down
amounts related to goodwill and other intangible assets, or incur or assume
substantial debt or liabilities, or it may cause adverse tax consequences,
substantial depreciation or deferred compensation charges;
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we may encounter difficulties in assimilating and integrating the business,
technologies, products, personnel or operations of companies that we acquire;
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certain acquisitions may disrupt our relationship with existing collaborators
who are competitive to the acquired business;
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acquisitions may require significant capital infusions and the acquired
businesses, products or technologies may not generate sufficient revenue to
offset acquisition costs;
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an acquisition may disrupt our ongoing business, divert resources, increase
our expenses and distract our management;
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acquisitions may involve the entry into a geographic or business market in
which we have little or no prior experience; and
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key personnel of an acquired company may decide not to work for us.
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Any of the foregoing risks could have a significant adverse effect on our business, financial
condition and results of operations.
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To the extent we enter markets outside of the United States, our business will be subject to
political, economic, legal and social risks in those markets, which could adversely affect our
business.
There are significant regulatory and legal barriers in markets outside the United States that we
must overcome to the extent we enter or attempt to enter markets in countries other than the United
States. We will be subject to the burden of complying with a wide variety of national and local
laws, including multiple and possibly overlapping and conflicting laws. We also may experience
difficulties adapting to new cultures, business customs and legal systems. Any sales and
operations outside the United States would be subject to political, economic and social
uncertainties including, among others, changes and limits in import and export controls; increases
in custom duties and tariffs; changes in currency exchange rates; economic and political
instability; changes in government regulations and laws; absence in some jurisdictions of effective
laws to protect our intellectual property rights; and currency transfer and other restrictions and
regulations that may limit our ability to sell certain products or repatriate profits to the United
States. Any changes related to these and other factors could adversely affect our business to the
extent we enter markets outside the United States.
Foreign governments often impose strict price controls on approved products, which may
adversely affect our future profitability in those countries, and the re-importation of drugs to
the United States from foreign countries that impose price controls may adversely affect our future
profitability.
Frequently foreign governments impose strict price controls on newly approved therapeutic products.
If we obtain regulatory approval to sell products in foreign countries, we may be unable to obtain
a price that provides an adequate financial return on our investment. Furthermore, legislation in
the United States may permit re-importation of drugs from foreign countries into the United States,
including re-importation from foreign countries where the drugs are sold at lower prices than in
the United States due to foreign government-mandated price controls. Such a practice, especially
if it is conducted on a widespread basis, may significantly reduce our potential U.S. revenues from
any drugs that we are able to develop.
If we elect not to sell our products in foreign countries that impose government mandated
price controls because we decide it is uneconomical to do so, a foreign government or patent office
may attempt to terminate our intellectual property rights in that country, enabling competitors to
make and sell our products.
In some cases we may choose not to sell a product in a foreign country because it is uneconomical
to do so under a system of government-imposed price controls, or because it could severely limit
our profitability in the U.S. or other markets. In such cases, a foreign government or patent
office may terminate any intellectual property rights we may obtain with respect to that product.
Such a termination could enable competitors to produce and sell our product in that market.
Furthermore, such products may be exported into the United States through legislation that
authorizes the importation of drugs from outside the United States. In such an event, we may have
to reduce our prices, or we may be unable to compete with low-cost providers of our drugs, and we
could be financially harmed as a result.
We may encounter difficulties managing our growth, which could adversely affect our business.
At various times we have experienced periods of rapid growth in our employee numbers as a result of
a dramatic increase in activity in technology programs, genomics programs, collaborative research
programs, discovery programs, and scope of operations. At other times, we have had to reduce staff
in order to bring our expenses in line with our financial resources. Our success will also depend
on the ability of our officers and key employees to continue to improve our operational
capabilities and our management information and financial control systems, and to expand, train and
manage our work force. In connection with the 2006 audit, Athersys received a letter regarding a
material weakness in internal control over financial reporting as a result of a restatement related
to a past partnership. Such restatement resulted in a favorable adjustment to net assets. If we
are unable to successfully implement improvements to our management information and financial
control systems in an efficient and timely manner, or if we encounter deficiencies in existing
systems and controls, our management may not have adequate information to manage our day-to-day
operations and our inability to manage our growth effectively could increase our losses.
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We may be sued for product liability, which could adversely affect our business.
Because our business strategy involves the development and sale by either us or our collaborators
of commercial products, we may be sued for product liability. We may be held liable if any product
we develop and commercialize, or any product our collaborators commercialize that incorporates any
of our technology, causes injury or is found otherwise unsuitable during product testing,
manufacturing, marketing, sale or consumer use. In addition, the safety studies we must perform and
the regulatory approvals required to commercialize our pharmaceutical products, will not protect us
from any such liability.
We carry product liability insurance, as well as liability insurance for conducting clinical
trials. We also intend to seek product liability insurance for any approved products that we may
develop or acquire. However, in the event there are product liability claims against us, our
insurance may be insufficient to cover the expense of defending against such claims, or may be
insufficient to pay or settle such claims. Furthermore, we may be unable to obtain adequate
product liability insurance coverage for commercial sales of any of our approved products. If such
insurance is insufficient to protect us, our results of operations will suffer. If any product
liability claim is made against us, our reputation and future sales will be damaged, even if we
have adequate insurance coverage.
The availability, manner, and amount of reimbursement for our product candidates from
government and private payers are uncertain, and our inability to obtain adequate reimbursement for
any products could severely limit our product sales.
We expect that many of the patients who seek treatment with any of our products that are approved
for marketing will be eligible for Medicare benefits. Other patients may be covered by private
health plans. If we are unable to obtain or retain adequate levels of reimbursement from Medicare
or from private health plans, our ability to sell our products will be severely limited. The
application of existing Medicare regulations and interpretive coverage and payment determinations
to newly approved products is uncertain and those regulations and interpretive determinations are
subject to change. The Medicare Prescription Drug Improvement and Modernization Act, enacted in
December 2003, provides for a change in reimbursement methodology that reduces the Medicare
reimbursement rates for many drugs, which may adversely affect reimbursement for any products we
may develop. Medicare regulations and interpretive determinations also may determine who may be
reimbursed for certain services, and may limit the pool of patients our product candidates are
being developed to serve.
Federal, state and foreign governments continue to propose legislation designed to contain or
reduce health care costs. Legislation and regulations affecting the pricing of products like our
potential products may change further or be adopted before any of our potential products are
approved for marketing. Cost control initiatives by governments or third-party payers could
decrease the price that we receive for any one or all of our potential products or increase patient
coinsurance to a level that make our products under development become unaffordable. In addition,
government and private health plans persistently challenge the price and cost-effectiveness of
therapeutic products. Accordingly, these third parties may ultimately not consider any or all of
our products under development to be cost effective, which could result in products not being
covered under their health plans or covered only at a lower price. Any of these initiatives or
developments could prevent us from successfully marketing and selling any of our products that are
approved for commercialization.
Public perception of ethical and social issues surrounding the use of adult-derived stem cell
technology may limit or discourage the use of our technologies, which may reduce the demand for our
therapeutic products and technologies and reduce our revenues.
Our success will depend in part upon our ability to develop therapeutic products incorporating or
discovered through our adult-derived stem cell technology. For social, ethical, or other reasons,
governmental authorities in the United States and other countries may call for limits on, or
regulation of the use of, adult-derived stem cell technologies. Although we do not use the more
controversial stem cells derived from embryos or fetuses, claims that adult-derived stem cell
technologies are ineffective, unethical or pose a danger to the environment may influence public
attitudes. The subject of stem cell technologies in general has received negative publicity and
aroused public debate in the United States and some other countries. Ethical and other concerns
about our adult-derived stem cell technology could materially hurt the market acceptance of our
therapeutic products and
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technologies, resulting in diminished sales and use of any products we are
able to develop using adult-derived stem cells.
Risks Related to Our Common Stock; Liquidity Risks
The price of our Common Stock is expected to be volatile and an investment in our Common Stock
could decline in value.
The market price of our Common Stock, and the market prices for securities of biotechnology
companies in general, are expected to be highly volatile. The following factors, in addition to
other risk factors described in this Current Report, and the potentially low volume of trades in
our Common Stock, may have a significant impact on the market price of our Common Stock, some of
which are beyond our control: announcements of technological innovations and discoveries by us or
our competitors; developments concerning any research and development, clinical trials,
manufacturing, and marketing collaborations; new products or services that we or our competitors
offer; actual or anticipated variations in operating results; the initiation, conduct and/or
outcome of intellectual property and/or litigation matters; changes in financial estimates by
securities analysts; conditions or trends in bio-pharmaceutical or other healthcare industries;
regulatory developments in the United States and other countries; changes in the economic
performance and/or market valuations of other biotechnology and flavor
companies; our announcement of significant acquisitions, strategic partnerships, joint ventures or
capital commitments; additions or departures of key personnel; global unrest, terrorist activities,
and economic and other external factors; and sales or other transactions involving our Common
Stock.
The stock market in general has recently experienced relatively large price and volume
fluctuations. In particular, market prices of securities of biotechnology companies have
experienced fluctuations that often have been unrelated or disproportionate to the operating
results of these companies. Continued market fluctuations could result in extreme volatility in
the price of the Common Stock, which could cause a decline in the value of the Common Stock.
Prospective investors should also be aware that price volatility may be worse if the trading volume
of the Common Stock is low.
Because Athersys has become a public company as a result of the Merger and not a public
offering, the Company may not attract the attention of major brokerage firms.
Security analysts of major brokerage firms may not provide coverage of the Company. No assurance
can be given that brokerage firms will want to conduct any primary offerings on behalf of the
Company in the future.
A significant number of the shares of Common Stock will be eligible for sale, and their sale
could depress the market price of the Company’s stock.
The sale of a significant number of shares of the Common Stock in the public market could harm the
market price of the Common Stock. As additional shares of the Common Stock become gradually
available for resale in the public market pursuant to the registration of those shares and releases
of lock-up agreements, the supply of the Common Stock will increase, which could decrease its
market price. The Company issued 13,000,000 shares of Common Stock in the Offering and 5,628,368
additional shares as a result of the completion of the Merger and the Offering. Some or all of the
shares of Common Stock may be offered from time to time in the open market pursuant to Rule 144 (or
pursuant to a registration statement, if one is effective), and these sales may have a depressive
effect on the market for the shares of Common Stock. In general, a person who has held restricted
shares for a period of one year may, upon filing of a notification on Form 144 with the SEC, sell
into the market Common Stock in an amount up to the greater of 1% of the outstanding shares or the
average weekly number of shares sold in the last four weeks before such sale. Such sales may be
repeated once each three months, and any of the restricted shares may be sold by a non-affiliate
after they have been held two years. Our officers and directors and substantially all of our
employees and the former Athersys stockholders that own greater than 1% of the issued and
outstanding Common Stock after consummation of the Merger and the Offering are subject to lock-up
provisions relating to shares of Common Stock that they will own that will prevent the sale or
transfer of their shares of Common Stock until 180 days after the effective date of the resale
registration statement.
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It is not anticipated that there will be an active public market for the Common Stock in the
near term and you may have to hold your Common Stock for an indefinite period of time.
Although our Common Stock is eligible for trading on the OTC Bulletin Board, there currently is not
an active public or other trading market for the Common Stock, and we cannot assure you that any
market will develop or be sustained. Because our Common Stock is expected to be thinly traded, you
cannot expect to be able to liquidate your investment in case of an emergency or if you otherwise
desire to do so. It may be difficult to for you to resell a large number of your shares of Common
Stock in a short period of time or at or above their purchase price. Further, the sale of shares
of Common Stock may have adverse federal income tax consequences.
If we do not comply with registration rights granted to certain holders of our restricted
securities, we may be required to pay damages to such holders.
We intend to file a “resale” registration statement with the SEC covering all shares of Common
Stock issued in the Offering, including shares of Common Stock into which any warrants are
exercisable, no later than 45 days after the Closing Date. We will use best efforts to have such
“resale” registration statement declared effective by the SEC as soon as possible and, in any
event, within 90 days after the filing (or within five days after receipt of a no review letter
from the SEC), and to maintain its effectiveness until such time as all securities registered under
the registration statement have been sold or are otherwise able to be sold under Rule 144 of the
Securities Act without regard to volume limitations, whichever is earlier. We cannot assure you
that we will be able to follow
the required procedures or obtain or maintain such effective registration statement. Subject to
certain exceptions, if the “resale” registration statement is not timely filed or declared
effective by the SEC or ceases to remain effective, a 1% cash penalty will be assessed for each
30-day period until the registration statement is either filed, declared effective or becomes
effective again, as applicable, capped at 10%. In addition, there are other issues affecting the
liquidity of the securities required to be included in the “resale” registration statement.
Our Common Stock may be considered a “penny stock” and may be difficult to sell.
The SEC has adopted regulations which generally define “penny stock” to be an equity security that
has a market or exercise price of less than $5.00 per share, subject to specific exemptions. The
market price of our Common Stock may drop below $5.00 per share and therefore may be designated as
a “penny stock” according to SEC rules. This designation requires any broker or dealer selling
these securities to disclose certain information concerning the transaction, obtain a written
agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase
the securities. These rules may restrict the ability of brokers or dealers to sell our Common Stock
and may affect the ability of our stockholders to sell their shares. In addition, since our Common
Stock is eligible for trading on the OTC Bulletin Board, our stockholders may find it difficult to
obtain accurate quotations of our Common Stock and may experience a lack of buyers to purchase such
stock or a lack of market makers to support the stock price.
Our stockholders may experience future dilution.
Our charter permits our Board of Directors, without your approval, to authorize shares of preferred
stock, which may also be issued by the Board of Directors without your approval. The Board of
Directors may classify or reclassify any preferred stock to set the preferences, rights and other
terms of the classified or reclassified shares, including the issuance of shares of preferred stock
that have preference rights over the Common Stock with respect to dividends, liquidation, voting
and other matters or shares of Common Stock having special voting rights.
The issuance of additional shares of our capital stock could be substantially dilutive to your
shares and may negatively affect the market price of the Common Stock.
Substantial future issuances of the Common Stock could depress our stock price.
The market price for the Common Stock could decline, perhaps significantly, as a result of
issuances of a large number of shares of our Common Stock in the public market or even the
perception that such issuances could occur. Under an existing registration rights agreement,
certain holders of shares of Common Stock and other securities will have demand, piggy-back and
Form S-3 registration rights. Sales of a substantial number of these
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shares of our Common Stock,
or the perception that holders of a large number of shares intend to sell their shares, could
depress the market price of our Common Stock. The existence of such registration rights could also
make it more difficult for us to raise funds through future offerings of our equity securities.
Our stockholders may experience additional dilution upon the exercise of warrants and options.
As of the closing of the Offering, we issued warrants to investors to acquire 3,750,000 shares of
Common Stock, warrants to the placement agents to acquire 1,093,525 shares of Common Stock,
warrants to the former holders of Athersys’ 10% secured convertible promissory notes to acquire
132,945 shares of Common Stock, and warrants to our senior secured lenders to acquire 149,026
shares of Common Stock, which is an aggregate of 5,125,496 shares of Common Stock underlying such
warrants that, if exercised or converted, could decrease the net tangible book value of your Common
Stock. In addition, there are 4,500,000 shares of Common Stock that may be granted pursuant to our
equity compensation plans. If the holders of equity awards exercise those awards, you may
experience dilution in the net tangible book value of your Common Stock.
If we do not meet the listing standards established by the NASDAQ Capital Market or other
similar markets, the Common Stock may not become listed for trading on one of those markets.
As soon as reasonably practicable, we intend to apply to list our Common Stock for trading on the
NASDAQ Capital Market. The NASDAQ Capital Market has established certain quantitative criteria and
qualitative standards that companies must meet in order to become and remain listed for trading on
these markets. We
cannot guarantee that Company will be able to meet all necessary requirements for listing;
therefore, we cannot guarantee that our Common Stock will be listed for trading on the NASDAQ
Capital Market or other similar markets.
The Company’s internal control over financial reporting may be insufficient to allow it to
accurately report its financial results or prevent fraud, which could cause its financial
statements to become materially misleading and adversely affect the trading price of the Common
Stock.
Effective internal controls will be necessary for the Company to provide reliable financial reports
and effectively prevent fraud and to operate successfully as a public company. Athersys’
independent public accountants have issued a letter to Athersys in which they identified certain
matters as a result of a restatement related to a past partnership that they consider to constitute
a material weakness in its internal control over financial reporting. If these measures, together
with other remedial measures that management is in the process of implementing, are insufficient to
address the issues raised, or if material weaknesses or additional significant deficiencies in the
Company’s internal control over financial reporting are discovered in the future, the Company may
fail to meet its financial reporting obligations. If the Company fails to meet these obligations,
its financial statements could become materially misleading, which could adversely affect the
trading price of the Common Stock.
FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
(in thousands, except per share data)
The tables below set forth selected financial data for Athersys for the years ended December 31,
2002, 2003, 2004, 2005 and 2006 and for the three months ended March 31, 2006 and 2007. Athersys
derived the selected financial data as of December 31, 2004, 2005, and 2006 and for the years then
ended from its consolidated audited financial statements, which have been audited by Ernst & Young
LLP, independent registered public accounting firm, and are included elsewhere in this Current
Report. Athersys has derived the selected financial data as of December 31, 2002 and 2003 and for
the years then ended from its consolidated audited financial statements, which have been audited by
Ernst & Young LLP, independent registered public accounting firm. Athersys derived the selected
financial data as of March 31, 2006 and 2007 and for the three-month periods then ended from its
unaudited condensed consolidated financial statements, which are included elsewhere in this Current
Report. Athersys has prepared its unaudited financial statements on the same basis as its audited
financial statements. In the opinion of management, the unaudited condensed consolidated financial
statements include all
34
adjustments, consisting of normal recurring adjustments, that it considers
necessary for a fair presentation of the financial position and operating results for these
periods. Historical results are not necessarily indicative of results to be expected for any
future period, and results for interim periods are not necessarily indicative of a full year’s
operations.
You should read the following selected financial data in conjunction with “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and Athersys’ financial statements
and related notes, each included elsewhere in this Current Report.
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
|
|
Year Ended December 31,
|
|
|
March 31,
|
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Consolidated Statement of
Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License fees
|
|
$
|
1,285
|
|
|
$
|
1,393
|
|
|
$
|
820
|
|
|
$
|
763
|
|
|
$
|
1,908
|
|
|
$
|
220
|
|
|
$
|
310
|
|
|
Grants
|
|
|
51
|
|
|
|
759
|
|
|
|
2,318
|
|
|
|
2,833
|
|
|
|
1,817
|
|
|
|
409
|
|
|
|
569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
1,336
|
|
|
|
2,152
|
|
|
|
3,138
|
|
|
|
3,596
|
|
|
|
3,725
|
|
|
|
629
|
|
|
|
879
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
13,760
|
|
|
|
13,675
|
|
|
|
12,415
|
|
|
|
12,578
|
|
|
|
9,741
|
|
|
|
2,584
|
|
|
|
2,365
|
|
|
Purchased in-process R&D
|
|
|
—
|
|
|
|
9,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
General and
administrative
|
|
|
6,280
|
|
|
|
10,882
|
|
|
|
4,717
|
|
|
|
3,755
|
|
|
|
3,347
|
|
|
|
688
|
|
|
|
608
|
|
|
Depreciation
|
|
|
1,996
|
|
|
|
1,803
|
|
|
|
1,297
|
|
|
|
982
|
|
|
|
528
|
|
|
|
155
|
|
|
|
80
|
|
|
Restructuring costs
|
|
|
—
|
|
|
|
1,076
|
|
|
|
107
|
|
|
|
251
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(20,700
|
)
|
|
|
(34,784
|
)
|
|
|
(15,398
|
)
|
|
|
(13,970
|
)
|
|
|
(9,891
|
)
|
|
|
(2,798
|
)
|
|
|
(2,174
|
)
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
594
|
|
|
|
1,000
|
|
|
|
—
|
|
|
|
18
|
|
|
|
91
|
|
|
|
94
|
|
|
|
—
|
|
|
Equity in earnings of
unconsolidated
affiliate
|
|
|
(105
|
)
|
|
|
114
|
|
|
|
—
|
|
|
|
—
|
|
|
|
117
|
|
|
|
117
|
|
|
|
—
|
|
|
Interest income
|
|
|
1,213
|
|
|
|
644
|
|
|
|
317
|
|
|
|
317
|
|
|
|
119
|
|
|
|
29
|
|
|
|
47
|
|
|
Interest expense
|
|
|
(185
|
)
|
|
|
(135
|
)
|
|
|
(73
|
)
|
|
|
(964
|
)
|
|
|
(1047
|
)
|
|
|
(235
|
)
|
|
|
(333
|
)
|
|
Accretion of premium on
convertible debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(260
|
)
|
|
|
—
|
|
|
|
(260
|
)
|
|
|
|
|
|
Loss before cumulative
effect of change in
accounting principle
|
|
|
(19,183
|
)
|
|
|
(33,161
|
)
|
|
|
(15,154
|
)
|
|
|
(14,599
|
)
|
|
|
(10,871
|
)
|
|
|
(2,793
|
)
|
|
|
(2,720
|
)
|
|
Cumulative effect of
change in accounting
principle
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
306
|
|
|
|
306
|
|
|
|
—
|
|
|
|
|
|
|
Net loss
|
|
$
|
(19,183
|
)
|
|
$
|
(33,161
|
)
|
|
$
|
(15,154
|
)
|
|
$
|
(14,599
|
)
|
|
$
|
(10,565
|
)
|
|
$
|
(2,487
|
)
|
|
$
|
(2,720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net
loss per common share
|
|
$
|
(2.67
|
)
|
|
$
|
(4.40
|
)
|
|
$
|
(1.86
|
)
|
|
$
|
(1.79
|
)
|
|
$
|
(1.29
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
used in computing basic
and diluted net loss per
common share
|
|
|
7,193
|
|
|
|
7,530
|
|
|
|
8,152
|
|
|
|
8,137
|
|
|
|
8,179
|
|
|
|
8,127
|
|
|
|
8,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
March 31,
|
|
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2006
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
Consolidated Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents
and investments
|
|
$
|
43,871
|
|
|
$
|
25,992
|
|
|
$
|
17,279
|
|
|
$
|
4,561
|
|
|
$
|
1,528
|
|
|
$
|
2,027
|
|
|
$
|
3,311
|
|
|
Working capital (deficit)
|
|
|
26,753
|
|
|
|
18,514
|
|
|
|
17,018
|
|
|
|
1,828
|
|
|
|
(3,106
|
)
|
|
|
(1,439
|
)
|
|
|
(1,056
|
)
|
|
Total assets
|
|
|
49,780
|
|
|
|
30,503
|
|
|
|
20,894
|
|
|
|
7,309
|
|
|
|
4,266
|
|
|
|
4,278
|
|
|
|
5,486
|
|
|
Long-term obligations,
less current portion
|
|
|
1,062
|
|
|
|
578
|
|
|
|
7,215
|
|
|
|
4,684
|
|
|
|
9,310
|
|
|
|
3,998
|
|
|
|
13,788
|
|
|
Accrued dividends
|
|
|
6,747
|
|
|
|
8,911
|
|
|
|
11,236
|
|
|
|
7,473
|
|
|
|
8,882
|
|
|
|
7,820
|
|
|
|
9,257
|
|
|
Total stockholders’
equity (deficit)
|
|
|
35,913
|
|
|
|
14,951
|
|
|
|
1,151
|
|
|
|
(8,584
|
)
|
|
|
(20,007
|
)
|
|
|
(11,448
|
)
|
|
|
(23,059
|
)
|
36
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements that involve numerous risks and
uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our
actual results could differ materially from those anticipated in the forward-looking statements.
Factors that could cause or contribute to these differences include those discussed in this
prospectus under “Cautionary Notice Regarding Forward-Looking Statements” and “Risk Factors,” as
well as those discussed elsewhere in this Current Report. You should read the following discussion
and analysis in conjunction with “Selected Financial Data” and Athersys’ financial statements and
related notes, each included elsewhere in this Current Report.
Overview
Athersys is a biopharmaceutical company engaged in the discovery and development of therapeutic
product candidates designed to extend and enhance the quality of human life. Through the
application of its proprietary technologies, Athersys has established a pipeline of therapeutic
product development programs in multiple disease areas that it intends to advance into clinical
trials in 2007 and 2008. Athersys’ lead product candidate is ATHX-105, which is a treatment for
obesity. Athersys is also developing novel pharmaceutical products for the treatment of cognitive
disorders, such as ADHD. In addition to these drug development programs, Athersys entered into a
collaboration with Angiotech to jointly develop a novel, proprietary non-embryonic stem cell
product, MultiStem, for the treatment of myocardial infarction and peripheral vascular disease.
Athersys is also developing MultiStem for stroke, oncology support, and certain other disease
indications.
Athersys has incurred losses since inception of operations in December 1995 and had an accumulated
deficit of $144 million at March 31, 2007. Athersys’ losses have resulted principally from costs
incurred in research and development, acquisition and licensing costs, and general and
administrative costs associated with its operations. Since its inception, Athersys has completed
four private placement transactions of its capital stock and sold shares of its capital stock to
certain strategic collaborators. Athersys has used the financing proceeds of these transactions
and other sources of capital to develop its technologies, such as RAGE, and to acquire its stem
cell technology in 2003. Athersys has also built its drug development capabilities to allow it to
begin clinical trials of its lead product candidate, ATHX-105, in 2007. Athersys has established
strategic collaborations that provide revenues and capabilities to help to further advance its
product candidates. Athersys has a pipeline of product candidates that includes potential small
molecule products to treat obesity and cognitive disorders. Athersys’ stem cell product candidates
may be used in the areas of cardiovascular disease, oncology support and stroke. Athersys has also
built a substantial portfolio of intellectual property.
In 2003 and in 2005, Athersys completed restructurings that resulted in reductions in its
personnel. Athersys refocused its activities to emphasize the development of its lead product
opportunities and reduced its spending in discovery activities. As Athersys has evolved from a
research-oriented company to a product-oriented company, its staffing needs have evolved, resulting
in the reductions in personnel. Athersys is currently optimizing the mix of its internal
capabilities with the capabilities of its outside collaborators, academic institutions, and third
party contract research organizations.
In May 2007, Athersys sold certain non-core assets related to its asthma discovery program to a
pharmaceutical company for $2 million, of which $1.5 million was received at closing. The
remaining $500,000 will be paid when Athersys delivers any remaining assets related to the program
within three months of closing. Athersys will recognize a gain on the sale of these assets in the
amount of $2.0 million in connection with this sale.
Upon the close of the Merger, the majority of Athersys’ outstanding stock options were terminated.
Following the Merger, we adopted two long-term incentive plans, which made available 4,500,000
shares of Common Stock for equity awards to be used to attract and retain officers, other
employees, directors, consultants and other independent contractors.
37
Results of Operations
Since Athersys’ inception, its revenues have consisted of license fees from its collaborators and
grant proceeds from federal and state grants. Athersys recognizes revenues over the period that it
performs the required activities under the terms of the agreements. Revenues from the achievement
of milestones are recognized when the milestone is achieved. Revenues from grants are recorded
when earned under the terms of the agreements. Athersys has derived no revenue on the sale of
FDA-approved products to date. Research and development expenses consist primarily of salaries and
related personnel costs, legal expenses resulting from intellectual property application processes,
contracted service costs, and laboratory supply and reagent costs. Athersys expenses research and
development costs as they are incurred. We expect to continue to make significant investments in
research and development to enhance our technologies, conduct preclinical studies and clinical
trials of our products, and manufacture our products. General and administrative expenses consist
primarily of salaries and related expenses for executive, business development, finance, and other
administrative personnel; professional fees; and other corporate expenses. Our general and
administrative expenses are expected to increase as we expand our regulatory affairs and product
development capabilities, as well as expand our business development and assume the obligations of
a public reporting company. Athersys depreciates its fixed assets on a straight-line basis. To
date, Athersys has financed its operations through private equity and debt financing and
investments by strategic collaborators. We expect to continue to incur substantial losses through
at least the next several years. We expect our development costs to increase as we initiate
clinical trials of our product candidates in 2007 and 2008.
38
The following table sets forth Athersys’ revenues and expenses for the periods indicated. The
following tables are stated in thousands.
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
Three months ended March 31,
|
|
|
|
2004
|
|
2005
|
|
2006
|
|
2006
|
|
2007
|
|
License fees
|
|
$
|
820
|
|
|
$
|
763
|
|
|
$
|
1,908
|
|
|
$
|
220
|
|
|
$
|
310
|
|
|
Grants
|
|
|
2,318
|
|
|
|
2,833
|
|
|
|
1,817
|
|
|
|
409
|
|
|
|
569
|
|
|
|
|
|
|
|
|
|
|
$
|
3,138
|
|
|
$
|
3,596
|
|
|
$
|
3,725
|
|
|
$
|
629
|
|
|
$
|
879
|
|
|
|
|
|
|
|
Research and development expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
Three months ended March 31,
|
|
Type of expense
|
|
2004
|
|
2005
|
|
2006
|
|
2006
|
|
2007
|
|
Personnel costs
|
|
$
|
4,451
|
|
|
$
|
4,587
|
|
|
$
|
2,721
|
|
|
$
|
683
|
|
|
$
|
597
|
|
|
Research supplies
|
|
|
2,661
|
|
|
|
2,286
|
|
|
|
1,208
|
|
|
|
317
|
|
|
|
204
|
|
|
Facilities
|
|
|
1,079
|
|
|
|
1,127
|
|
|
|
879
|
|
|
|
244
|
|
|
|
191
|
|
|
Sponsored research,
preclinical and
clinical costs
|
|
|
647
|
|
|
|
2,095
|
|
|
|
3,281
|
|
|
|
864
|
|
|
|
941
|
|
|
Patent legal fees
|
|
|
366
|
|
|
|
714
|
|
|
|
595
|
|
|
|
135
|
|
|
|
276
|
|
|
Other
|
|
|
1,203
|
|
|
|
968
|
|
|
|
781
|
|
|
|
254
|
|
|
|
125
|
|
|
Stock compensation expense
|
|
|
2,008
|
|
|
|
801
|
|
|
|
276
|
|
|
|
87
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,415
|
|
|
$
|
12,578
|
|
|
$
|
9,741
|
|
|
$
|
2,584
|
|
|
$
|
2,365
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
Three months ended March 31,
|
|
Type of expense
|
|
2004
|
|
2005
|
|
2006
|
|
2006
|
|
2007
|
|
Personnel costs
|
|
$
|
2,096
|
|
|
$
|
1,858
|
|
|
$
|
1,891
|
|
|
$
|
389
|
|
|
$
|
358
|
|
|
Facilities
|
|
|
319
|
|
|
|
286
|
|
|
|
291
|
|
|
|
70
|
|
|
|
77
|
|
|
Legal and professional fees
|
|
|
303
|
|
|
|
446
|
|
|
|
590
|
|
|
|
100
|
|
|
|
82
|
|
|
Other
|
|
|
518
|
|
|
|
508
|
|
|
|
392
|
|
|
|
84
|
|
|
|
78
|
|
|
Stock compensation expense
|
|
|
1,481
|
|
|
|
657
|
|
|
|
183
|
|
|
|
45
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,717
|
|
|
$
|
3,755
|
|
|
$
|
3,347
|
|
|
$
|
688
|
|
|
$
|
608
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006
Revenues
. Revenues increased to $879,000 for the three months ended March 31, 2007 from $629,000
in the comparable period in 2006. License fee revenues increased $90,000 for the three months
ended March 31, 2007 compared to the three months ended March 31, 2006. The increase in license
fee revenue over this period is a result of the nature and timing of target acceptances under
Athersys’ collaboration agreement with BMS. Grant revenue increased $160,000 for the three months
ended March 31, 2007 compared to the three months ended March 31, 2006. In July 2003, Athersys was
awarded a $5.0 million state grant that spanned three years and was completed in February 2006.
This grant was renewed in May 2006 for approximately $3.5 million that will also span three years.
The increase in grant revenue for the three months ended March 31, 2007 compared to the three
months ended March 31, 2006 is principally
the result of recognizing three months of revenue under this state grant in 2007 versus only two
months of revenue in 2006.
39
Research and Development Expenses
. Research and development expenses decreased to $2.4 million for
the three months ended March 31, 2007 from $2.6 million in the comparable period in 2006. The
decrease of approximately $219,000 relates primarily to a decrease of $252,000 in personnel costs,
research supplies and facilities costs related to the restructuring and reduction in force effected
in late 2005 and carried over into early 2006, a decrease in other expenses of $129,000 and a
decrease of $56,000 in stock compensation expense, offset by an increase in sponsored research and
preclinical expenses of $77,000 and an increase in patent legal fees of $141,000. Included in
other expenses in 2006 was a license fee of $125,000 paid in shares of common stock to the former
holders of the MAPC technology. Patent legal fees increased in the first three months of 2007 as
a result of maintaining Athersys’ growing and maturing portfolio of patent applications.
General and Administrative Expenses
. General and administrative expenses decreased to $608,000 for
the three months ended March 31, 2007 from $688,000 in the comparable period in 2006. The decrease
of $80,000 relates primarily to a $18,000 decrease in legal and professional fees, a $30,000
decrease in personnel costs, facilities costs and other expenses related to the restructuring and
reduction in force effected in late 2005 and carried over into early 2006, and a decrease of
$32,000 in stock compensation expense.
Depreciation
. Depreciation expense decreased to $80,000 for the three months ended March 31, 2007
from $155,000 for the comparable period in 2006. The decrease was due to more laboratory
equipment, computer equipment, furniture, and leasehold improvements becoming fully depreciated,
combined with fewer purchases of new equipment during the first three months of 2007 compared with
the comparable period of 2006.
Other Income and Equity in Earnings of Unconsolidated Affiliate
. In January 2006, a milestone was
achieved related to Athersys’ joint venture with Oculus Pharmaceuticals, Inc, a dormant entity with
rights to certain potential milestone-based consideration. As a result, Athersys received $100,000
of stock-based proceeds from Oculus, which was recorded in other income. Similarly, Oculus also
received stock-based proceeds in another company in the amount of $260,000. Athersys recorded its
share of Oculus’ net income (after recapturing past net losses) of $117,000 in equity in earnings
of unconsolidated affiliate on the statement of operations. No additional milestones where
achieved in the three months ended March 31, 2007.
Interest Income
. Interest income represents interest earned on Athersys’ cash and available for
sale securities. Interest income increased to $47,000 for the three months ended March 31, 2007
from $29,000 for the comparable period in 2006 due to the increase in Athersys’ average cash
balances during those periods. Athersys obtained $5 million in January 2007 as a result of issuing
a subordinated convertible promissory note to Angiotech related to its co-development collaboration
agreement.
Interest Expense.
Interest expense on Athersys’ debt outstanding under its senior loan and its
subordinated convertible promissory notes increased to $333,000 for the three months ended March
31, 2007 from $235,000 for the comparable period in 2006. The increase in interest expense is due
to the subordinated convertible promissory notes issued by Athersys in May 2006, October 2006 and
January 2007.
Accretion of Premium on Convertible Debt
. The accretion of premium on convertible debt in the
amount of $260,000 for the three months ended March 31, 2007 is a result of the $2.5 million
subordinated secured convertible promissory notes issued in October 2006. The notes, if not
converted, were repayable with accrued interest at maturity, plus a repayment fee of 200% of the
outstanding principal. Athersys has computed a premium on the debt in the amount of $5,250,000 due
upon redemption, which is being accreted over the term of the notes using the effective interest
method. This accretion was reversed in June 2007 when the notes were converted into common stock
upon the closing of the Offering.
Cumulative effect of change in accounting principle
. Effective January 1, 2006, Athersys adopted
the fair value recognition provisions of Statement of Financial Accounting Standards No. 123
(revised 2004)
(“SFAS No. 123R”), “Share-Based Payment,” using the modified-prospective-transition method. SFAS
No. 123R requires Athersys to estimate forfeitures in calculating the expense relating to
share-based
40
compensation, while previously Athersys was permitted to recognize forfeitures as an
expense reduction upon occurrence. The adjustment to apply estimated forfeitures to previously
recognized share-based compensation was accounted for as a cumulative effect of a change in
accounting principle at January 1, 2006 and reduced net loss by $306,000 for the three months ended
March 31, 2006.
Year Ended December 31, 2006 Compared to year ended December 31, 2005
Revenues
. Revenues increased to $3.7 million for the year ended December 31, 2006 from $3.6
million for the comparable period in 2005. License fee revenues increased $1.1 million over this
period as a result of the nature and timing of target acceptances under Athersys’ collaboration
agreement with Bristol-Myers Squibb. Grant revenue decreased $1.0 million for the year ended
December 31, 2006 compared to the year ended December 31, 2005. In July 2003, Athersys was awarded
a $5.0 million state grant that spanned three years and was completed in February 2006. This grant
was renewed in May 2006 for approximately $3.5 million that will also span three years. The
decrease in grant revenue for the year ended December 31, 2006 is principally the result of
recognizing eight months of revenue under this state grant in 2006 versus twelve months of revenue
in 2005. In addition, Athersys had fewer active NIH grant awards in 2006 as compared to 2005.
Research and Development Expenses
. Research and development expenses decreased to $9.7 million in
2006 from $12.6 million in 2005. The decrease of approximately $2.9 million in research and
development expenses relates primarily to a decrease in personnel costs of $1.9 million, a decrease
in research supplies expenses of $1.1 million, and a decrease in facilities and other costs of
$435,000 related to the restructuring and reduction in force that occurred late in 2005. In
addition, patent legal fees decreased $119,000 and stock compensation expense decreased $525,000 in
2006 compared to 2005. These decreases were offset by an increase in sponsored research,
preclinical and clinical expenses of $1.2 million in 2006 compared to 2005. As Athersys has
evolved from a research-oriented company to a product-oriented company, its staffing needs have
evolved, resulting in the reductions in personnel and related costs. Athersys is currently
optimizing the mix of its internal capabilities with the capabilities of its outside collaborators,
academic institutions, and third party contract research organizations resulting in an increase in
these costs.
General and Administrative Expenses
. General and administrative expenses decreased to $3.3 million
in 2006 from approximately $3.8 million in 2005. The decrease in general and administrative
expenses was due primarily to a decrease in stock compensation expense of $474,000 and a decrease
in other expenses of $116,000. These decreases were offset by an increase in legal and
professional fees of $144,000, which was a result of legal costs associated with potential
financing and strategic transactions.
Depreciation
. Depreciation expense decreased to $528,000 in 2006 from $982,000 in 2005. The
decrease in depreciation expense was due to more laboratory equipment, computer equipment,
furniture, and leasehold improvements becoming fully depreciated, combined with fewer purchases of
new equipment.
Restructuring Costs
. Restructuring costs for the year ended December 31, 2005 were a result of the
restructuring and reduction in force, which occurred late in 2005.
Other Income and Equity in Earnings of Unconsolidated Affiliate.
In January 2006, a milestone was
achieved related to Athersys’ joint venture with Oculus Pharmaceuticals, Inc., a dormant entity
with rights to certain potential milestone-based consideration. As a result, Athersys received
$100,000 of stock-based proceeds from Oculus, which was recorded in other income. Similarly,
Oculus also received stock-based proceeds in another company in the amount of $260,000. Athersys
recorded its share of Oculus’ net income (after recapturing past net losses) of $117,000 in equity
in earnings of unconsolidated affiliate on the statement of operations.
Interest Income
. Interest income decreased to $119,000 for the year ended December 31, 2006 from
$317,000 in 2005. Changes in interest income was due to changes in Athersys’ average cash balances
and available for sale securities during those periods.
41
Interest Expense.
Interest expense on Athersys’ debt outstanding under its senior loan and its
subordinated promissory notes increased to $1,047,000 for the year ended December 31, 2006 from
$964,000 for the comparable period in 2005. The increase in interest expense is due to the
subordinated convertible promissory notes issued by Athersys in May 2006 and October 2006.
Accretion of Premium on Convertible Debt
. The accretion of premium on convertible debt for the
year ended December 31, 2006, is a result of the $2.5 million subordinated secured convertible
promissory notes issued in October 2006. The notes, if not converted, are repayable with accrued
interest at maturity, plus a repayment fee of 200% of the outstanding principal. Athersys has
computed a premium on the debt in the amount of $5,250,000 due upon redemption, which is being
accreted over the term of the notes using the effective interest method. This accretion was
reversed in June 2007 when the notes were converted into common stock upon the closing of the
Offering.
Cumulative effect of change in accounting principle
. Effective January 1, 2006, Athersys adopted
the fair value recognition provisions of SFAS No. 123R using the modified-prospective-transition
method. SFAS No. 123R requires Athersys to estimate forfeitures in calculating the expense
relating to share-based compensation, while previously Athersys was permitted to recognize
forfeitures as an expense reduction upon occurrence. The adjustment to apply estimated forfeitures
to previously recognized share-based compensation was accounted for as a cumulative effect of a
change in accounting principle at January 1, 2006 and reduced net loss by $306,000 for the year
ended December 31, 2006.
Year Ended December 31, 2005 compared to year ended December 31, 2004
Revenues
. Revenues increased to $3.6 million in 2005 from $3.1 million in 2004. License fee
revenue decreased $57,000 from 2004 to 2005 due to the nature and timing of target acceptances
under Athersys’ collaboration agreement with Bristol-Myers Squibb. The remaining increase of
$515,000 from 2004 to 2005 was due primarily to increased grant revenue. In 2003, Athersys was
awarded a $5 million state grant that spanned three years and was completed in April 2006.
Research and Development Expenses
. Research and development expenses increased to $12.6 million in
2005 from $12.4 million in 2004. The increase of $163,000 in research and development expenses
relates to a decrease in stock compensation expense of $1.2 million, a decrease in research
supplies expenses of $375,000, an increase in outside sponsored research and preclinical expenses
of $1.5 million, and an increase in patent legal costs of $348,000.
General and Administrative Expenses
. General and administrative expenses decreased to $3.8 million
in 2005 from $4.7 million in 2004. The decrease in general and administrative expenses of $962,000
is due primarily to a decrease in stock option expense of $824,000, a decrease in payroll,
facilities and other expense of $281,000 related to the restructuring and reduction in force late
in 2005, and an increase in legal and professional fees of $143,000.
Depreciation
. Depreciation expense decreased to $1.0 million in 2005 from $1.3 million in 2004.
The decrease in depreciation expense was due to more laboratory equipment, computer equipment,
furniture, and leasehold improvements becoming fully depreciated, combined with fewer purchases of
new equipment.
Restructuring Costs.
Restructuring costs for the year ended December 31, 2005 were a result of the
restructuring and reduction in force, which occurred late in 2005. Restructuring costs for the year
ended December 31, 2004 were a result of the restructuring and reduction in force, which occurred
late in 2003.
Interest Income
. Interest income was $317,000 in 2006 and 2005. Interest income was as result of
Athersys’ average cash balances and available for sale securities during those periods.
Interest Expense
. Interest expense on Athersys’ debt under credit agreements increased to $964,000
in 2005 from $73,000 in 2004. The increase in interest expense was attributable to Athersys’
borrowing $7.5 million under its senior loan late in 2004
.
42
Liquidity and Capital Resources
Athersys has primarily financed its operations through private equity and debt financings that have
resulted in aggregate cumulative proceeds of approximately $131 million prior to the Offering.
In November 2004, Athersys entered into a Loan and Security Agreement (the “Senior Loan”) with
Venture Lending & Leasing IV, Inc. and Costella Kirsch IV, L.P. (the “Senior Lenders”), pursuant to
which it borrowed $7.5 million pursuant to notes that mature on June 1, 2008. Amounts outstanding
under the Senior Loan are payable in 30 monthly installments following an initial interest-only
period that expired on December 1, 2005. The Senior Loan has an implied fixed interest rate of
approximately 13%. A final payment of $487,500 is due on June 1, 2008. As of May 31, 2007, the
outstanding balance of the Senior Loan is approximately $3,528,000. Athersys’ obligations under
the Senior Loan are secured by substantially all of its assets. As a result of the Offering, the
Senior Lenders’ lien on Athersys’ intellectual property is being released. The lien on
intellectual property could, however, re-attach at any time if the ratio of Athersys’ unrestricted
cash to four months’ expenses is less than one-to-one. The agreement governing the Senior Loan
contains affirmative and negative covenants customary for such financings and customary events of
default. As of March 31, 2007, Athersys was in compliance with these covenants.
The Senior Lenders have the right to receive a milestone payment of $2.25 million upon the first to
occur of the following milestone events: (1) a firmly underwritten initial public offering of
common stock; (2) Athersys’ merger with or into another entity where its stockholders do not hold
at least a majority of the voting power of the surviving entity; (3) the sale of all or
substantially all of Athersys’ assets; and (4) Athersys’ liquidation or dissolution. The milestone
payment is payable in cash, except that if the milestone event is an initial public offering,
Athersys may elect to pay 75% of the milestone in shares of common stock at the per share offering
price to the public. Although the Offering did not constitute a milestone event under the Senior
Loan, Athersys is discussing an amendment with the Lenders to include the occurrence of an
additional significant financing or financings (occurring subsequent to the consummation of the
Merger and the Offering) as a milestone event that would obligate it to make such milestone payment
or otherwise restructure the milestone payment since an initial public offering technically can no
longer occur. The Senior Lenders also received warrants to purchase 149,026 shares of Common Stock
with an exercise price of $5.00 upon the closing of the Offering. Athersys is evaluating the
potential restructuring or prepayment of this Senior Loan.
In October 2006, Athersys completed a bridge financing of $2,500,000 in the form of 10% secured
convertible promissory notes. The notes and accrued interest were converted into Common Stock at a
conversion price of $5.00 upon the closing of the Offering. Prior to conversion, the notes were
repayable with accrued interest at maturity plus a repayment fee of 200% of the outstanding
principal. Athersys had computed a premium on the debt in the amount of $5,250,000 due upon
redemption, which was being accreted over the term of the notes using the effective interest
method. Athersys reversed this premium upon the conversion of the notes in June 2007. The
noteholders also received warrants to purchase 999,977 shares of Common Stock, which were exercised
at the closing of the Offering. In 2006, Athersys allocated $250,000 of the purchase price of the
notes to the warrants based on the relative fair value of the notes and warrants.
In connection with developing MultiStem for the treatment of the cardiovascular disorders of
myocardial infarction and peripheral vascular disease as part of a commercial collaboration with
Angiotech that was entered into in May 2006, in support of the collaboration, Angiotech purchased
$10,000,000 in aggregate principal amount of subordinated convertible promissory notes, which were
converted along with accrued interest into Common Stock upon the closing of the Offering at a
conversion price of $5.50, which was 110% of the price per share paid in the Offering. Athersys
may also receive additional equity investments
and cash payments based upon the successful achievement of specified clinical development and
commercialization milestones.
Athersys’ contractual payment obligations as of December 31, 2006 are as follows:
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 1
|
|
|
|
|
|
|
|
|
|
More than 5
|
|
|
|
Total
|
|
year
|
|
1-3 years
|
|
3-5 years
|
|
years
|
|
Operating lease for facilities
|
|
$
|
201,000
|
|
|
$
|
201,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Long-term debt (principal and
interest)
|
|
$
|
5,132,000
|
|
|
$
|
3,332,000
|
|
|
$
|
1,800,000
|
|
|
|
—
|
|
|
|
—
|
|
|
Total
|
|
$
|
5,333,000
|
|
|
$
|
3,533,000
|
|
|
$
|
1,800,000
|
|
|
|
—
|
|
|
|
—
|
|
The table above excludes Athersys’ convertible promissory notes since they were converted upon the
closing of the Offering. Athersys has an operating lease for its office and laboratory space that
expires in March 2009. Athersys has an option to renew the lease in six-month intervals during the
term at the existing rental rate. Athersys has exercised options to renew the lease through
September 2007.
Athersys has never paid dividends on its capital stock, and all accrued cumulative dividends were
eliminated in June 2007 in connection with the Merger.
Upon the closing of the Offering in June 2007, the Company received net proceeds of approximately
$58.8 million. The placement agents received approximately $5.5 million in fees from the gross
proceeds.
At March 31, 2007, Athersys had $3.3 million in cash, cash equivalents, and available-for-sale
securities.
Net cash used in operating activities was $8.4 million, $12.1 million, and $11.7 million in 2006,
2005, and 2004, respectively, and represented the use of cash in funding technology development and
product development initiatives. Net cash used in operating activities was $2.1 million for the
three months ended March 31, 2007 and $2.0 million for the three months ended March 31, 2006, and
was primarily attributed to expenditures used to fund Athersys’ research and product development
activities.
Net cash provided by investing activities was $3.4 million, $10.3 million, and $6.4 million in
2006, 2005, and 2004, respectively. Net cash provided by (used in) investing activities was
$(3,000) in the three months ended March 31, 2007, and $2.0 million for the comparable period in
2006. The fluctuations from period to period are due to the timing of purchases and maturity dates
of investments, and the purchase of equipment. Purchases of equipment were $83,000 in 2006,
$239,000 in 2005, $173,000 in 2004, $3,000 for the three-month period ended March 31, 2007 and
$4,000 for the three-month period ended March 31, 2006.
Financing activities provided cash of $5.4 million in 2006, $4.0 million in 2004 and $3.9 million
in the three months ended March 31, 2007. Financing activities used cash of $446,000 in 2005 and
$596,000 in the three months ended March 31, 2006. These fluctuations relate primarily to proceeds
and repayments of loans and the issuance of Athersys’ convertible promissory notes in 2006 and in
the first quarter of 2007.
We expect to continue to incur substantial losses through at least the next several years and may
incur losses in subsequent periods. The amount and timing of our future losses are highly
uncertain. Our ability to achieve and thereafter sustain profitability will be dependent upon,
among other things, successfully developing, commercializing and obtaining regulatory approval or
clearances for our technologies and products resulting from these technologies. The Company
presumes that it will continue as a going concern.
We will require substantial additional funding in order to continue our research and product
development programs, including preclinical testing and clinical trials of our product candidates.
While we believe that the net proceeds from the Offering, combined with current capital resources
and anticipated cash flows
from licensing activities, will be sufficient to meet our capital and operating requirements for
approximately three years, we cannot assure you that we will not require additional financing
before that
44
time. Our funding requirements may change at any time due to technological advances or
competition from other companies. Our future capital requirements will also depend on numerous
other factors, including scientific progress in our research and development programs, additional
personnel costs, progress in preclinical testing and clinical trials, the time and cost related to
proposed regulatory approvals, if any, and the costs in filing and prosecuting patent applications
and enforcing patent claims. We cannot assure you that adequate funding will be available to us
or, if available, that it will be available on acceptable terms. Any shortfall in funding could
result in our having to curtail our research and development efforts.
Critical Accounting Policies and Management Estimates
The SEC defines critical accounting policies as those that are, in management’s view, important to
the portrayal of our financial condition and results of operations and demanding of management’s
judgment. Our discussion and analysis of financial condition and results of operation are based on
Athersys’ consolidated financial statements, which have been prepared in accordance with U.S.
generally accepted accounting principles, or GAAP. The preparation of these financial statements
requires Athersys to make estimates on experience and on various assumptions that we believe are
reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from those estimates.
Athersys’ critical accounting polices include:
Revenue Recognition
Revenue is recognized over the period that Athersys performs its required activities under the
terms of various agreements. Revenue from transactions that do not require future performance
obligations from Athersys is recognized as contemplated in the agreements, typically upon
acceptance and when collectibility is reasonably assured. Revenue resulting from the achievement of
milestone events stipulated in the agreements is recognized when the milestone is achieved.
Revenue from grants consists primarily of funding under cost reimbursement programs from federal
and state sources for qualified research and development activities performed by Athersys. Revenue
from grants is recorded when earned under the terms of the agreements.
Research and Development
Research and development expenditures, including direct and allocated overhead expenses, are
charged to expense as incurred.
Royalties
Athersys may be required to remit royalty payments based on product sales to certain parties under
license agreements. Athersys has not paid any such royalties for the three-year period ended
December 31, 2006 or the three-month period ended March 31, 2007.
Long-Lived Assets
Equipment is stated at acquired cost less accumulated depreciation. Laboratory and office equipment
are depreciated on the straight-line basis over the estimated useful lives (three to seven years).
Impairment of long-lived assets is recognized when events or changes in circumstances indicate that
the carrying amount of the asset or related group of assets may not be recoverable. If the expected
future undiscounted cash flows are less than the carrying amount of the asset, an impairment loss
is recognized at that time. Measurement of impairment may be based upon appraisal, market value of
similar assets or discounted cash flows.
45
Patent Costs and Rights
Patent costs and rights are expensed as incurred. Athersys has filed for broad intellectual
property protection on its proprietary technologies. Athersys currently has numerous U.S. patent
applications and corresponding international patent applications related to its technologies, as
well as many issued U.S. and international patents.
Stock-Based Compensation
In December 2004, SFAS No. 123R was issued as a revision to Statement of Financial Accounting
Standards No. 123 (“SFAS No. 123”), “Accounting for Stock Options.” SFAS No. 123R required to be
adopted by nonpublic companies in January 2006. Prior to January 1, 2006, Athersys elected to
account for its stock-based compensation in accordance with the intrinsic value method as described
in the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees,” and related interpretations, as permitted by SFAS No. 123. As such, compensation was
recorded in 2004 and 2005 on the date of issuance or grant as the excess of the current estimated
market value of the underlying stock over the purchase or exercise price of the stock option. Any
unearned compensation was recognized over the respective vesting periods of the equity instruments,
if any, using the graded vesting method as prescribed by Financial Accounting Standards Board
Interpretation No. 28.
Effective January 1, 2006, Athersys adopted the fair value recognition provisions of SFAS No. 123
using the modified-prospective-transition method. Under that transition method, compensation cost
recognized in 2006 includes: (1) compensation cost for all share-based payments granted prior to,
but not yet vested as of January 1, 2006, based on the grant date fair value estimated in
accordance with the original provisions SFAS No. 123; and (2) compensation cost for all share-based
payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in
accordance with the provisions of SFAS No. 123R. Results for prior periods have not been restated.
For some of the awards granted prior to the adoption of SFAS No. 123R, Athersys recognized
compensation expense on the accelerated method. For awards granted subsequent to adoption of SFAS
No. 123R, Athersys will recognize expense on the straight line method.
Income Taxes
As of December 31, 2006, Athersys had net operating loss and research and development credit
carryforwards of approximately $109.9 million and $5.8 million, respectively. These carryforwards
may be used to reduce future tax liabilities and expire at various dates between 2013 and 2027.
Athersys’ use of its current net operating loss and research and development credit carryforwards
may be substantially limited as a result of the change in ownership related to the Merger and
Offering.
Recently issued accounting standards
In July 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48 (FIN 48),
“Accounting for Uncertainty in Income Taxes,” which is applicable for fiscal years beginning after
December 15, 2006. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in
an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income
Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for financial
statement recognition and measurement of a tax position reported or expected to be reported on a
tax return. FIN 48 also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. Athersys adopted the
provisions of FIN 48 on January 1, 2007. Upon adoption of FIN 48 and through March 31, 2007,
Athersys determined that it had no liability for uncertain income taxes as prescribed by FIN 48.
Athersys’ policy is to recognize potential accrued interest and penalties related to the liability
for uncertain tax benefits, if applicable, in income tax expense. Net operating loss and credit
carryforwards since inception remain open to examination by taxing authorities, and will for a
period post utilization. We do not anticipate any events during 2007 that would require Athersys
to record a liability related to any uncertain income taxes.
46
Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk.
Our exposure to interest rate risk is related to Athersys’ investment portfolio and its borrowings.
Fixed rate investments and borrowings may have their fair market value adversely impacted from
changes in interest rates. Floating rate borrowings will lead to additional interest expense if
interest rates increase. Due in part to these factors, Athersys’ future investment income may fall
short of expectations, and Athersys’ interest expense may be above its expectations due to changes
in U.S. interest rates. Further, Athersys may suffer losses in investment principal if it is
forced to sell securities that have declined in market value due to changes in interest rates.
Athersys invests its excess cash primarily in debt instruments of the U.S. government and its
agencies.
Athersys enters into loan arrangements with financial institutions when needed. At March 31, 2007,
Athersys had borrowings of approximately $4.0 million outstanding under its Senior Loan, which
bears interest at a fixed rate of approximately 13%, and $12.8 million under its subordinated
convertible promissory notes, which bear interest at a fixed rates of 5% and 10%.
PROPERTIES
Our principal offices are located at 3201 Carnegie Avenue in Cleveland, Ohio. We currently lease
approximately 53,000 square feet of space for our corporate offices and laboratories, with about
40,000 square feet of state-of-the-art laboratory space. The lease currently expires in September
2007, and we have an option to extend the lease in six-month increments through March 2009 at our
current rent of $267,000 per year.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information on the estimated beneficial ownership of Common Stock
after the Merger and Offering based on the current beneficial ownership of BTHC VI Common Stock by
the individuals who are our executive officers and directors and greater than 5% stockholders after
the consummation of the Merger and the Offering on June 8, 2007. Beneficial ownership is
determined according to rules of the SEC governing the determination of beneficial ownership of
securities. A person is deemed to be a beneficial owner of any securities for which that person
has a right to acquire beneficial ownership within 60 days. The table below contains the following
assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Percent of
|
|
Name of Beneficial Owner
|
|
Shares
|
|
Class
|
|
Greater Than 5% Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OrbiMed Advisors LLC and affiliates
(1)
|
|
|
3,750,000
|
|
|
|
19.06
|
%
|
|
Radius Venture Partners and affiliates
(2)
|
|
|
2,400,000
|
|
|
|
12.17
|
%
|
|
Angiotech Pharmaceuticals, Inc.
(3)
|
|
|
1,885,890
|
|
|
|
9.96
|
%
|
|
RA Capital Biotech Fund, LP and affiliates
(4)
|
|
|
1,500,000
|
|
|
|
7.80
|
%
|
|
Accipiter Capital Management LLC and affiliates
(5)
|
|
|
1,500,000
|
|
|
|
7.80
|
%
|
|
Hambrecht & Quist Capital Management LLC and affiliates
(6)
|
|
|
1,000,000
|
|
|
|
5.23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Directors and Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gil Van Bokkelen
(7)
|
|
|
392,887
|
|
|
|
2.04
|
%
|
|
John Harrington
(8)
|
|
|
371,127
|
|
|
|
1.93
|
%
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Percent of
|
|
Name of Beneficial Owner
|
|
Shares
|
|
Class
|
|
William Mulligan
(9)
|
|
|
515,235
|
|
|
|
2.72
|
%
|
|
George Milne
(10)
|
|
|
2,415,000
|
|
|
|
12.23
|
%
|
|
Jordan Davis
(11)
|
|
|
2,400,000
|
|
|
|
12.17
|
%
|
|
Michael Sheffery
(12)
|
|
|
3,750,000
|
|
|
|
19.06
|
%
|
|
Floyd Loop
(13)
|
|
|
2,400,000
|
|
|
|
12.17
|
%
|
|
William (BJ) Lehmann
(14)
|
|
|
166,250
|
|
|
|
*
|
|
|
Kurt Brunden
|
|
|
—
|
|
|
|
*
|
|
|
Robert Deans
(15)
|
|
|
96,000
|
|
|
|
*
|
|
|
Laura Campbell
(16)
|
|
|
83,329
|
|
|
|
*
|
|
|
All directors and executive officers as a group (11 persons)
|
|
|
7,789,828
|
|
|
|
39.79
|
%
|
|
|
|
|
|
*
|
|
Less than one percent
|
|
|
|
(1)
|
|
Includes 3,000,000 shares (2,971,698 shares held by Caduceus Private Investment III, LP and
28,302 shares held by OrbiMed Associates III, LP) of Common Stock. Also includes 750,000
shares (742,925 shares held by Caduceus Private Investment III, L.P.
and 7,075 shares held by
OrbiMed Associates III, LP) of Common Stock issuable upon the exercise of warrants at $6.00
per share. The address for OrbiMed Advisors LLC and its affiliates is 767 3
rd
Avenue, 30
th
Floor, New York, New York 10017.
|
|
|
|
(2)
|
|
Includes 1,600,000 shares (800,000 shares held by Radius Venture Partners II, L.P., 103,766
shares held by Radius Venture Partners III, L.P., and 696,234 shares held by Radius Venture
Partners III QP, L.P.) of Common Stock. Also includes 800,000 shares (400,000 shares held by
Radius Venture Partners II, L.P., 51,883 shares held by Radius Venture Partners III, L.P., and
348,117 shares held by Radius Venture Partners III QP, L.P.) of Common Stock issuable upon the
exercise of warrants at $6.00 per share. The address for Radius Venture Partners II, L.P. and
its affiliates is 400 Madison Avenue, 8
th
Floor, New York, New York 10017.
|
|
|
|
(3)
|
|
Represents shares received upon the conversion of subordinated convertible promissory notes
upon the closing of the Offering. The address for Angiotech Pharmaceuticals, Inc. is 1618
Station Street, Vancouver, British Columbia, Canada V6A 1B6.
|
|
|
|
(4)
|
|
Includes 1,200,000 shares (1,178,880 shares held by RA Capital Biotech Fund, L.P. and 21,120
shares held by RA Capital Biotech Fund II, L.P.) of Common Stock. Also includes 300,000
shares (294,720 shares held by RA Capital Biotech Fund, L.P. and 5,280 shares held by RA
Capital Biotech Fund II, L.P.) of Common Stock issuable upon the exercise of warrants at $6.00
per share. The address for RA Capital Biotech Fund, LP and its affiliates is 111 Huntington
Avenue, Suite 610, Boston, Massachusetts 02199.
|
|
|
|
(5)
|
|
Includes 1,200,000 shares (319,950 shares held by Accipiter Life Sciences Fund (Offshore),
L.P., 318,500 shares held by Accipiter Life Sciences Fund, L.P., 271,450 shares held by
Accipiter Life Sciences Fund II (Offshore), L.P., 157,750 shares held by Accipiter Life
Sciences Fund II (QP), L.P., and 132,350 shares held by Accipiter Life Sciences Fund II, L.P.)
of Common Stock. Also includes 300,000 shares (79,988 shares held by Accipiter Life Sciences
Fund (Offshore), L.P., 79,625 shares held by Accipiter Life Sciences Fund, L.P., 67,863 shares
held by Accipiter Life Sciences Fund II (Offshore), L.P., 39,437 shares held by Accipiter Life
Sciences Fund II (QP), L.P., and 33,087 shares held by Accipiter Life Sciences Fund II, L.P.)
of Common Stock issuable upon the exercise of warrants at $6.00 per share. The address for
Accipiter Capital Management LLC and its affiliates is 399 Park Avenue, 38
th
Floor,
New York, New York 10022.
|
|
|
|
(6)
|
|
Includes 800,000 shares (472,000 shares held by H&Q Healthcare Investors and 328,000 shares
held by H&Q Life Sciences Investors) of Common Stock. Also includes 200,000 shares (118,000
shares held by H&Q Healthcare Investors and 82,000 shares held by H&Q Life Sciences Investors)
of Common Stock issuable upon the exercise of warrants at $6.00 per share. The address for
Hambrecht & Quist Capital Management LLC and its affiliates is 30 Roews Wharf, Boston,
Massachusetts 02110.
|
|
|
|
(7)
|
|
Includes 41,299 shares (537 of which are held in trust for his children) of Common Stock
issued upon exchange of the Athersys shares of capital stock upon consummation of the Merger.
Also includes 21,271
|
48
|
|
|
|
|
|
|
shares of Common Stock issued upon conversion of a secured subordinated
convertible promissory note and the exercise of a related warrant for 39,999 shares of Common
Stock at $0.01 per share. Also includes
warrants to purchase 5,318 shares of Common Stock at $6.00 per share that were issued upon
the conversion of the note. Also includes vested options of 285,000 granted with an
exercise price of $5.00.
|
|
|
|
(8)
|
|
Includes 24,539 shares of Common Stock issued upon exchange of the Athersys shares of capital
stock upon consummation of the Merger. Also includes 21,271 shares of Common Stock issued upon
conversion of a secured subordinated convertible promissory note and the exercise of a related
warrant for 39,999 shares of Common Stock at $0.01 per share. Also includes warrants to
purchase 5,318 shares of Common Stock at $6.00 per share that were issued upon the conversion
of the note. Also includes vested options of 280,000 granted with an exercise price of $5.00.
|
|
|
|
(9)
|
|
Includes 182,292 shares (175,004 shares held by Primus Capital Fund IV Limited Partnership
and 7,288 shares held by Primus Executive Fund Limited Partnership) of Common Stock issued
upon exchange of the Athersys shares of capital stock upon consummation of the Merger. Also
includes 106,356 (102,102 shares held by Primus Capital Fund IV Limited Partnership and 4,245
shares held by Primus Executive Fund Limited Partnership) shares of Common issued upon
conversion of a secured subordinated convertible promissory note and the exercise of a related
warrant for 199,998 shares (191,999 shares held by Primus Capital Fund IV Limited Partnership
and 7,999 shares held by Primus Executive Fund Limited Partnership) of Common Stock at $0.01
per share. Also includes warrants to purchase 26,589 shares (25,526 shares held by Primus
Capital Fund IV Limited Partnership and 1,063 shares held by Primus Executive Fund Limited
Partnership) of Common Stock at $6.00 per share that were issued upon the conversion of the
note. Mr. Mulligan is a limited partner of the General Partner of Primus Venture Partners,
L.P. and disclaims beneficial ownership of the reported securities except to the extent of his
pecuniary interest therein. Mr. Mulligan was appointed to our Board of Directors in June 2007
(formerly on Athersys board since 1998).
|
|
|
|
(10)
|
|
Includes 1,600,000 shares (800,000 shares held by Radius Venture Partners II, L.P., 103,766
shares held by Radius Venture Partners III, L.P., and 696,234 shares held by Radius Venture
Partners III QP, L.P.) of Common Stock. Also includes 800,000 shares (400,000 shares held by
Radius Venture Partners II, L.P., 51,883 shares held by Radius Venture Partners III, L.P., and
348,117 shares held by Radius Venture Partners III QP, L.P.) of Common Stock issuable upon the
exercise of warrants at $6.00 per share. Also includes 10,000 shares of Common Stock
purchased by Dr. Milne in this Offering, and related warrants to purchase 5,000 shares of
Common Stock at $6.00 per share. Dr. Milne is a venture partner
of Radius Ventures, LLC and disclaims beneficial ownership of the reported securities except to the
extent of his pecuniary interest therein. Dr. Milne was appointed to our Board of Directors
in June 2007 (formerly on Athersys board since 2003). The
address for Dr. Milne is c/o Athersys, Inc., 3201
Carnegie Avenue, Cleveland, Ohio 44115.
|
|
|
|
(11)
|
|
Includes 1,600,000 shares (800,000 shares held by Radius Venture Partners II, L.P., 103,766
shares held by Radius Venture Partners III, L.P., and 696,234 shares held by Radius Venture
Partners III QP, L.P.) of Common Stock. Also includes 800,000 shares (400,000 shares held by
Radius Venture Partners II, L.P., 51,883 shares held by Radius Venture Partners III, L.P., and
348,117 shares held by Radius Venture Partners III QP, L.P.) of Common Stock issuable upon the
exercise of warrants at $6.00 per share. Mr. Davis is a managing member of the General
Partner of each of Radius Venture Partners II, L.P., Radius Venture Partners III, L.P. and Radius
Venture Partners III QP, L.P., and disclaims beneficial ownership of the reported securities
except to the extent of his pecuniary interest therein. Mr. Davis was appointed to our Board
of Directors in June 2007. The address for Mr. Davis is
Radius Ventures, LLC, 400
Madison Avenue, 8
th
Floor, New York, New York 10017.
|
|
|
|
(12)
|
|
Includes 3,000,000 shares (2,971,698 shares held by Caduceus Private Investment III, L.P. and
28,302 shares held by OrbiMed Associates III, L.P.) of Common Stock. Also includes 750,000
shares (742,925 shares held by Caduceus Private Investment III, L.P. and 7,076 shares held by
OrbiMed Associates III, L.P.) of Common Stock issuable upon the exercise of warrants at $6.00
per share. Mr. Sheffery is a partner of OrbiMed Advisors LLC and disclaims beneficial
ownership of the reported securities except to the extent of his pecuniary interest therein.
Mr. Sheffery was appointed to our Board of Directors in June 2007. The address for Mr.
Sheffery is 767 Third Avenue, 30
th
Floor, New York, New York 10017.
|
|
|
|
(13)
|
|
Includes 1,600,000 shares (800,000 shares held by Radius Venture Partners II, L.P., 103,766
shares held by Radius Venture Partners III, L.P., and 696,234 shares held by Radius Venture
Partners III QP, L.P.) of Common Stock. Also includes 800,000 shares (400,000 shares held by
Radius Venture Partners II, L.P., 51,883 shares held by Radius Venture Partners III, L.P., and
348,117 shares held by Radius Venture
|
49
|
|
|
|
|
|
|
Partners III QP, L.P.) of Common Stock issuable upon the
exercise of warrants at $6.00 per share. Dr. Loop is venture
partner of Radius Ventures, LLC and disclaims beneficial ownership of the reported
securities except to the extent of his pecuniary interest therein. Dr. Loop was appointed
to our Board of Directors in June 2007. The address for
Dr. Loop is c/o Athersys, Inc., 3201 Carnegie
Avenue, Cleveland, Ohio 44115.
|
|
|
|
(14)
|
|
Includes 5,000 shares of Common Stock purchased by Mr. Lehmann in the Offering, and related
warrants to purchase 1,250 shares of Common Stock at $6.00 per share. Also includes vested
options of 160,000 granted with an exercise price of $5.00.
|
|
|
|
(15)
|
|
Includes vested options of 96,000 granted with an exercise price of $5.00.
|
|
|
|
(16)
|
|
Includes 1,064 shares of Common Stock issued upon conversion of a secured subordinated
convertible promissory note and the exercise of a related warrant for 1,999 shares of Common
Stock at $0.01 per share. Also includes warrants to purchase 266 shares of Common Stock at
$6.00 per share that were issued upon the conversion of the note. Also includes vested
options of 80,000 granted with an exercise price of $5.00.
|
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors is responsible for the overall management of Athersys and elects the
executive officers who are responsible for administering Athersys’ day-to-day operations. Athersys’
management team is comprised of experienced executives of understanding that have participated in
other development stage, venture capital-funded, start-up companies and corporate development
transactions and have held executive positions in publicly traded companies.
In connection with the Merger, the following persons were elected to serve as officers and
directors on the board of directors of BTHC VI:
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Gil Van Bokkelen, Ph.D.
|
|
|
46
|
|
|
Chief Executive Officer and Chairman
|
|
William (BJ) Lehmann
|
|
|
|
|
|
|
|
Jr., J.D., M.B.A.
|
|
|
41
|
|
|
President and Chief Operating Officer
|
|
John J. Harrington, Ph.D.
|
|
|
39
|
|
|
Chief Scientific Officer and
Executive VP and Director
|
|
Kurt R. Brunden, Ph.D.
|
|
|
49
|
|
|
Senior VP – Biopharmaceuticals
|
|
Robert J. Deans Ph.D.
|
|
|
55
|
|
|
Senior VP – Regenerative Medicine
|
|
Laura K. Campbell, C.P.A.
|
|
|
43
|
|
|
VP – Finance
|
|
George M. Milne, Ph.D.
|
|
|
63
|
|
|
Director
|
|
William C. Mulligan
|
|
|
53
|
|
|
Director
|
|
Jordan S. Davis
|
|
|
45
|
|
|
Director
|
|
Floyd D. Loop, M.D.
|
|
|
70
|
|
|
Director
|
|
Michael Sheffery
|
|
|
56
|
|
|
Director
|
Gil Van Bokkelen, Ph.D.
Chief Executive Officer and Chairman
Dr. Van Bokkelen co-founded Athersys in October 1995 and has served as Chief Executive Officer and
a director since Athersys’ founding. Prior to May 2006, he also served as Athersys’ President. He
has served as Chairman of Athersys’ Board of Directors since August 2000. Dr. Van Bokkelen is the
current Chairman of the Center for Stem Cells and Regenerative Medicine, and has served on a number
of other boards, including the Biotechnology Industry Organization’s ECS Board of Directors from
2001 to 2004, the Kent State University Board of Trustees from 2001 to 2004 and serves as an
advisor to Early Stage Partners, a venture capital firm. He received his Ph.D. in Genetics from
Stanford University, his B.A. in Economics from the University of California at Berkeley, and his
B.A. in Molecular Biology from the University of California at Berkeley.
50
William (BJ) Lehmann, J.D., M.B.A.
President and Chief Operating Officer
William (BJ) Lehmann, Jr., J.D. joined Athersys in September 2001 and was Athersys’ Executive Vice
President of Corporate Development and Finance from August 2002 until May 2006, when he became
Athersys’ President. From 1994 to 2001, Mr. Lehmann was with McKinsey & Company, Inc., an
international management consulting firm, where he worked extensively with new technology and
service-based businesses in the firm’s Business Building practice. Prior to joining McKinsey, he
worked at Wilson, Sonsini, Goodrich & Rosati, a Silicon Valley law firm, and worked with First
Chicago Corporation, a financial institution. Mr. Lehmann received his J.D. from Stanford
University, his M.B.A. from the University of Chicago, and his B.A. from the University of Notre
Dame.
John J. Harrington
Chief Scientific Officer and Executive Vice President, and Director
Dr. Harrington co-founded Athersys in October 1995 and has served as Athersys’ Executive Vice
President and Chief Scientific Officer and as a director since Athersys’ founding. Dr. Harrington
led the development of the RAGE technology as well as its application for gene discovery, drug
discovery and commercial protein production applications. He is a listed inventor on 20 issued or
pending U.S. patents, has authored 20 scientific publications, and has received numerous awards for
his work, including being named one of the top international young scientists by MIT Technology
Review in 2002. Dr. Harrington has overseen the therapeutic product development programs at
Athersys since their inception, and during his career he has also held positions at Amgen and
Scripps Clinic. He received his Ph.D. in Cancer Biology from Stanford University and his B.A. in
Biochemistry and Cell Biology from the University of California at San Diego.
Kurt R. Brunden, Ph.D.
Senior Vice President – Biopharmaceuticals
Dr. Brunden joined Athersys as Vice President of Drug Discovery in September 2000 and has served as
Athersys’ Senior Vice President of Biopharmaceuticals since October 2004. Dr. Brunden was employed
at Gliatech Inc., a pharmaceutical and device company, from 1991 to 2000, where his most recent
position was Vice President of Research. In that capacity, he was responsible for the initiation
and development of small molecule and protein drug discovery programs. From 1988 to 1991, Dr.
Brunden held a tenure-track faculty position within the Department of Biochemistry at the
University of Mississippi Medical Center. He was a Research Fellow at the Mayo Clinic from 1985 to
1988. Dr. Brunden received his Ph.D. in Biochemistry from Purdue University and his B.S. in
Biology and Chemistry from Western Michigan University. Dr. Brunden is considering a possible
return to a faculty position, which would begin in late summer 2007. If Dr. Brunden does take a
faculty position, Athersys currently anticipates that he would continue his involvement with the
Company as a consultant, providing his expertise to the advancement of its biopharmaceutical
programs.
Robert J. Deans, Ph.D.
Senior Vice President – Regenerative Medicine
Dr. Deans has led Athersys’ regenerative medicine research and development activities since
February 2003 and has served as Vice President of Regenerative Medicine since October 2003. He was
named Senior Vice President of Regenerative Medicine in June 2006. Dr. Deans is highly regarded as
an expert in stem cell therapeutics, with over fifteen years of experience in this field. From
2001 to 2003, Dr. Deans worked for early-stage biotechnology companies. Dr. Deans was formerly the
Vice President of Research at Osiris Therapeutics, Inc., a biotechnology company, from 1998 to 2001
and Director of Research and Development with the Immunotherapy Division of Baxter International,
Inc., a global healthcare company, from 1992 to 1998. Dr. Deans was also previously on faculty at
USC Medical School in Los Angeles, between 1981 and 1998, in the departments of Microbiology and
Neurology at the
51
Norris Comprehensive Cancer Center. Dr. Deans was an undergraduate at MIT,
received his Ph.D. at the University of Michigan, and did his post-doctoral work at UCLA in Los
Angeles.
Laura K. Campbell, CPA,
Vice President — Finance
Laura Campbell joined Athersys in January 1998 as Controller and has served as Vice President of
Finance since May 2006. Prior to joining Athersys, she was at Ernst & Young LLP, a public
accounting
firm, for 11 years, in the audit practice. During her tenure with Ernst & Young LLP, Ms. Campbell
specialized in entrepreneurial services and the biotechnology industry sector and participated in
several initial public offerings. Ms. Campbell received her B.S., with distinction, in Business
Administration from The Ohio State University.
George M. Milne, Ph.D.
Director
Dr. Milne has been a director of Athersys since January 2003 after his retirement in 2002 from
Pfizer Inc, a pharmaceutical company, where he most recently served as President of Worldwide
Strategic and Operations Management and Executive Vice President of Global Research and
Development. He joined Pfizer Inc in 1970 and held a variety of positions conducting both
chemistry and pharmacology research. Dr. Milne is a Venture Partner of Radius. Dr. Milne became
Director of the Department of Immunology and Infectious Diseases at Pfizer Inc in 1981, was
Executive Director from 1984 to 1985 and was Vice President of Research and Development from 1985
to 1988. He was appointed Senior Vice President in 1988 and President of Central Research in 1993
with global responsibility for Human and Veterinary Medicine R&D. Dr. Milne serves as a director
of Mettler-Toledo, Inc., Charles River Laboratories, Inc., MedImmune Inc., and Aspreva
Pharmaceuticals Inc. He also serves on the board of the New York Botanical Garden and the Mystic
Aquarium/Institute for Exploration. Dr. Milne received his B.S. in Chemistry from Yale University
and his Ph.D. in Organic Chemistry from Massachusetts Institute of Technology.
William C. Mulligan
Director
Mr. Mulligan has been a director of Athersys since October 1998. Mr. Mulligan joined Primus
Venture Partners, a Cleveland-based private equity firm and an investor in Athersys, in 1985 from
McKinsey & Company, Inc. Mr. Mulligan has served as a Managing Director of Primus since 1987. His
previous work experience includes management positions at Deere and Company, and First Chicago
Corporation. Mr. Mulligan serves as a director of several private companies and Universal
Electronics, Inc. (NASDAQ: UEIC). Mr. Mulligan is a trustee of The Cleveland Clinic Foundation and
chairs the Advisory Board of CCF Innovations, which is responsible for commercializing technology
developed at the Cleveland Clinic. Mr. Mulligan is also a trustee of Denison University, the
Western Reserve Land Conservancy. Mr. Mulligan received his B.A. in economics from Denison
University and his M.B.A. from the University of Chicago.
Jordan S. Davis
Director
Mr. Davis is a Managing Partner of Radius Ventures, a health and life sciences venture capital
firm, which he co-founded in 1997. Mr. Davis currently serves on the board of directors of several
Radius portfolio companies, including Health Language, Inc., Heartscape Technologies, Inc.,
Impliant, Inc., and Zettacore, Inc. He also serves on the board of American Bank Note
Holographics, Inc. (OTC: ABHH). Mr. Davis earned an M.B.A. from the Kellogg School of Management at
Northwestern University and a B.A. in Economics from The State University of New York at
Binghamton.
52
Floyd D. Loop, M.D.
Director
Dr. Loop was the CEO and chairman of the Board of Governors of The Cleveland Clinic Foundation from
1989 to 2004. Earlier, he chaired the Department of Thoracic and Cardiovascular Surgery at the
Cleveland Clinic from 1975 to 1989. Dr. Loop and his colleagues were responsible for today’s
widespread use of arterial conduits in coronary artery surgery, innovations in valve repair,
reoperations and numerous changes in technical procedure. As a surgeon, Dr. Loop performed more
than 12,000 open heart operations and authored 350 papers on all aspects of cardiovascular surgery.
During his tenure as CEO, the Cleveland Clinic revenues grew from $650 million to $3.6 billion.
His accomplishments included a significant development of basic and applied research, creation of a
delivery system comprised
of 12 hospitals and 14 outpatient sites, a new medical school for physician investigators and
construction of two hospitals in Florida. Dr. Loop is a Venture Partner of Radius. Dr. Loop was
president of the American Association for Thoracic Surgery, Chairman of the Residency Review
Committee, and a member of the American Board of Thoracic Surgery. Dr. Loop has received honorary
degrees from Cleveland State University, Purdue University, and St. Louis University among many
other international awards. He currently serves on two public boards, Tenet Healthcare Corporation
and Intuitive Surgical, Inc. Dr. Loop received his M.D. from the George Washington University.
Michael B. Sheffery, Ph.D.
Director
Dr. Sheffery is a founding General Partner of OrbiMed Advisors, LLC and Co-Head of Private Equity.
Dr. Sheffery was formerly Head of the Laboratory of Gene Structure and Expression at Memorial
Sloan-Kettering Cancer Center. He received both his Ph.D. in Molecular Biology and his B.A. in
Biology from Princeton University. Dr. Sheffery joined Mehta and Isaly in 1996 as a Senior Analyst
covering the biotechnology industry. Since 1998, Dr. Sheffery had been a General Partner of
OrbiMed Advisors, LLC. He is currently a Director of Affimed Therapeutics, AG, Supernus
Pharmaceuticals, Inc., CoGenesys, Inc., and Sientra, Inc.
COMPENSATION DISCUSSION & ANALYSIS
This section discusses the principles underlying our executive compensation policies and decisions
and the most important factors relevant to an analysis of these policies and decisions. It
provides qualitative information regarding the manner and context in which compensation is awarded
to and earned by our named executive officers, which we refer to further under “Executive
Compensation” below, and places in perspective the data presented in the compensation tables and
narratives that follow.
Compensation Objectives and Philosophy
Historically, Athersys’ board of directors has been responsible for establishing and approving the
compensation of its executive officers and key employees. In connection with the completion of the
Offering, the Compensation Committee of the Board of Directors was established, and will be
responsible for overseeing executive and other employee compensation, as well as certain other
matters. With respect to compensation matters, the initial objective of the Board of Directors and
Compensation Committee will be to establish a compensation program that attracts and helps retain
talented and experienced individuals for senior level positions throughout the organization, as
well as to authorize appropriate compensation for our employees and key consultants.
The Board of Directors and the Compensation Committee will oversee compensation programs designed
to also:
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•
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Recruit, retain, and motivate executives and employees that can help us achieve our
core business goals;
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53
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•
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Provide incentives to promote and reward superior performance throughout the organization;
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•
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Facilitate stock ownership and retention by our executives and other employees; and
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•
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Promote alignment between executives and other employees and the long term interests of
stockholders.
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The Board of Directors and Compensation Committee will seek to achieve these objectives by:
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•
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Establishing a compensation program that is market competitive and internally fair; and
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•
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Linking performance with certain elements of compensation through the use of equity
options, stock grants, cash performance bonuses or other means of compensation the value of
which is substantially tied to the achievement of our company goals.
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Components of Compensation
The Company’s executive compensation program will include the following elements:
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•
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Base salary;
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•
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Discretionary and performance-based bonuses;
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•
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Long-term incentive plan awards; and
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•
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Retirement and health insurance benefits.
|
The Compensation Committee will set a competitive rate of annual base salary for each executive
officer in order to attract and retain top quality executives. However, the Compensation Committee
has not yet committed to the means by which it will determine competitive rates of annual base
salary in the market, which means might include executive officer and director input, input from a
compensation consultant and third-party information.
We do not have a specific formula for allocating total compensation between current and long-term
compensation or between cash and non-cash compensation. However, we do vary the mix of our
executive officers’ compensation elements based on competitive practices and their relative
management level to recognize each individual’s operating responsibilities and reward his or her
ability to impact short- and long-term results.
Elements of Executive Compensation
We will pay our executive officers the following compensation:
Base Salary.
We pay base salaries in order to attract executive officers and provide a basic level
of financial security. We establish base salaries for our executives based on the scope of their
responsibilities, taking into account competitive market compensation paid by other companies for
similar positions. Base salaries are reviewed (1) at the time of renewal of an executive’s
employment agreement, or (2) annually, with adjustments based on the individual’s responsibilities,
performance and experience during the year. This review occurs each year at the annual review.
Discretionary and Performance-Based Bonuses.
The Board of Directors expects to adopt a formal
process for determining and awarding discretionary and performance-based annual bonuses later in
2007.
54
The Board of Directors intends to utilize annual incentive bonuses to reward officers and
other employees for achieving financial and operational goals and for achieving individual annual
performance objectives. These objectives will vary depending on the individual executive and
employee, but will relate generally to strategic factors, including establishment and maintenance
of key strategic relationships, advancement of our product candidates, identification and
advancement of additional programs or product candidates, and to financial factors, including
raising capital, improving our results of operations and increasing the price per share of our
common stock. Commencing in 2007, the Board of Directors will have authority to award
discretionary annual bonuses to, or enter into commitments for the award of an annual bonus with,
our executive officers.
Long-Term Incentive Program.
We believe that we can encourage superior long-term performance by
our executive officers and employees through encouraging them to own, and assisting them with the
acquisition of, our stock. We have established the BTHC VI, Inc. Long-Term Incentive Plan and the
BTHC VI, Inc. Equity Incentive Compensation Plan, which we refer to as our equity compensation
plans, to provide our employees, including executive officers, with incentives to help align their
interests with the interests of our stockholders. Our Board of Directors believes that the use of
stock and stock-based awards offers the best approach to achieving our compensative objective of
fostering a culture of ownership, which it believes will, in turn, motivate our executive officers
to create and enhance stockholder value. Historically, Athersys has elected to use stock options
as its primary long-term equity incentive vehicle. We have not adopted stock ownership guidelines,
but our equity compensation plans provide a principal method for our executive officers to acquire
equity in our Company.
Stock Options
. Our equity compensation plans authorize us to grant options to purchase
shares of Common Stock to our employees, directors and consultants. The Compensation Committee
of the Board of Directors administers our equity compensation plans. Stock option grants are
made at the commencement of employment and, on occasion, following a significant change in job
responsibilities or to meet other special retention objectives. The Compensation Committee
annually reviews and approves stock option awards to executive officers based upon a review of
competitive compensation data, its assessment of individual performance, a review of each
executive’s existing long-term incentives and retention considerations. Periodic stock option
grants are made at the discretion of the Compensation Committee to eligible employees, including
named executive officers, and, in appropriate circumstances, the Compensation Committee
considers the recommendations of members of management. Our stock options are generally
exercisable for a period of ten years, have an exercise price equal to the fair market value of
our Common Stock on the day of grant and typically vest over a four-year period, with 25%
vesting twelve months after the vesting commencement date and the remainder vesting 25% per year
(on a quarterly basis) thereafter based upon continued employment. Incentive stock options also
include certain other terms necessary to assure compliance with particular provisions of the
Internal Revenue Code.
In June 2007, upon the closing of the Merger, we granted option awards to purchase 3,250,000
shares of Common Stock with an exercise price of $5.00 to our employees, including our executive
officers, and certain consultants in June 2007 upon the closing of the Merger. These option
awards generally vest 40% on the date of grant, and 20% in each of the three years (on a
quarterly basis) thereafter. Dr. Van Bokkelen received stock option grants to purchase 712,500
shares of Common Stock at $5.00 per share; Dr. John Harrington received stock option grants to
purchase 700,000 shares of Common Stock at $5.00 per share; Mr. Lehmann received stock option
grants to purchase 400,000 shares of Common Stock at $5.00 per share; Dr. Brunden received stock
option grants to purchase 50,000 shares of Common Stock at $5.00 per share; Dr. Deans received
stock option grants to purchase 240,000 shares of Common Stock at $5.00 per share; and Ms.
Campbell received stock option grants to purchase 200,000 shares of Common Stock at $5.00 per
share. Also in June 2007, option awards to purchase 75,000 shares of Common Stock with an
exercise price of $5.00 were granted to each of our directors (options for a total of 375,000
shares), which stock options vest at a rate of 50% in the first year (on a
55
quarterly basis), and
25% in each of the two years (on a quarterly basis) thereafter, based on participation at
quarterly meetings of the Board of Directors.
We expect to continue to use stock options as a long-term incentive vehicle because we believe:
•
Stock options align the interests of our executives with those of our stockholders,
support a pay-for-performance culture, foster an employee stock ownership culture and focus the
management team on increasing value for our stockholders;
•
The value of stock options is based on our performance, because all the value received
by the recipient of a stock option is based on the growth of our stock price;
•
Stock options help to provide a balance to the overall executive compensation program
because, while base salary and our discretionary annual bonus program focus on short-term
compensation rewards, vesting stock options reward increases in stockholder value over the
longer term; and
•
The vesting period of stock options encourages executive retention and their efforts to
preserve stockholder value.
In determining the number of stock options to be granted to executives, we take into account the
individual’s position, scope of responsibility, ability to affect profits and stockholder value
and the individual’s historic and recent performance and the value of stock options in relation
to other elements of the individual executive’s total compensation.
Restricted Stock and Restricted Stock Units
.
Our equity compensation plans authorize us
to grant restricted stock and restricted stock units to our employees, directors and
consultants. To date, we have not granted any restricted stock or restricted stock units under
our equity compensation plans. We anticipate that in order to implement the long-term incentive
goals of the Compensation Committee, we may grant restricted stock units in the future.
Retirement and Health Insurance Benefits.
Consistent with our compensation philosophy, we intend
to continue to maintain our current benefits for our executive officers, including medical, dental,
vision and life and disability insurance coverage and the ability to contribute to a 401(k)
retirement plan; however, the Board of Directors, in its discretion, may revise, amend or add to
the executive officer’s benefits if it deems it advisable. We believe these benefits are currently
lower than median competitive levels for comparable companies. We have no current plans to change
the level of benefits provided to our executive officers.
Severance Arrangements
See the disclosure under “Potential Payments Upon Termination or Change of Control” for more
information about severance arrangements with our named executive officers.
Employment Agreements and Arrangements
Dr. Gil Van Bokkelen
. On December 1, 1998, Athersys entered into a one-year employment
agreement, effective April 1, 1998, with Dr. Gil Van Bokkelen, to serve initially as president
and chief executive officer. The agreement automatically renews for subsequent one-year terms
on April 1 of each year unless either party gives notice of termination at least 30 days before
the end of any term. Dr. Van Bokkelen is entitled to a base
salary of $350,000, which may be
increased at the discretion of the Athersys board of directors, and an annual discretionary
incentive bonus of up to 33% of his base salary. Dr. Van Bokkelen also received options to
purchase shares of Athersys common stock. Dr. Van Bokkelen is also entitled to life insurance
coverage for the benefit of his family in the amount of approximately $2 million and is provided
the use of a company automobile for business use. The agreement was amended as of May 31, 2007
to provide technical accommodations for the Merger and Offering. For more information about
severance arrangements under the amended agreement, see the disclosure under “Potential Payments
Upon Termination or Change of Control.” Dr. Van Bokkelen has also entered into a
non-competition and confidentiality agreement with Athersys under which, during his employment
and for a period of 18 months thereafter, he is restricted from, among other things, competing
with Athersys.
56
Dr. John J. Harrington
. On December 1, 1998, Athersys entered into a one-year
employment agreement, effective April 1, 1998, with Dr. John J. Harrington to serve initially as
executive vice president and chief scientific officer. The agreement automatically renews for
subsequent one-year terms on April 1 of each year unless either party gives notice of
termination at least thirty days before the end of any term. Dr. Harrington is entitled to a
base salary of $300,000, which may be increased at the discretion of the Athersys board of
directors, and an annual discretionary incentive bonus of up to 33% of his base salary. Dr.
Harrington also received options to purchase shares of Athersys common stock. Dr. Harrington is
also entitled to life insurance coverage for the benefit of his family in the amount of
approximately $2 million. The agreement was amended as of May 31, 2007 to provide technical
accommodations for the Merger and Offering. For more information about severance arrangements
under the amended agreement, see the disclosure under “Potential Payments Upon Termination or
Change of Control.” Dr. Harrington has also entered into a non-competition and confidentiality
agreement with Athersys under which, during his employment and for a period of 18 months
thereafter, he is restricted from, among other things, competing with Athersys.
Laura K. Campbell
. On May 22, 1998, Athersys entered into a two-year employment
agreement with Laura K. Campbell to serve initially as controller. The agreement automatically
renews for subsequent one-year terms on May 22 of each year unless either party gives notice of
termination at least thirty days before the end of any term. Ms. Campbell is entitled to a base
salary of $195,000, which may be increased at the discretion of the Athersys board of directors.
Ms. Campbell also received options to purchase shares of Athersys common stock. The agreement
was amended as of May 31, 2007 to provide technical accommodations for the Merger and Offering.
For more information about severance arrangements under the amended agreement, see the
disclosure under “Potential Payments Upon Termination or Change of Control.”
Dr. Kurt Brunden
. On September 25, 2000, a subsidiary of Athersys entered into a
four-year employment agreement with Dr. Kurt Brunden to serve initially as vice president of
drug discovery. The agreement automatically renews for subsequent one-year terms on September
25 of each year unless either party gives notice of termination at least thirty days before the
end of any term. Dr. Brunden is entitled to a base salary of
$240,000, which may be increased
at the discretion of the Athersys board of directors, and guaranteed bonuses for 2001 and 2002.
Dr. Brunden also received options to purchase shares of Athersys common stock. Dr. Brunden is
also entitled to life insurance coverage for the benefit of his family of approximately $1
million. The agreement was amended as of May 31, 2007 to provide technical accommodations for the Merger and Offering. For more
information about severance arrangements under the amended agreement, see the disclosure under
“Potential Payments Upon Termination or Change of Control.” Dr. Brunden has also entered into a
non-competition and confidentiality agreement with Athersys under which, during his employment
and for a period of 18 months thereafter, he is restricted from, among other things, competing
with Athersys.
Dr. Robert Deans
. On October 3, 2003, a subsidiary of Athersys entered into a four-year
employment agreement with Dr. Robert Deans to serve initially as vice president of regenerative
medicine. The agreement automatically renews for subsequent one-year terms on October 3 of each
year unless either party gives notice of termination at least thirty days before the end of any
term. Dr. Deans is entitled to a base salary of $235,000, which may be increased at the
discretion of the Athersys board of directors, and an annual discretionary incentive bonus of up
to 30% of his base salary. Dr. Deans also received options to purchase shares of Athersys
common stock. Dr. Deans is also entitled to life insurance coverage for the benefit of his
family of approximately $1 million. The agreement was amended as of May 31, 2007 to provide
technical accommodations for the Merger and Offering. For more information about severance
arrangements under the amended agreement, see the disclosure under “Potential Payments Upon
Termination or Change of Control.” Dr. Deans has also entered into a non-competition and
confidentiality agreement with Athersys under which, during his employment and for a period of
18 months thereafter, he is restricted from, among other things, competing with Athersys.
William (BJ) Lehmann
. On January 1, 2004, a subsidiary of Athersys entered into a
four-year employment agreement with William (BJ) Lehmann to serve initially as executive vice
president of corporate development and finance. The agreement automatically renews for
subsequent one-year terms on January 1 of each year unless either party gives notice of
termination at least 30 days before the end of any term. Mr. Lehmann is entitled to a base
salary of $300,000, which may be increased at the discretion of the Athersys board of directors.
Mr. Lehmann is entitled to life insurance coverage for the benefit of his family in the amount
of approximately $1 million. The agreement was amended as of May 31, 2007 to provide technical
accommodations for the Merger and Offering. For more information about severance arrangements
under the amended agreement, see the disclosure under “Potential Payments Upon Termination or
Change of Control.” Mr. Lehmann has also entered into a non-competition and confidentiality
agreement with Athersys under which, during his employment and for a period of 18 months
thereafter, he is restricted from, among other things, competing with Athersys.
57
Recoupment of Incentive Payments
We do not have a formal policy regarding adjusting or recovering discretionary or performance-based
bonuses or long-term incentive plan awards or payments if the relevant performance metrics upon
which such awards or payments are based are later restated or otherwise adjusted in a manner that
reduces the actual size of the award or payment. We will consider making such adjustments on a
case-by-case basis if such situations arise.
General Tax Deductibility of Executive Compensation
We intend to structure our compensation program to comply with Internal Revenue Code Sections
162(m) and 409A. Under Section 162(m) of the Internal Revenue Code, a limitation was placed on tax
deductions of any publicly-held corporation for individual compensation to certain executives of
such
corporation exceeding $1,000,000 in any taxable year, unless the compensation is performance-based.
If an executive is entitled to nonqualified deferred compensation benefits that are subject to
Section 409A, and such benefits do not comply with Section 409A, then the benefits are taxable in
the first year they are not subject to a substantial risk of forfeiture. In such case, the
executive is subject to regular federal income tax, interest and an additional federal income of
20% of the benefit includible in income. We intend for our Compensation Committee to generally
manage our incentive programs to qualify for the performance based exemption. The Compensation
Committee also reserves the right to provide compensation that does not meet the exemption criteria
if, in its sole discretion, it determines that doing so advances our business objectives.
EXECUTIVE COMPENSATION
The following tables and narratives provide, for the fiscal year ended December 31, 2006,
descriptions of the cash compensation paid by us, as well as certain other compensation paid or
accrued, for that year to Dr. Gil Van Bokkelen, Chief Executive Officer; and Laura Campbell, Vice
President – Finance; and the four most highly compensated executive officers other than Dr. Van
Bokkelen and Ms. Campbell who were serving as executive officers as of December 31, 2006. We
refer to these individuals as our named executive officers. The stock option information set
forth in this section is historical information based on the option plans of Athersys. All
employee and director options under the Athersys stock option plans were terminated upon closing
of the Merger, and new options were granted under the BTHC VI incentive plans.
2006 Summary Compensation Table
The following table shows compensation information for 2006 for our named executive officers:
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All Other
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Salary
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Bonus
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Option Awards
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Compensation
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Total
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Name and Principal Position
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Year
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($) (1)
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($)
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($) (2)
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($)
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($)
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(a)
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(b)
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(c)
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(d)
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(f)
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(i)
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(j)
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Dr. Gil Van Bokkelen, Chief
Executive Officer (3)
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2006
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$
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350,000
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$
|
25,000
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$
|
0
|
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|
$
|
149,604
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(4)
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$
|
524,604
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William Lehmann, Jr.,
President and Chief Operating
Officer
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2006
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$
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300,000
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$
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20,833
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|
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$
|
91,015
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|
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$
|
1,000
|
|
|
$
|
412,848
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|
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|
|
|
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Dr. John Harrington, Chief
Scientific Officer and
Executive Vice President (3)
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2006
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$
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300,000
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$
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21,667
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|
|
$
|
0
|
|
|
$
|
1,000
|
|
|
$
|
322,667
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Dr. Kurt Brunden, Vice
President – Biopharmaceuticals
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2006
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$
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240,000
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$
|
18,333
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|
|
$
|
75,570
|
|
|
$
|
2,000
|
|
|
$
|
335,903
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Dr. Robert Deans, Vice
President – Regenerative
Medicine
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2006
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$
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235,000
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$
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16,667
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$
|
105,119
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$
|
6,000
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$
|
362,786
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Laura Campbell, Vice President
– Finance
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2006
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$
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195,000
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$
|
14,219
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|
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$
|
20,056
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|
|
$
|
0
|
|
|
$
|
229,275
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58
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(1)
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The 2006 salary increase was approved by Athersys’ Compensation Committee effective June
1, 2006, but payment was deferred until the closing of the Offering.
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(2)
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Amounts in column (f) do not necessarily reflect compensation actually received by Athersys’
named executive officers. The amounts in column (f) reflect the dollar amount recognized for
financial statement reporting purposes for the fiscal year ended December 31, 2006, in
accordance with SFAS No. 123R, for option awards
granted prior to 2006. Assumptions used in the calculation of these amounts are included in
Notes A and J to Athersys’ audited consolidated financial statements for the fiscal year ended
December 31, 2006, which are filed as an exhibit to this Current Report on Form 8-K.
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(3)
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Drs. Van Bokkelen and Harrington also served as Athersys directors for 2006, but did not
receive any compensation as Athersys directors.
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(4)
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Includes $145,604 representing a loan which was forgiven by Athersys’ Board of Directors,
including certain tax benefits.
|
2006 Grants of Plan-Based Awards
Athersys implemented an incentive plan in 2005, which was amended in June 2007, which provides the
named executive officers with cash (or equity, as applicable) bonus payments upon the achievement
of certain thresholds from financing transactions, mergers or acquisitions, and asset sale
transactions. Payments under this plan are set forth in the 2006 Summary Compensation Table. No
plan-based awards were granted to our named executive officers during 2006.
Certain of our named executive officers are parties to employment agreements with us. For more
information about these agreements, see “Compensation Discussion & Analysis—Employment Agreements
and Arrangements” above. For more information about the compensation arrangements in which our
named executive officers participate and the proportion of our named executive officers’ total
compensation represented by base salary and bonus, see “2006 Summary Compensation Table” above.
Outstanding Equity Awards at 2006 Fiscal Year End Table
The following table shows all outstanding equity awards held by our named executive officers at
the end of 2006.
59
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Option Awards
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Equity Incentive
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Number
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Plan Awards:
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of
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Number of Securities
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Number of
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Securities
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Underlying
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Securities
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Underlying
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Unexercised Options
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Underlying Unexer-
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Unexercised Options
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(#)
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cised Unearned
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Option Exercise
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(#)
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Unexercisable
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Options
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Price
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Option Expiration
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Name
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Exercisable
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(1)
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(#)
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($)
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Date
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(a)
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(b)
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(c)
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(d)
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(e)
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(f)
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Dr. Van Bokkelen
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199,980
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—
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—
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$
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1.65
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April 1, 2008
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100,020
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—
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—
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$
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1.20
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April 1, 2008
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45,000
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—
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—
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$
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3.25
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April 2, 2013
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345,000
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Mr. Lehmann
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50,000
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—
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—
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$
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1.00
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November 14, 2011
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10,000
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—
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—
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$
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15.60
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November 14, 2011
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75,000
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—
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—
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$
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4.00
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December 9, 2013
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—
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25,000
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—
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$
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4.00
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December 9, 2013
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135,000
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25,000
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Dr. Harrington
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199,980
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—
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—
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$
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1.50
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April 1, 2008
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100,020
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—
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—
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$
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1.50
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April 1, 2008
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457,500
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—
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—
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$
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1.50
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April 1, 2008
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757,500
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Dr. Brunden
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50,000
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—
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—
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$
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1.00
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September 25, 2010
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10,000
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—
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—
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$
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15.60
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September 25, 2010
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70,000
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—
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—
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$
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4.00
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December 9, 2013
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—
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20,000
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—
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$
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4.00
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December 9, 2013
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130,000
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20,000
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Dr. Deans
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7,500
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—
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—
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$
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13.00
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October 3, 2013
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37,500
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—
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—
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$
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3.25
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October 3, 2013
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30,000
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—
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—
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$
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4.00
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December 9, 2013
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—
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2,500
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—
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$
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13.00
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October 3, 2013
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—
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12,500
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—
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$
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3.25
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October 3, 2013
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—
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10,000
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—
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$
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4.00
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December 9, 2013
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75,000
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25,000
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Ms. Campbell
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60,000
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—
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—
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$
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1.50
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May 22, 2008
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30,000
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—
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—
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$
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1.00
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February 22, 2010
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30,000
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—
|
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|
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—
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$
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7.00
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February 22, 2010
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30,000
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—
|
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|
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—
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$
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4.00
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December 9, 2013
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
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150,000
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|
|
|
|
|
|
|
|
|
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|
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(1)
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The stock options listed in column (c) for Mr. Lehmann were granted on December 9, 2003,
vest at a rate of 25% on each grant date anniversary, and will be fully exercisable on
December 9, 2007. The stock options listed in column (c) for Dr. Brunden were granted on
December 9, 2003 and vest at a rate of 11% on the date of grant, and 22% on each subsequent
grant date anniversary thereafter, and will be fully exercisable on December 9, 2007. The
stock options listed in column (c) for Dr. Deans were granted on October 3, 2003, October 3,
2003, and December 9, 2003, respectively, vest at a rate of 25% on each grant date
anniversary, and will be fully exercisable on October 3, 2007, October 3, 2007 and December 9,
2007, respectively.
|
Upon the close of the Merger, the majority of Athersys’ outstanding stock options were
terminated, including all of the stock options listed in the table above. Following the Merger,
new grants were made to employees, including the named executive officers.
2006 Options Exercised and Stock Vested
None of our named executive officers’ stock awards vested during 2006, and none of our named
executive officers exercised any stock options during 2006.
60
Potential Payments Upon Termination or Change of Control
Upon termination, the named executive officers may be entitled to certain potential payments. In
the event that an executive officer is terminated without cause or terminates employment for good
reason including a change of control, we would be obligated to pay full base salary and other
benefits for a defined period, subject to mitigation related to other employment. For Dr. Gil Van
Bokkelen and Dr. John Harrington, this period is eighteen months, and for all other executive
officers, the period is six months. In addition, we would be obligated to continue the
participation of the executive officer in all medical, life and other employee “welfare” benefit
programs for a period of eighteen months to the extent available and possible under the programs.
In the event than an executive officer is terminated for cause, other than for good reason, or as
a result of death, we would be obligated to pay full base salary and other benefits, including any
unpaid expense reimbursements, through the date of termination, and would have no further
obligations to the executive officer. In the event that an executive officer is unable to perform
duties as a result of a disability, we would be obligated to pay full base salary and other
benefits until employment is terminated and for a
period of twelve months from the date of such termination.
61
2006 Director Compensation Table
Our non-employee directors received the following compensation for 2006:
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|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
Option
|
|
All Other
|
|
|
|
|
|
Cash
|
|
Awards
|
|
Compensation
|
|
Total
|
|
Name
|
|
($)
|
|
($) (1)
|
|
($)
|
|
($)
|
|
(a)
|
|
(b)
|
|
(d)
|
|
(g)
|
|
(h)
|
|
Dr. George M. Milne
|
|
$
|
25,000
|
|
|
$
|
38,481
|
(2)
|
|
$
|
0
|
|
|
$
|
38,481
|
|
|
William C. Mulligan
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Timothy G. Biro
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
(1)
|
|
Amounts in column (d) do not necessarily reflect compensation actually received by
Athersys’ directors. The amounts in column (d) reflect the dollar amount recognized for
financial statement reporting purposes for the fiscal year ended December 31, 2006, in
accordance with SFAS No. 123R, for option awards granted prior to 2006. Assumptions used in
the calculation of these amounts are included in Notes A and J to Athersys’ audited
consolidated financial statements for the fiscal year ended December 31, 2006, which are filed
as an exhibit to this Current Report on Form 8-K. No grants of stock awards or stock options
were made by Athersys to its directors in 2006. The non-employee directors had option awards
outstanding as of December 31, 2006 for the following number of shares of Athersys common
stock (which option awards were terminated upon the closing of the Merger): Dr.
Milne, 100,000; Mr. Mulligan, 150,000; and Mr. Biro, 150,000.
|
|
|
|
(2)
|
|
The amount in column (d) for Dr. Milne relates to an option that Athersys granted Dr. Milne
in January 2003 for 33,000 shares of Athersys common stock, at an exercise price of $10.00 per
share, and an option that Athersys granted Dr. Milne in January 2003 for 67,000 shares of
Athersys common stock at an exercise price of $3.25 per share. These options vested over a
four-year period, and were terminated in connection with the Merger.
|
Athersys’ directors typically have not received cash for services they provide as directors;
however, Dr. Milne has historically received $25,000 annually for his services as a board member.
Also, Athersys’ non-employee directors have historically received grants of options to purchase
shares of Athersys common stock. During 2006, none of Athersys’ other non-employee directors
received any compensation for his service as a director.
Upon the closing of the Merger and the Offering, all existing members of the Athersys board of
directors, other than Mr. Timothy Biro, along with some new individuals, were appointed to the
Board. The new directors are Mr. Jordan Davis, Dr. Floyd Loop, and Mr. Michael Sheffery.
The Board approved a compensation program for the Board beginning in June 2007. The new
compensation program includes an initial stock option grant to purchase 75,000 shares of Common
Stock at fair market value on the date of grant, which options vest at a rate of 50% in the first
year (on a quarterly basis), and 25% in each of the two years (on a quarterly basis) thereafter.
Each of our non-employee directors received a grant of stock options to purchase 75,000 shares of
Common Stock at $5.00 per share in June 2007.
Additionally, the non-employee directors will receive, at each anniversary of service, an option
award to purchase 15,000 shares of Common Stock at fair market value on the date of grant. These
additional awards will vest at a rate of 50% in the first year (on a quarterly basis), and 25% in
each of the two years (on a quarterly basis) thereafter.
The non-employee directors also receive cash compensation of $30,000 per year, paid quarterly, plus
62
daily fees of $1,500 for participating in person, or $500 for participating by telephone, at Board
meetings.
The chair of the audit committee receives additional cash compensation of $10,000 per year, paid
quarterly, and the chair of the compensation committee receives additional cash compensation of
$6,000 per year, paid quarterly. All audit committee and compensation committee members also
receive additional daily fees of $1,000 for participating in person, or $500 for participating by
telephone, at each audit committee or compensation committee meeting. Directors, however, cannot
receive more than $2,500 in any one day for participation in Board and committee meetings.
Directors will be reimbursed for reasonable out-of-pocket expenses incurred while attending Board
and committee meetings.
Incentive Plans
Athersys has a cash incentive plan that generally will result in the payment of bonuses of one
month of salary to its employees (two months of salary for officers) upon achievement of certain
milestones, which included the sale of certain non-core assets related to Athersys’ asthma
discovery program and the completion of this Offering. Additionally, Mr. Lehmann was eligible
for a one-time bonus in the amount of $50,000 in connection with the completion of the Offering
pursuant to the terms of his employment agreement. In connection with the sale of the non-core
assets and the completion of the Offering, the named executive officers received the following cash
bonuses: Dr. Van Bokkelen — $74,537; Dr. Harrington — $63,889; Mr. Lehmann — $113,889; Dr.
Brunden — $51,111; Dr. Deans — $50,047; and Ms. Campbell — $41,528.
Equity Incentive Plans
Upon the close of the Merger, the majority of Athersys’ outstanding options were terminated.
However, pursuant to the terms of the Merger Agreement, the Registrant has agreed to assume 5,052
options granted to former employees and consultants of Athersys. In June 2007, we adopted our
equity plans, which authorize the Board, or a committee thereof, to provide equity-based
compensation in the form of stock options, stock appreciation rights restricted stock, restricted
stock units, performance shares and units, and other stock-based awards, which will be used to
attract and retain qualified employees, directors and consultants. Equity awards will be granted
from time to time under the guidance and approval of the Compensation Committee. Total awards
under these plans are limited to 4,500,000 shares of Common Stock. Option awards to purchase
3,250,000 shares of Common Stock with an exercise price of $5.00 were granted to our employees,
including our executive officers, and certain consultants in June 2007 upon the closing of the
Merger. Theses option awards generally vest 40% on the date of grant, and 20% in each of the three
years (on a quarterly basis) thereafter. Also in June 2007, option awards to purchase 375,000
shares of Common Stock with an exercise price of $5.00 were granted to our non-employee directors,
which options vest 50% in the first year (on a quarterly basis), and 25% in each of the two years
(on a quarterly basis) thereafter, based on participation at quarterly meetings on the Board of
Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors Biro and Mulligan served as members of the compensation committee of the Athersys board
of directors during 2006. No interlocking relationship within the meaning of the rules of the
Securities and Exchange Commission exists regarding any of our executive officers and any executive
officer of any other company, and no interlocking relationship has existed in the past. The
current compensation committee of the Board of Directors of BTHC VI consists of Directors Davis,
Mulligan and Sheffery.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
BTHC VI Relationships, Indebtedness, and Related Party Transactions
In September 1999, Ballantrae Healthcare LLC (and affiliated limited liability companies including
BTHC VI, LLC, collectively, “Ballantrae”), was organized for the purpose of operating nursing homes
throughout the United States. On March 28, 2003, Ballantrae filed a petition for reorganization
under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court,
Northern District of Texas (the “Bankruptcy Court”). On November 29, 2004, the Bankruptcy Court
approved the First Amended Joint Plan of Reorganization of Ballantrae and its creditors (the
“Bankruptcy Plan”). On April 11, 2006, pursuant to the Bankruptcy Plan, BTHC VI, LLC was merged
into BTHC VI, Inc., a Delaware corporation.
Halter Financial Group, L.P. (“HFG”) participated with Ballantrae and their creditors in
structuring the Bankruptcy Plan. As part of the Bankruptcy Plan, HFG provided $76,500 to be used
to pay professional fees associated with the Bankruptcy Plan confirmation process. HFG was granted
an option to be repaid through the issuance of equity securities in 17 of the reorganized
Ballantrae entities, including the Registrant. HFG exercised the option, and as provided in the
Plan, 70% of the BTHC VI’s then-
63
outstanding common stock, or 350,000 shares, were issued to HFG, in
satisfaction of HFG’s
administrative claims. The remaining 30% of the Registrant’s then-outstanding common stock, or
150,000 shares, were issued to 499 holders of administrative and tax claims and unsecured debt.
The 500,000 shares (the “Plan Shares”) were issued pursuant to Section 1145 of the Bankruptcy Code.
As further consideration for the issuance of the 350,000 Plan Shares to HFG, the Bankruptcy Plan
required HFG to assist BTHC VI in identifying a potential merger or acquisition candidate. HFG was
responsible for the payment of BTHC VI’s operating expenses and HFG was obligated to provide BTHC
VI with consulting services at no cost to BTHC VI, including assisting BTHC VI with formulating
the structure of any proposed merger or acquisition. Additionally, HFG was responsible for paying
BTHC VI’s expenses incurred in consummating a merger or acquisition. On February 15, 2006, HFG
transferred its 350,000 Plan Shares to Halter Financial Investments L.P., a Texas limited
partnership controlled by Timothy P. Halter (“HFI”). Timothy P. Halter is the sole officer,
director and shareholder of HFG and an officer and member of Halter Financial Investments GP, LLC,
general partner of HFI. Mr. Halter recently served as BTHC VI’s President, Chief Executive
Officer, Chief Financial Officer and sole director until his resignation in connection with Merger.
Other than the participation of HFG and Timothy P. Halter in the Plan of Reorganization and the
issuance to HFG of 350,000 shares of Common Stock for satisfaction of certain administrative claims
and for HFG’s agreement to provide BTHC VI with certain services as described, there were no
relationships or transactions between BTHC VI and any of its directors, officers and principal
stockholders.
Athersys Relationships, Indebtedness, and Related Person Transactions
The following is a description of transactions during 2004, 2005 and 2006 to which Athersys has
been a party, in which the amount involved in the transaction exceeds $120,000 and in which any of
Athersys’ directors, executive officers or holders (or immediate family members of holders) of more
than 5% of its capital stock had or will have a direct or indirect material interest, other than
compensation arrangements, which are described under “Executive Compensation.” Athersys believes
the terms obtained or consideration that was paid or received, as applicable, in connection with
the transactions described below were comparable to terms available or the amounts that would be
paid or received, as applicable, in arm’s-length transactions.
In 2006 and 2007, Athersys issued $10,000,000 in aggregate principal amount of 5% unsecured
convertible promissory notes to Angiotech, one of its collaborators. In 2006, Athersys also issued
$2,500,000 in aggregate principal amount of 10% secured convertible promissory notes to bridge
investors. Investors in the bridge financing consisted primarily of existing Athersys stockholders
and Drs. Van Bokkelen and Harrington and Ms. Campbell. Upon the closing of the Offering on June 8,
2007, the convertible promissory notes were converted into shares of Common Stock. The securities
offered in these financings to such persons were sold at their fair market value upon the same
price, terms and conditions that were given to unaffiliated third parties.
In 2006, a subsidiary of Athersys forgave a 2002 loan made to Dr. Van Bokkelen in aggregate
principal and accrued interest amount of approximately $122,000. In connection with loan
forgiveness, Athersys paid Dr. Van Bokkelen approximately $24,000 as a partial gross up for his tax obligations
in connection with such forgiveness.
Director Independence
After closing the Merger, our Board of Directors will review at least annually the independence of
each director. During these reviews, our Board of Directors will consider transactions and
relationships between each director (and his or her immediate family and affiliates) and our
company and its management to determine whether any such transactions or relationships are
inconsistent with a determination that the director was independent. Our Board of Directors will
conduct its annual review of director independence and to determine if any transactions or
relationships exist that would disqualify any of the individuals who then served as a director
under the rules of the NASDAQ Stock Market, or require disclosure under SEC rules. Currently, we
have two members of management who also serve on the
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Board of Directors, Dr. Van Bokkelen, who is
also our Chairman and Chief Executive Officer, and Dr.
Harrington, who is our Chief Scientific Officer and Executive Vice President. Neither Dr. Van
Bokkelen nor Dr. Harrington would be considered independent under the independence rules of the
NASDAQ Stock Market.
One of the requirements that the Company will have to meet in order for the Common Stock to be
listed on the NASDAQ Capital Market is that a majority of the members of the Company’s Board of
Directors will have to be independent. Additionally, the Company will also be required to have an
audit committee comprised of at least three members, all of whom must be independent.
Related Person Transaction Policy
We give careful attention to related person transactions because they may present the potential for
conflicts of interest. We refer to “related person transactions” as those transactions,
arrangements, or relationships in which:
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we were, are or are to be a participant;
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the amount involved exceeds $120,000; and
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any of our directors, director nominees, executive officers or greater-than five percent
shareholders (or any of their immediate family members) had or will have a direct or
indirect material interest.
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To identify related person transactions in advance, we rely on information supplied by our
executive officers, directors and certain significant stockholders. Although we currently do not
have a comprehensive written policy for the review, approval or ratification of related person
transactions, our Board of Directors reviews all related person transactions identified by us, and
memorializes its decisions in the written minutes of Board meetings. The Board of Directors
approves or ratifies only those related person transactions that are determined by the Board of
Directors to be, under all of the circumstances, in the best interest of our company and its
shareholders.
LEGAL PROCEEDINGS
From time to time, the Company may become involved in various investigations, claims and legal
proceedings that arise in the ordinary course of the Company’s business. These matters may relate
to intellectual property, employment, tax, regulation, contract or other matters. The resolution of
these matters as they arise will be subject to various uncertainties. As of the date of this
current report, Athersys is not a party to any material pending legal proceeding.
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Trading Market and Outstanding Equity
Prior to the Merger, BTHC VI was a shell company with no operations and no or nominal assets. BTHC
VI’s Common Stock is eligible for trading on the OTC Bulletin Board, although no trading took place
prior to the Merger because none of BTHC VI’s outstanding shares were able to be transferred under
the terms of BTHC VI’s bankruptcy plan until the Merger was consummated. Since the completion of
the Merger, there has been no established public trading market for our Common Stock. As soon as
reasonably practicable, once we satisfy all necessary listing requirements, we intend to apply to
list the Common Stock for trading on the NASDAQ Stock Market.
As a result of both the Merger and the Offering, we have 18,927,990 shares of Common Stock issued
and outstanding. Additionally, 5,125,496 shares of Common Stock are subject to outstanding
warrants to purchase our Common Stock. Of these warrant shares, 4,976,470 are subject to five-year
warrants to
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purchase shares of Common Stock at an exercise price of $6.00 per share, and 149,026
are subject to seven-year warrants with a cash or cashless exercise price of $5.00 per share. The five-year
warrants were issued as part of the Offering, to our placement agents, to holders of Athersys’ 10%
secured convertible promissory notes, and to our lead investor, Radius. The seven-year warrants
were issued to the lenders under our Senior Loan agreement.
Holders
As a result of both the Merger and the Offering, the number of holders of record at June 8, 2007
was approximately 938.
Dividends
All of our assets consist of the stock of Athersys. We would have to rely upon dividends and other
payments from Athersys to generate the funds necessary to make dividend payments, if any, on our
Common Stock. Athersys, however, is legally distinct from us and has no obligation to pay amounts
to us. The ability of Athersys to make dividend and other payments to us is subject to, among
other things, the availability of funds, the terms of our indebtedness and applicable state laws.
We do not anticipate that we will pay any dividends on our Common Stock in the foreseeable future.
Rather, we anticipate that we will retain earnings, if any, for use in the development of our
business.
Registration Rights
We intend to file a “resale” registration statement with the SEC covering all shares of Common
Stock issued in the Offering, including shares of Common Stock into which any warrants are
exercisable, no later than 45 days after June 8, 2007. We will use our best efforts to have such
“resale” registration statement declared effective by the SEC as soon as possible and, in any
event, within 90 days of the filing (or within five days after receipt of a no review letter from
the SEC), and to maintain its effectiveness until such time as all securities registered under the
registration statement have been sold or are otherwise able to be sold under Rule 144 of the
Securities Act without regard to volume limitations, whichever is earlier.
Prior to the Merger, Athersys entered into a registration rights agreement that provided demand and
“piggyback’’ registration rights to some of its stockholders, which rights are described below. As
a condition to the closing of the Offering, the holders: waived their demand rights until 180 days
after the effective date of the “resale” registration statement; and waived their “piggyback”
rights in connection with the filing of the “resale” registration statement.
“Piggyback’’ Rights
Former holders of shares of Athersys capital stock that now own 3,256,845 shares of Common Stock
are entitled to “piggyback’’ registration rights. If we propose to register any of our securities,
we will be obligated to provide to these holders notice of the registration and include, at our
expense, their shares of Common Stock in the registration, subject to certain limitations.
Demand Rights
Long-Form
Certain former holders of shares of Athersys capital stock that hold shares of Common Stock have
the right to require us to file a long-form registration statement under the Securities Act with
respect to shares of Common Stock owned by them. We will be required to use our reasonable best
efforts to effect the requested registration.
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Short-Form
Certain former holders of shares of Athersys capital stock that hold shares of Common Stock have
the right to require us to file a short-form registration statement under the Securities Act with
respect to shares of Common Stock owned by them, and we will be required to use our reasonable best
efforts to effect the requested registration; provided, that the reasonably anticipated price to
the public for those shares requested to be registered would have equal or exceed $500,000.
All of these registration rights are subject to various conditions and limitations, among them our
right to limit the number of shares included in a registration and our right to not effect a
requested registration (1) within 180 days after the effective date of an initial public offering,
(2) within 90 days after the effective date of a previous registration on a Form S-1 or (3) within
90 days after the effective date of a registration that included all shares requested by holders of
registrable shares. We will bear all of the expenses incurred in connection with all exercises of
these registration rights excluding discounts and commissions.
Shares Eligible for Future Sale
Of the 18,927,990 shares of Common Stock that we had issued and outstanding upon completion of the
Merger and the Offering, 299,622 shares of Common Stock will be freely tradeable without further
restriction or further registration under the Securities Act. The remaining 18,628,368 shares are
deemed to be “restricted securities” as that term is defined under Rule 144 promulgated under the
Securities Act (“Rule 144”). The “restricted” shares will not be registered under the Securities
Act and may be transferred only pursuant to a registration under the Securities Act or pursuant to
an available exemption from registration, such as Rule 144 under the Securities Act. Under Rule
144, restricted securities may be sold into the public market, subject to holding period, volume,
manner of sale, public information, filing and other limitations set forth under Rule 144. In
general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated)
who has beneficially owned restricted shares for at least one year, including any person who may be
deemed to be an “affiliate” of ours (
i.e.
, directors, officers and 10% stockholders), as defined
under the Securities Act, is entitled to sell, within any three-month period, an amount of shares
that together with all other sales of restricted securities of the same class (including, for
“affiliates,” sales of other non-restricted securities of the same class) does not exceed the
greater of:
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the average weekly trading volume of the Common Stock, as reported through the
automated quotation system of a registered securities association, during the four
calendar weeks preceding such sale; or
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1% of the shares then outstanding.
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In order for a stockholder to rely on Rule 144, we must have available adequate current public
information with respect to its business and financial status. A person who is not deemed to be an
affiliate and has not been an affiliate for the most recent three months, and who has held
restricted shares for at least two years would be entitled to sell such shares under Rule 144(k)
without regard to the various resale limitations of Rule 144.
Under Rule 144, the holding periods will commence as of the Effective Time for former Athersys
stockholders who received shares of Common Stock in the Merger. Sales under Rule 144 are also
subject to manner of sale provisions and notice requirements and to the availability of current
public information about the Company.
We intend to file a “resale” registration statement with the SEC covering all shares of Common
Stock issued in the Offering, including shares of Common Stock into which any warrants are
exercisable, no later than 45 days after June 8, 2007. We will use our best efforts to have such
“resale” registration
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statement declared effective by the SEC as soon as possible and, in any
event, within 90 days of the filing
(or within five days after receipt of a no review letter from the SEC), and to maintain its
effectiveness until such time as all securities registered under the registration statement have
been sold or are otherwise able to be sold under Rule 144 of the Securities Act without regard to
volume limitations, whichever is earlier.
RECENT SALES OF UNREGISTERED SECURITIES
For more information about unregistered sales of the Company’s securities, see Item 1.01 and
elsewhere in this Item 2.01 of this Current Report.
DESCRIPTION OF REGISTRANT’S CAPITAL STOCK
Common Stock
Holders of shares of Common Stock will be entitled to receive dividends if and when declared by the
Board of Directors from funds legally available therefor, and upon liquidation, dissolution or
winding-up of the Company will be entitled to share ratably in all assets remaining after payment
of liabilities. The holders of shares of Common Stock will not have any preemptive rights, but
will be entitled to one vote for each share of Common Stock held of record. Stockholders will not
have the right to cumulate their votes for the election of directors. The shares of Common Stock
offered hereby, when issued, will be fully paid and nonassessable.
Preferred Stock
Our Board of Directors is authorized, without action by our stockholders, to designate and issue up
to 10,000,000 shares of preferred stock, par value $0.001 per share, in one or more series. The
Board of Directors can fix the rights, preferences and privileges of the shares of each series and
any of its qualifications, limitations or restrictions. Our Board of Directors may authorize the
issuance of preferred stock with voting or conversion rights that could adversely affect the voting
power or other rights of the holders of Common Stock. The issuance of preferred stock, while
providing flexibility in connection with possible future financings, acquisitions and other
corporate purposes could, under certain circumstances, have the effect of delaying, deferring or
preventing a change in control of the Company and could adversely affect the market price of our
Common Stock. We do not have any shares of preferred stock outstanding, and we have no current
plans to issue any preferred stock.
Warrants
As of the closing of the Offering, we issued warrants to investors to acquire 3,750,000 shares of
Common Stock, warrants to the placement agents to acquire 1,093,525 shares of Common Stock,
warrants to the former holders of Athersys’ 10% secured convertible promissory notes to acquire
132,945 shares of Common Stock, and warrants to our senior secured lenders to acquire 149,026
shares of Common Stock, as further described below, for an aggregate of 5,125,496 shares of Common
Stock underlying such warrants.
Warrants
The warrants issued to investors have a cash exercise price of $6.00 per share and a term of five
years from the closing date of the Offering. Additionally, if at any time after the one-year
anniversary of the issuance of the Warrants there is no effective “resale” registration statement
for the Common Stock issuable upon exercise of the Warrants, then the Warrants provide for cashless
exercise. The shares of Common Stock issuable upon exercise of the Warrants will be afforded the
same registration rights as all other shares of Common Stock sold in the Offering.
Placement Agent Warrants
The warrants issued to the placement agents have a cash or cashless exercise price of $6.00 per
share and a term of five years from the closing date of the Offering. The shares of Common Stock
issuable upon
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exercise of the placement agents’ warrants will be afforded the same registration rights as all
other shares of Common Stock sold in the Offering.
Lead Investor Warrants
The warrants issued to the lead investor, Radius, have a cash or cashless exercise price of $6.00
per share and a term of five years from the closing date of the Offering. The shares of Common
Stock issuable upon exercise of the Radius warrants will be afforded the same registration rights
as all other shares of Common Stock sold in the Offering.
10% Secured Convertible Promissory Note Warrants
The warrants issued to the former holders of Athersys’ 10% secured convertible promissory notes
have a cash exercise price of $6.00 per share and a term of five years from the closing date of the
Offering. Additionally, if at any time after the one-year anniversary of the issuance of the
noteholder warrants there is no effective “resale” registration statement for the Common Stock
issuable upon exercise of the noteholder warrants, then the noteholder warrants will provide for
cashless exercise. The shares of Common Stock issuable upon exercise of the noteholder warrants
will be afforded the same registration rights as all other shares of Common Stock sold in the
Offering.
Lender Warrants
The warrants issued to the lenders under Athersys’ Senior Loan Agreement have a cash or cashless
exercise price of $5.00 per share and a term of seven years from the closing date of the Offering.
Delaware Anti-Takeover Law
We are subject to Section 203 of the General Corporation Law of the State of Delaware (“DGCL”).
Section 203 generally prohibits a public Delaware corporation from engaging in a “business
combination” with an “interested stockholder” for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless:
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prior to the date of the transaction, the board of directors of the corporation
approved either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
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the interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding (1) shares owned by persons who are
directors and also officers and (2) shares owned by employee stock plans in which
employee participants do not have the right to determine whether shares held subject to
the plan will be tendered in a tender or exchange offer; or
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on or subsequent to the date of the transaction, the business combination is
approved by the board and authorized at an annual or special meeting of stockholders,
and not by written consent, by the affirmative vote of at least 66-2/3% of the
outstanding voting stock that is not owned by the interested stockholder.
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Section 203 defines a business combination to include:
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any merger or consolidation involving the corporation and the interested stockholder;
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any sale, transfer, pledge or other disposition involving the interested stockholder
of 10% or more of the assets of the corporation;
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subject to exceptions, any transaction that results in the issuance or transfer by
the corporation of any stock of the corporation to the interested stockholder; and
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the receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits provided by or through the corporation.
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In general, Section 203 defines an interested stockholder as any entity or person beneficially
owning 15% or more of the outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by the entity or person.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Limitation of Liability and Indemnification Matters
Delaware law provides that directors of a company will not be personally liable for monetary
damages for breach of their fiduciary duty as directors, except for liabilities:
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for any breach of their duty of loyalty to the company or its stockholders;
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for acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law;
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for unlawful payment of dividend or unlawful stock repurchase or redemption, as
provided under Section 174 of the DGCL; or
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for any transaction from which the director derived an improper personal benefit.
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Our current amended certificate of incorporation requires us to indemnify, to the fullest extent
permitted by the DGCL, any and all persons we have the power to indemnify under the DGCL from and
against any and all expenses, liabilities or other matters covered by the DGCL. Additionally, our
current amended certificate of incorporation requires us to indemnify each of our directors and
officers in each and every situation where the DGCL permits or empowers us (but does not obligate
us) to provide such indemnification, subject to the provisions of our bylaws. Our bylaws require
us to indemnify our directors to the fullest extent permitted by the DGCL, and permit us, to the
extent authorized by the Board of Directors, to indemnify our officers and any other person we have
the power to indemnify against liability, reasonable expense or other matters.
Under our current amended certificate of incorporation, indemnification may be provided to
directors and officers acting in their official capacity, as well as in other capacities.
Indemnification will continue for persons who have ceased to be directors, officers, employees or
agents, and will inure to the benefit of their heirs, executors and administrators. Additionally,
under our current amended certificate of incorporation, except under certain circumstances, our
directors are not personally liable to us or our stockholders for monetary damages for breach of
fiduciary duty as a director.
Insofar as the indemnification for liabilities arising under the Securities Act may be permitted to
directors, officers and controlling persons pursuant to the foregoing or otherwise, we have been
advised that, in the opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Previous Independent Accountants.
On June 11, 2007, BTHC VI dismissed S.W. Hatfield, CPA as its independent accountant. The reports
of S.W. Hatfield, CPA on the financial statements of BTHC VI for each of the past two fiscal years
contained no adverse opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles.
The decision to change independent accountants was approved by the Audit Committee of BTHC VI’s
Board of Directors on June 12, 2007.
During BTHC VI’s two most recent fiscal years and through the date of this Current Report on Form
8-K, BTHC VI has had no disagreements with S.W. Hatfield, CPA on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of S.W. Hatfield, CPA, would have caused it to
make reference to the subject matter of such disagreements in its report on the financial
statements of BTHC VI for such periods.
During BTHC VI’s two most recent fiscal years and through the date of this Current Report on Form
8-K, there were no reportable events as defined under Item 304(a)(1)(v) of Regulation S-K adopted
by the SEC.
BTHC VI has provided S.W. Hatfield, CPA with a copy of this disclosure before its filing with the
SEC. BTHC VI has requested the S.W. Hatfield, CPA furnish it with a letter addressed to the SEC
stating whether it agrees with the above statements. A copy of such letter, dated June 11, 2007,
is filed as Exhibit 16.1 to this Current Report on Form 8-K.
New Independent Accountants.
The Audit Committee of BTHC VI’s Board of Directors appointed Ernst & Young, LLP (“Ernst & Young”)
as its new independent registered public accounting firm as of June 12, 2007. During the two most
recent fiscal years and through the date of Ernst & Young’s engagement by BTHC VI, BTHC VI did not
consult Ernst & Young regarding either (1) the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that might be rendered on
BTHC VI’s financial statements, or (2) any matter that was either the subject of a disagreement (as
defined in Regulation S-K Item 304(a)(1)(iv) and the related instructions to Item 304) or a
reportable event (as defined in Regulation S-K Item 304(a)(1)(v)). Ernst & Young served as
Athersys’ independent registered public accounting firm before the Merger.
FINANCIAL STATEMENTS AND EXHIBITS
See Item 9.01 of this Current Report.
Item 3.02. Unregistered Sale of Equity Securities.
See Item 1.01 and Item 2.01 of this Current Report, which are incorporated herein by reference.
Item 3.03. Material Modification to Rights of Security Holders.
See Item 1.01 and Item 2.01 of this Current Report, which are incorporated herein by reference.
Item 4.01. Changes in Registrant’s Certifying Accountant.
See Item 2.01 of this Current Report, which is incorporated herein by reference.
Item 5.01. Changes in Control of Registrant.
See Item 1.01 and Item 2.01 of this Current Report, which are incorporated herein by reference.
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Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain
Officers.
See Item 2.01 of this Current Report, which is incorporated herein by reference.
Item 5.03. Amendments to Articles of Incorporation of Bylaws; Change in Fiscal Year.
On June 8, 2007, the Board of Directors of BTHC VI adopted, effective as of June 8, 2007, amended
Bylaws for BTHC VI. Apart from non-substantive language and other technical edits, the Bylaws of
BTHC VI (which were last adopted as of April 10, 2006) were amended by BTHC VI to:
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mandate the election of a Chief Executive Officer of BTHC VI;
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(ii)
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establish the duties and powers of the Chief Executive Officer, which consist
of: (A) general charge and supervision of BTHC VI’s business; (B) the exercise and
performance of all duties incident to the office of Chief Executive Officer; (C) the
direct supervision of BTHC VI’s other officers; (D) the exercise and performance of all
powers and duties assigned to the Chief Executive Officer by the board of directors of
BTHC VI; (E) the exercise of the powers and performance of the duties of the President
of BTHC VI during the President’s absence or disability; and (F) supervise the
Secretary of BTHC VI;
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(iii)
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remove the authority of the Chairman of the board of directors of BTHC VI to:
(A) sign all certificates, contracts and other instruments of BTHC VI; and (B) exercise
the powers and perform the duties of the President of BTHC VI during the President’s
absence or disability;
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(iv)
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permit the Chief Executive Officer of BTHC VI to, among other things: (A)
call, under certain circumstances, stockholders’ special meetings; (B) direct the
delivery to stockholders of notice of stockholder meetings; (C) call, under certain
circumstances, special meetings of the board of directors of BTHC VI; and (D) delegate
powers and duties to the President, Secretary, Treasurer, Vice Presidents, Assistant
Secretaries and Assistant Treasurers of BTHC VI from time to time; (E) sign stock
certificates of BTHC VI; and (F) accept written notices of resignation from any
director, officer or agent of BTHC VI;
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(v)
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eliminate reference to BTHC VI’s certificate of incorporation to determine the
size of the first board of directors of BTHC VI;
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(vi)
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permit committees of the board of directors of BTHC VI to consist of a minimum
of one (rather than two) directors, and eliminating the requirement that committees of
the board of directors of BTHC VI consist of at least a majority of employee directors;
and
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(vii)
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remove the authority of the President of BTHC VI to: (A) act as the Chief
Executive Officer of BTHC VI; and (B) supervise and control BTHC VI’s business and
affairs.
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The foregoing is a brief description of the material amendments to the Bylaws of BTHC VI and is
qualified in its entirety by reference to the full text of the Revised Bylaws. This description
should be read in conjunction with the amended Bylaws, a copy of which is filed herewith as Exhibit
3.2 and is incorporated herein by reference.
Item 5.06. Change in Shell Company Status.
As a result of the consummation of the Merger described in Items 1.01 and 2.01 of this Current
Report, we believe that the Company is no longer a shell corporation, as that term is defined in
Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act.
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Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
In accordance with Item 9.01(a), Athersys’ audited financial statements for the fiscal years
ended December 31, 2006, 2005 and 2004 and unaudited financial statements for the three months ended March 31, 2007
and 2006 are filed with this Current Report as Exhibit 99.1 and Exhibit 99.2, respectively.
(b) Pro Forma Financial Information.
In accordance with Item 9.01(b), filed herewith as Exhibit 99.3 are the pro forma consolidated financial
statements of Athersys and BTHC VI for the requisite periods.
(d) Exhibits
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Exhibit No.
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Description
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2.1
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Agreement and Plan of Merger, dated as of May 24, 2007, by and among
Athersys, Inc., BTHC VI, Inc. and B-VI Acquisition Corp. (incorporated
herein by reference to Exhibit 10.1 to Registrant’s Current Report on
Form 8-K (Commission No. 000-52108) filed with the SEC on May 24, 2007)
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2.2
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First Amendment to Agreement and Plan of Merger, dated as of June 8,
2007, by and among Athersys, Inc., BTHC VI, Inc. and B-VI Acquisition
Corp.
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3.1
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Certificate of Incorporation of BTHC VI, Inc., last amended June 1, 2007
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3.2
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Bylaws of BTHC VI, Inc., dated as of June 8, 2007
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4.1
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Form of Investor Warrant
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4.2
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Form of Lead Investor Warrant
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4.3
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Form of Placement Agent Warrant
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4.4
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Form of Lender Warrant
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10.1 *
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Research Collaboration and License Agreement, dated as of December 8,
2000, by and between Athersys, Inc. and Bristol-Myers Squibb Company
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10.2 *
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Cell Line Collaboration and License Agreement, dated as of July 1,
2002, by and between Athersys, Inc. and Bristol-Myers Squibb Company
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10.3 *
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Extended Collaboration and License Agreement, dated as of January 1,
2006, by and between Athersys, Inc. and Bristol-Myers Squibb Company
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10.4
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License Agreement, effective as of May 5, 2006, by and between
Athersys, Inc. and Angiotech Pharmaceuticals, Inc.
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10.5
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Sublicense Agreement, effective as of May 5, 2006, by and between
Athersys, Inc. and Angiotech Pharmaceuticals, Inc.
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10.6
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Amended and Restated Registration Rights Agreement, dated as of April
28, 2000, by and among Athersys, Inc. and the stockholders of Athersys,
Inc. parties thereto
|
73
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
|
|
10.7
|
|
Amendment No. 1 to Athersys, Inc. Amended and Restated
Registration Rights Agreement, dated as of January 29,
2002, by and among Athersys, Inc., the New Stockholders,
the Investors, Biotech and the Stockholders (each as
defined in the Amended and Restated Registration Rights
Agreement, dated as April 28, 2000, by and among
Athersys, Inc. and the stockholders of Athersys, Inc.
parties thereto)
|
|
|
|
|
|
10.8
|
|
Amendment No. 2 to Athersys, Inc. Amended and Restated
Registration Rights Agreement, dated as of November 19,
2002, by and among Athersys, Inc., the New Stockholders,
the Investors, Biotech and the Stockholders (each as
defined in the Amended and Restated Registration Rights
Agreement, dated as April 28, 2000, as amended, by and
among Athersys, Inc. and the stockholders of Athersys,
Inc. parties thereto)
|
|
|
|
|
|
10.9
|
|
Amendment No. 3 to Amended and Restated Registration
Rights Agreement, dated as of May 15, 2007, by and among
Athersys, Inc. and the Existing Stockholders (as defined
therein)
|
|
|
|
|
|
10.10
|
|
BTHC VI, Inc. Long-Term Incentive Plan
|
|
|
|
|
|
10.11
|
|
BTHC VI, Inc. Equity Incentive Compensation Plan
|
|
|
|
|
|
10.12
|
|
Loan and Security Agreement, and Supplement, dated as of
November 2, 2004, by and among Athersys, Inc., Advanced
Biotherapeutics, Inc., Venture Lending & Leasing IV,
Inc., and Costella Kirsch IV, L.P.
|
|
|
|
|
|
10.13
|
|
Amendment to Loan and Security Agreement, dated as of
September 29, 2006, by and among Athersys, Inc., Advanced
Biotherapeutics, Inc., Venture Lending & Leasing IV,
Inc., and Costella Kirsch IV, L.P.
|
|
|
|
|
|
10.14
|
|
Amended and Restated Employment Agreement, dated as of
December 1, 1998 but effective as of April 1, 1998, by
and between Athersys, Inc. and Dr. Gil Van Bokkelen
|
|
|
|
|
|
10.15
|
|
Amendment No. 1 to Amended and Restated Employment
Agreement, dated as of May 31, 2007, by and between
Advanced Biotherapeutics, Inc. and Gil Van Bokkelen
|
|
|
|
|
|
10.16
|
|
Non-Competition and Confidentiality Agreement, dated as
of December 1, 1998, by and between Athersys, Inc. and
Dr. Gil Van Bokkelen
|
|
|
|
|
|
10.17
|
|
Amended and Restated Employment Agreement, dated as of
December 1, 1998 but effective as of April 1, 1998, by
and between Athersys, Inc. and Dr. John J. Harrington
|
|
|
|
|
|
10.18
|
|
Amendment No. 1 to Amended and Restated Employment
Agreement, dated as of May 31, 2007, by and between
Advanced Biotherapeutics, Inc. and John Harrington
|
|
|
|
|
|
10.19
|
|
Non-Competition and Confidentiality Agreement, dated as
of December 1, 1998, by and between Athersys, Inc. and
Dr. John J. Harrington
|
|
|
|
|
|
10.20
|
|
Employment Agreement, dated as of May 22, 1998, by and
between Athersys, Inc. and Laura K. Campbell
|
|
|
|
|
|
10.21
|
|
Amendment No. 1 to Employment Agreement, dated as of May
31, 2007, by and between Advanced Biotherapeutics, Inc.
and Laura Campbell
|
|
|
|
|
|
10.22
|
|
Employment Agreement, dated as of September 25, 2000, by
and between Advanced Biotherapeutics, Inc. and Kurt
Brunden
|
74
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
|
|
10.23
|
|
Amendment No. 1 to Employment Agreement, dated as of May 31,
2007, by and between Advanced Biotherapeutics, Inc. and Kurt
Brunden
|
|
|
|
|
|
10.24
|
|
Non-Competition and Confidentiality Agreement, dated as of
September 25, 2000, by and among Athersys, Inc., Advanced
Biotherapeutics, Inc. and Kurt Brunden
|
|
|
|
|
|
10.25
|
|
Employment Agreement, dated as of October 3, 2003, by and
between Advanced Biotherapeutics, Inc. and Robert Deans,
Ph.D.
|
|
|
|
|
|
10.26
|
|
Amendment No. 1 to Employment Agreement, dated as of May 31,
2007, by and between Advanced Biotherapeutics, Inc. and
Robert Deans
|
|
|
|
|
|
10.27
|
|
Non-Competition and Confidentiality Agreement, dated as of
October 3, 2003, by and among Athersys, Inc., Advanced
Biotherapeutics, Inc. and Robert Deans
|
|
|
|
|
|
10.28
|
|
Employment Agreement, dated as of January 1, 2004, by and
between Advanced Biotherapeutics, Inc. and William Lehmann
|
|
|
|
|
|
10.29
|
|
Amendment No. 1 to Employment Agreement, dated as of May 31,
2007, by and between Advanced Biotherapeutics, Inc. and
William Lehmann
|
|
|
|
|
|
10.30
|
|
Non-Competition and Confidentiality Agreement, dated as of
September 10, 2001, by and among Athersys, Inc., Advanced
Biotherapeutics, Inc. and William Lehmann
|
|
|
|
|
|
10.31
|
|
Form Incentive Agreement by and between
Advanced Biotherapeutics, Inc. and named executive officers,
and acknowledged by Athersys, Inc. and ReGenesys, LLC
|
|
|
|
|
|
10.32
|
|
Form Amendment No. 1 to Incentive Agreement by and between
Advanced Biotherapeutics, Inc. and named executive officers,
and acknowledged by Athersys, Inc. and ReGenesys, LLC
|
|
|
|
|
|
10.33
|
|
Securities Purchase Agreement, dated as of June 8, 2007, by
and among Athersys, BTHC VI, Inc. and Investors (as defined
therein)
|
|
|
|
|
|
10.34 *
|
|
Exclusive License Agreement, dated as of May 17, 2002, by
and between Regents of the University of Minnesota and MCL
LLC, assumed by ReGenesys, LLC through operation of merger
on November 4, 2003
|
|
|
|
|
|
10.35 *
|
|
Strategic Alliance Agreement, by and between Athersys, Inc.
and Angiotech Pharmaceuticals, Inc., dated as of May 5, 2006
|
|
|
|
|
|
10.36
|
|
Amendment No. 1 to Cell Line
Collaboration and License Agreement, dated as of January 1,
2006, by and between Athersys, Inc. and Bristol-Myers Squibb Company
|
|
|
|
|
|
16.1
|
|
Letter from S. W. Hatfield, CPA, dated June 11, 2007
|
|
|
|
|
|
21.1
|
|
List of Subsidiaries
|
|
|
|
|
|
99.1
|
|
Consolidated Audited Financial Statements of Athersys, Inc.
|
|
|
|
|
|
99.2
|
|
Unaudited Financial Statements of Athersys, Inc.
|
|
|
|
|
|
99.3
|
|
Pro Forma Consolidated Financial Statements of Athersys, Inc. and BTHC VI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
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.
|
75
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: June 14, 2007
|
|
|
|
|
|
|
|
BTHC VI, INC.
|
|
|
|
By:
|
/s/ Dr. Gil Van Bokkelen
|
|
|
|
|
Name:
|
Dr. Gil Van Bokkelen
|
|
|
|
|
Title:
|
Chief Executive Officer
|
|
EXHIBIT INDEX
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
2.1
|
|
Agreement and Plan of Merger, dated as of May 24, 2007, by and among
Athersys, Inc., BTHC VI, Inc. and B-VI Acquisition Corp. (incorporated
herein by reference to Exhibit 10.1 to Registrant’s Current Report on
Form 8-K (Commission No. 000-52108) filed with the SEC on May 24, 2007)
|
|
|
|
|
|
2.2
|
|
First Amendment to Agreement and Plan of Merger, dated as of June 8,
2007, by and among Athersys, Inc., BTHC VI, Inc. and B-VI Acquisition
Corp.
|
|
|
|
|
|
3.1
|
|
Certificate of Incorporation of BTHC VI, Inc., last amended June 1, 2007
|
|
|
|
|
|
3.2
|
|
Bylaws of BTHC VI, Inc., dated as of June 8, 2007
|
|
|
|
|
|
4.1
|
|
Form of Investor Warrant
|
|
|
|
|
|
4.2
|
|
Form of Lead Investor Warrant
|
|
|
|
|
|
4.3
|
|
Form of Placement Agent Warrant
|
|
|
|
|
|
4.4
|
|
Form of Lender Warrant
|
|
|
|
|
|
10.1 *
|
|
Research Collaboration and License Agreement, dated as of December 8,
2000, by and between Athersys, Inc. and Bristol-Myers Squibb Company
|
|
|
|
|
|
10.2 *
|
|
Cell Line Collaboration and License Agreement, dated as of July 1,
2002, by and between Athersys, Inc. and Bristol-Myers Squibb Company
|
|
|
|
|
|
10.3 *
|
|
Extended Collaboration and License Agreement, dated as of January 1,
2006, by and between Athersys, Inc. and Bristol-Myers Squibb Company
|
|
|
|
|
|
10.4
|
|
License Agreement, effective as of May 5, 2006, by and between
Athersys, Inc. and Angiotech Pharmaceuticals, Inc.
|
|
|
|
|
|
10.5
|
|
Sublicense Agreement, effective as of May 5, 2006, by and between
Athersys, Inc. and Angiotech Pharmaceuticals, Inc.
|
|
|
|
|
|
10.6
|
|
Amended and Restated Registration Rights Agreement, dated as of April
28, 2000, by and among Athersys, Inc. and the stockholders of Athersys,
Inc. parties thereto
|
|
|
|
|
|
10.7
|
|
Amendment No. 1 to Athersys, Inc. Amended and Restated Registration
Rights Agreement, dated as of January 29, 2002, by and among Athersys,
Inc., the New Stockholders, the Investors, Biotech and the Stockholders
(each as defined in the Amended and Restated Registration Rights
Agreement, dated as April 28, 2000, by and among Athersys, Inc. and the
stockholders of Athersys, Inc. parties thereto)
|
|
|
|
|
|
10.8
|
|
Amendment No. 2 to Athersys, Inc. Amended and Restated Registration
Rights Agreement, dated as of November 19, 2002, by and among Athersys,
Inc., the New Stockholders, the Investors, Biotech and the Stockholders
(each as defined in the Amended and Restated Registration Rights
Agreement, dated as April 28, 2000, as amended, by and among Athersys,
Inc. and the stockholders of Athersys, Inc. parties thereto)
|
EXHIBIT INDEX (CONTINUED)
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
10.9
|
|
Amendment No. 3 to Amended and Restated Registration Rights
Agreement, dated as of May 15, 2007, by and among Athersys,
Inc. and the Existing Stockholders (as defined therein)
|
|
|
|
|
|
10.10
|
|
BTHC VI, Inc. Long-Term Incentive Plan
|
|
|
|
|
|
10.11
|
|
BTHC VI, Inc. Equity Incentive Compensation Plan
|
|
|
|
|
|
10.12
|
|
Loan and Security Agreement, and Supplement, dated as of
November 2, 2004, by and among Athersys, Inc., Advanced
Biotherapeutics, Inc., Venture Lending & Leasing IV, Inc., and
Costella Kirsch IV, L.P.
|
|
|
|
|
|
10.13
|
|
Amendment to Loan and Security Agreement, dated as of
September 29, 2006, by and among Athersys, Inc., Advanced
Biotherapeutics, Inc., Venture Lending & Leasing IV, Inc., and
Costella Kirsch IV, L.P.
|
|
|
|
|
|
10.14
|
|
Amended and Restated Employment Agreement, dated as of
December 1, 1998 but effective as of April 1, 1998, by and
between Athersys, Inc. and Dr. Gil Van Bokkelen
|
|
|
|
|
|
10.15
|
|
Amendment No. 1 to Amended and Restated Employment Agreement,
dated as of May 31, 2007, by and between Advanced
Biotherapeutics, Inc. and Gil Van Bokkelen
|
|
|
|
|
|
10.16
|
|
Non-Competition and Confidentiality Agreement, dated as of
December 1, 1998, by and between Athersys, Inc. and Dr. Gil
Van Bokkelen
|
|
|
|
|
|
10.17
|
|
Amended and Restated Employment Agreement, dated as of
December 1, 1998 but effective as of April 1, 1998, by and
between Athersys, Inc. and Dr. John J. Harrington
|
|
|
|
|
|
10.18
|
|
Amendment No. 1 to Amended and Restated Employment Agreement,
dated as of May 31, 2007, by and between Advanced
Biotherapeutics, Inc. and John Harrington
|
|
|
|
|
|
10.19
|
|
Non-Competition and Confidentiality Agreement, dated as of
December 1, 1998, by and between Athersys, Inc. and Dr. John
J. Harrington
|
|
|
|
|
|
10.20
|
|
Employment Agreement, dated as of May 22, 1998, by and between
Athersys, Inc. and Laura K. Campbell
|
|
|
|
|
|
10.21
|
|
Amendment No. 1 to Employment Agreement, dated as of May 31,
2007, by and between Advanced Biotherapeutics, Inc. and Laura
Campbell
|
|
|
|
|
|
10.22
|
|
Employment Agreement, dated as of September 25, 2000, by and
between Advanced Biotherapeutics, Inc. and Kurt Brunden
|
|
|
|
|
|
10.23
|
|
Amendment No. 1 to Employment Agreement, dated as of May 31,
2007, by and between Advanced Biotherapeutics, Inc. and Kurt
Brunden
|
|
|
|
|
|
10.24
|
|
Non-Competition and Confidentiality Agreement, dated as of
September 25, 2000, by and among Athersys, Inc., Advanced
Biotherapeutics, Inc. and Kurt Brunden
|
|
|
|
|
|
10.25
|
|
Employment Agreement, dated as of October 3, 2003, by and
between Advanced Biotherapeutics, Inc. and Robert Deans, Ph.D.
|
|
|
|
|
|
10.26
|
|
Amendment No. 1 to Employment Agreement, dated as of May 31,
2007, by and between Advanced Biotherapeutics, Inc. and Robert
Deans
|
EXHIBIT INDEX (CONTINUED)
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
10.27
|
|
Non-Competition and Confidentiality Agreement, dated as of
October 3, 2003, by and among Athersys, Inc., Advanced
Biotherapeutics, Inc. and Robert Deans
|
|
|
|
|
|
10.28
|
|
Employment Agreement, dated as of January 1, 2004, by and
between Advanced Biotherapeutics, Inc. and William Lehmann
|
|
|
|
|
|
10.29
|
|
Amendment No. 1 to Employment Agreement, dated as of May 31,
2007, by and between Advanced Biotherapeutics, Inc. and
William Lehmann
|
|
|
|
|
|
10.30
|
|
Non-Competition and Confidentiality Agreement, dated as of
September 10, 2001, by and among Athersys, Inc., Advanced
Biotherapeutics, Inc. and William Lehmann
|
|
|
|
|
|
10.31
|
|
Form Incentive Agreement by and between
Advanced Biotherapeutics, Inc. and named executive officers,
and acknowledged by Athersys, Inc. and ReGenesys, LLC
|
|
|
|
|
|
10.32
|
|
Form Amendment No. 1 to Incentive Agreement by and between
Advanced Biotherapeutics, Inc. and named executive officers,
and acknowledged by Athersys, Inc. and ReGenesys, LLC
|
|
|
|
|
|
10.33
|
|
Securities Purchase Agreement, dated as of June 8, 2007, by
and among Athersys, BTHC VI, Inc. and Investors (as defined
therein)
|
|
|
|
|
|
10.34 *
|
|
Exclusive License Agreement, dated as of May 17, 2002, by and
between Regents of the University of Minnesota and MCL LLC,
assumed by ReGenesys, LLC through operation of merger on
November 4, 2003
|
|
|
|
|
|
10.35 *
|
|
Strategic Alliance Agreement, by and between Athersys, Inc.
and Angiotech Pharmaceuticals, Inc., dated as of May 5, 2006
|
|
|
|
|
|
10.36
|
|
Amendment No. 1 to Cell Line Collaboration and License
Agreement, dated as of January 1, 2006, by and between Athersys, Inc.
and Bristol-Myers Squibb Company
|
|
|
|
|
|
16.1
|
|
Letter from S. W. Hatfield, CPA, dated June 11, 2007
|
|
|
|
|
|
21.1
|
|
List of Subsidiaries
|
|
|
|
|
|
99.1
|
|
Consolidated Audited Financial Statements of Athersys, Inc.
|
|
|
|
|
|
99.2
|
|
Unaudited Financial Statements of Athersys, Inc.
|
|
|
|
|
|
99.3
|
|
Pro Forma Consolidated Financial Statements of Athersys, Inc. and BTHC VI
|
|
|
|
|
|
*
|
|
Confidential treatment has been requested for the redacted portions of this exhibit, and
such confidential portions have been omitted and filed separately with the Securities and
Exchange Commission.
|
EXHIBIT 10.1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE
REDACTED PORTIONS OF THIS EXHIBIT, AND SUCH CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
RESEARCH COLLABORATION AND LICENSE AGREEMENT
This Research Collaboration and License Agreement
(the “Agreement”) is made and
entered into as of December 8, 2000 (the “Effective Date”) by and between
Athersys, Inc.
, a Delaware corporation having its principal offices at 3201 Carnegie
Avenue, Cleveland, Ohio 44115 (“Athersys”), and
Bristol-Myers Squibb Company
, a Delaware
corporation having offices at Route 206 and Province Line Road, Princeton, New Jersey 08543
(“BMS”). Athersys and BMS may be referred to herein individually as a “Party” and collectively as
the “Parties.”
Recitals
A.
Athersys has developed and owns technology and intellectual property rights relating to
methods for activating gene or protein expression in cells, referred to by Athersys as the Random
Activation of Gene Expression or RAGE technology, which includes the RAGE-VT technology useful for
creating cell lines that express particular desired proteins.
B.
BMS desires to engage Athersys to create certain such cell lines, using the RAGE-VT
technology, each of which expresses a specific cell surface or cellular protein of interest to BMS,
and to obtain license rights to use such cell lines for internal research, development and
commercialization of pharmaceutical products.
C.
Athersys is willing to create and provide BMS with the desired cell lines pursuant to the
terms of this Agreement.
Now, Therefore
, in consideration of the foregoing and the covenants and promises
contained in this Agreement, the Parties agree as follows:
1.
Definitions
As used herein, the following capitalized terms shall have the following meanings (with terms
defined in the singular having the same meanings when used in the plural):
1.1 “Accepted Cell Line”
shall have the meaning assigned to such term in Section 2.3.
1.2 “Affiliate”
shall mean, with respect to a Party, any corporation or other entity that,
directly or indirectly, controls, is controlled by or is under the common control with such Party.
For the purpose of this definition, “control” shall mean (a) the direct or indirect ownership of
fifty percent (50%) or more of the outstanding shares or other voting rights of the subject entity
to elect directors, or (b) if such amount of ownership of a foreign entity is not permitted by law,
ownership of the maximum amount of such entity as permitted by law, or (c) the actual ability to
control and direct the management of the subject entity.
1.3 “Athersys Know How”
shall mean the Information that is Controlled by Athersys during the
term of this Agreement and relates directly to Collaboration Cell Lines, but excluding Athersys
Patents.
1
1.4 “Athersys Patents”
shall mean all Patents that are Controlled by Athersys during the term
of the Agreement and contain a Valid Claim covering a Collaboration Cell Line or its method of
manufacture or use in the Field.
1.5 “Athersys Technology”
shall mean the Athersys Know-How and Athersys Patents collectively.
1.6 “Candidate Compound”
shall mean:
(a)
any compound that has activity, with respect to the target protein expressed by the
applicable Accepted Cell Line, initially discovered or detected by using an Accepted Cell Line or
materials or assays derived from an Accepted Cell Line, where such activity is potentially useful
for therapeutic or prophylactic use, or
(b)
any compound that is an analog, homolog, isomer or other chemical derivative of a compound
that meets the criteria in subsection (a) above (the “Parent Compound”), provided that such
compound (i) was made by or on behalf of BMS or its Affiliate or sublicensee based on information
relating to the Parent Compound, and (ii) has activity that is potentially useful for therapeutic
or prophylactic use and is similar or related to the activity of such Parent Compound (with the
understanding that such activity may be superior to the activity of the Parent Compound, in any
appropriate criteria).
1.7 “Collaboration Cell Line”
shall mean any cell line made by Athersys pursuant to its work
under this Agreement using the RAGE Technology.
1.8 “Confidential Information”
shall mean (a) any proprietary or confidential information or
material of a Party in tangible form disclosed hereunder that is (i) marked as “Confidential” at
the time it is delivered to the receiving Party, or (ii) designated as confidential or proprietary
in a written memorandum provided to the receiving Party by the disclosing Party within thirty (30)
days of such disclosure, or (b) any proprietary or confidential information of a Party disclosed
orally hereunder that is identified as confidential or proprietary when disclosed and designated as
confidential or proprietary in a written memorandum provided to the receiving Party by the
disclosing Party within thirty (30) days of such oral disclosure by the disclosing Party. Further,
it is agreed that if Athersys discloses to BMS that it is working on a particular protein or gene
target, such information shall be treated by BMS as the Confidential Information of Athersys.
Still further, it is agreed that Athersys shall treat the fact that BMS has nominated a specific
target under Section 2.1 (and/or Section 2.5, as the case may be) and the fact that Athersys has
provided BMS with a corresponding Collaboration Cell Line under Section 2.2 as Confidential
Information of BMS.
1.9 “Controlled”
shall mean, with respect to any material, Information or intellectual
property right, that a Party owns or has a license to such
material, Information or intellectual property right and has the ability to grant to the other
Party the licenses or sublicenses thereto as provided for herein without violating the terms of any
agreement with any Third Party.
1.10 “Field”
shall mean use of the Accepted Cell Lines by BMS solely for BMS’s internal
discovery, research, development and/or commercialization of Products. For the avoidance of doubt,
subject to Section 3.5(b), the Field shall include BMS’s use of the Accepted
2
Cell Lines in
connection with any bona fide collaboration between BMS and an academic and/or corporate
collaborator, provided that any compounds initially discovered or detected pursuant to such
collaboration by using an Accepted Cell Line or materials or assays derived from an Accepted Cell
Line shall be deemed to be Candidate Compounds.
1.11 “Improvement”
shall mean any improvement, modification or enhancement to the Athersys
Know-How or Athersys Patents or to the Accepted Cell Lines, and any Information relating thereto
that the possessing Party has the right to disclose to the other Party without violating
contractual obligations to a Third Party. Furthermore, any Improvement that can be practiced or
has utility solely in connection with one or more Accepted Cell Lines and/or the Athersys Know-How
or Athersys Patents (but, as to the latter, only to the extent that such Athersys Patent covers a
particular Accepted Cell Line) shall be referred to as a “Specific Improvement,” and any other
Improvement shall be referred to as a “General Improvement.”
1.12 “Information”
shall mean information, results and/or data of any type whatsoever, in any
tangible or intangible form, including without limitation databases, inventions, practices,
methods, techniques, specifications, formulations, formulae, knowledge, know-how, skill,
experience, test data including pharmacological, biological, chemical, biochemical, toxicological
and clinical test data, analytical and quality control data, stability data, studies and
procedures, and patent and other legal information or descriptions.
1.13 “License”
shall have the meaning assigned to it in Section 3.2.
1.14 “Net Sales”
shall mean the amount invoiced or otherwise billed by BMS or its Affiliate or
licensee for sales or other commercial disposition of a Product to a Third Party purchaser, less
the following to the extent included in such billing or otherwise actually allowed or incurred with
respect to such sales: (i) discounts, including cash, trade and quantity discounts, price reduction
programs, retroactive price adjustments with respect to sales of a product, charge-back payments
and rebates granted to managed health care organizations or to federal, state and local governments
(or their respective agencies, purchasers and reimbursers) or to trade customers, including but not
limited to, wholesalers and chain and pharmacy buying groups; (ii) credits or allowances actually
granted upon rejections or returns of Products, including for recalls or damaged goods; (iii)
freight, postage, shipping and insurance charges actually allowed or paid for delivery of Products,
to the extent billed; (iv) customs duties, tariffs, surcharges and other governmental charges
incurred in connection with the exportation or importation of a Product; (v) bad debts relating to
sales of Products that are actually written off by BMS in accordance with generally accepted
accounting
principles, consistently applied, during the applicable royalty calculation period, and (vi)
taxes, duties or other governmental charges levied on, absorbed or otherwise imposed on sale of
Products, including without limitation value-added taxes, or other governmental charges otherwise
measured by the billing amount, when included in billing, as adjusted for rebates and refunds, but
specifically excluding taxes based on net income of the seller; provided that all of the foregoing
deductions are calculated in accordance with generally accepted accounting principles consistently
applied throughout the party’s organization.
Notwithstanding the foregoing, if any Product is sold under a bundled or capitated arrangement with
other BMS products, then, solely for the purpose of calculating Net Sales for royalty purposes
hereunder, any discount on such Product sold under such an arrangement shall be no
3
greater, on a
percentage basis based on the gross selling price prior to discount, than the largest percentage
discount applied on the other pharmaceutical products sold within such bundled arrangement for the
applicable accounting period. In case of any dispute as to the applicable discount numbers under
the preceding sentence, the determination of same shall be calculated and certified by BMS’
independent public accountants, whose decision shall be binding.
A sale of a Product is deemed to occur upon the earliest of invoicing or transfer of title in the
Product to the Third Party purchaser. In the event that BMS, after reasonable efforts, cannot
calculate accurately the Net Sales of a sublicensee in a particular country, the Parties will meet
and negotiate in good faith an appropriate means for calculating “Net Sales” in such a situation.
For sake of clarity and avoidance of doubt, sales by BMS, its Affiliates or sublicensees of a
Product to a Third Party distributor of such Product in a given country shall be considered sales
to a Third Party customer, but sales and/or transfers of a Product between or among BMS, its
Affiliates or sublicensees shall not be considered sales to a Third Party customer, so long as such
recipient subsequently resells the Product. Any Products used (but not sold for consideration) for
promotional or advertising purposes or used for clinical or other research purposes shall not be
considered in determining Net Sales hereunder.
In the event a Product is sold as an end-user product consisting of a combination of active
functional elements or as a combined product and/or service, Net Sales, for purposes of determining
royalty payments on such Product, shall be calculated by multiplying the Net Sales of the end-user
product and/or service by the fraction A over A+B, in which A is the gross selling price of the
Product portion of the end-user product and/or service when such Product is sold separately during
the applicable accounting period in which the sales of the end-user product were made, and B is the
gross selling price of the other active elements and/or service, as the case may be, of the
end-user product and/or service sold separately during the accounting period in question. All
gross selling prices of the elements of such end-user product and/or service shall be calculated as
the average gross selling price of the said elements during the applicable accounting period for
which the Net Sales are being calculated. In the event that, in any country or countries, no
separate sale of either such above-designated Product or such above designated elements of the
end-user product and/or service are made during the accounting period in which the sale was made or
if gross retail selling price for an active functional element, component or service, as the case
may be, cannot be determined for an accounting period, Net Sales allocable to the Product in each
such country shall be determined by mutual agreement reached in good faith by the Parties prior to
the end of the accounting period in question based on
an equitable method of determining same that takes into account, on a country by country basis,
variations in potency, the relative contribution of each active agent, component or service, as the
case may be, in the combination, and relative value to the end user of each active agent, component
or service, as the case may be.
Notwithstanding the foregoing, it is agreed that drug delivery vehicles, adjuvants, and excipients
shall not be deemed to be “active ingredients” or “active functional elements,” the presence of
which in a Product would be deemed to create a combination product subject to the terms of the
preceding paragraph.
4
1.15 “Patents”
shall mean all issued United States and foreign patents (including all
reissues, extensions, renewals, substitutions, re-examinations, supplementary protection
certificates and the like, and patents of addition) and pending United States and foreign patent
applications (including, without limitation, all provisional and nonprovisional applications and
all continuations, continuations-in-part and divisions thereof).
1.16 “Product”
shall mean any product containing a Candidate Compound, including any
formulation, dosage form, packaged form or delivery means thereof.
1.17 “RAGE Technology”
shall mean any and all intellectual property, whether or not
patentable, that is owned or licensed by Athersys and relates to Athersys’ techniques for
activating gene expression, which are referred to by Athersys collectively as Random Activation of
Gene Expression or RAGE technology.
1.18 “Term”
shall have the meaning assigned to it in Section 11.1.
1.19 “Third Party”
means any entity other than Athersys, BMS or an Affiliate of either of
them.
1.20 “Valid Claim”
shall mean either (i) a claim of issued and unexpired letters patent which
has not been held permanently revoked, unenforceable or invalid by a decision of a court or other
governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed
for appeal and that is not admitted to be invalid or unenforceable through reissue, disclaimer or
otherwise, or (ii) a claim of a pending patent application that has not been pending for more than
seven (7) years and that has not been abandoned or finally rejected without the possibility of
appeal or refiling.
2.
Collaboration Program
2.1 Review of Proposed Cell Lines by Athersys.
Athersys shall have the right to review and
approve, as provided in Exhibit A, the target protein to be expressed in each RAGE-VT cell line
that BMS proposes be made under this collaboration, as set forth in Exhibit A. Athersys shall
complete such review within thirty (30) days after the Effective Date of this Agreement, or the
date Athersys receives information from BMS regarding a proposed target to be expressed in a
RAGE-VT cell line (if
later), or upon any other schedule to which the Parties may mutually agree. If Athersys
approves of a proposed RAGE-VT cell line, Athersys shall promptly thereafter commence work under
Section 2.2 to create a RAGE-VT cell line based thereon, and any such cell line shall be a
“Collaboration Cell Line.” If Athersys rejects any of the proposed RAGE-VT cell lines in
accordance with the parameters set forth in Exhibit A, Athersys shall promptly notify BMS and BMS
shall have the right to amend Exhibit A in order to designate a replacement RAGE-VT cell line (for
each one of the RAGE-VT cell lines originally proposed and rejected by Athersys) within sixty (60)
days after receiving notice of the rejection; provided, however, that Athersys shall again have the
right to review and approve any such proposed replacement cell line, as above. Athersys shall not
be obligated to supply to BMS more than a total of six (6) Collaboration Cell Lines unless BMS
exercises its option under Section 2.5.
5
2.2 Supply of Collaboration Cell Lines; Status Reports.
Athersys shall use reasonable efforts
to deliver to BMS each Collaboration Cell Line that Athersys approves under Section 2.1 within six
(6) months after such approval. Prior to the first Anniversary Date (as defined in Section 2.5
below), Athersys shall provide BMS with summary reports, which shall be written, of the status and
progress of Athersys’s efforts to provide Collaboration Cell Lines every six (6) weeks. Such
reports shall be sent to the attention of the BMS Project Coordinator. If the Parties proceed with
additional Collaboration Cell Lines under Section 2.5, Athersys will provide BMS such progress
reports as the Parties reasonably agree to at such time.
2.3 Review of Collaboration Cell Lines by BMS.
(a)
BMS shall have the right, for a period of forty-five (45) days after receiving each
Collaboration Cell Line, to review such Collaboration Cell Line for the purpose of evaluating
whether or not the production of protein meets the applicable requirements referred to in Exhibit
A. Unless BMS provides written notice to Athersys that such Collaboration Cell Line does not meet
such requirements within such period, such Collaboration Cell Line shall be accepted by BMS and
shall be an “Accepted Cell Line” for all purposes hereunder. Even if any Collaboration Cell Line
fails to produce the amount of protein meeting the applicable requirements set forth in Exhibit A,
BMS shall nonetheless have the right, but not the obligation, to accept such Collaboration Cell
Line as an Accepted Cell Line, by written notice to Athersys within such forty-five (45) day
period. If BMS does not accept a Collaboration Cell Line, BMS and Athersys shall discuss the
reason(s) such Collaboration Cell Line was not accepted, and if BMS and Athersys agree that
modifying the approach to creating a Collaboration Cell Line is feasible, Athersys shall make such
modification and present such modified Collaboration Cell Line to BMS for evaluation and acceptance
(if applicable) as provided herein.
(b)
Athersys shall provide the BMS Project Coordinator with at least two (2) weeks’ advance
notice of Athersys’ intent to deliver a Collaboration Cell Line to BMS for review under Section
2.3(a), so that BMS may attempt to allocate internal resources appropriately. In the event
Athersys fails to do so with respect to any given Collaboration Cell Line, the BMS review period
therefor shall be extended to sixty (60) days.
2.4 Infringement by Accepted Cell Lines.
If at any time during the term of the License
applicable to a particular Accepted Cell Line, such Accepted Cell Line becomes, or in Athersys’
opinion is likely to become, the subject of a Third Party patent infringement claim based on BMS’
practice of such License, then Athersys shall use commercially reasonable efforts, at its sole
expense, either (i) to procure for BMS the right to continue using such Accepted Cell Line, or (ii)
to replace or modify such Accepted Cell Line so that it becomes noninfringing while still having
substantially the same functionality and efficacy as prior to such replacement or modification. In
the event Athersys is not successful in its efforts under clause (i) and/or (ii) of the preceding
sentence within three (3) months after any such claim arises, Athersys shall, at BMS’s request,
meet to discuss in good faith other possible solutions to the claim.
2.5 Option To Expand Collaboration Cell Lines.
Provided that at least five (5) of the six (6)
Collaboration Cell Lines initially provided to BMS pursuant to Section 2.2 have achieved the “HTPS
Completion for Accepted Cell Line” milestone as set forth in Exhibit B by
6
the fourteen month
anniversary of the Effective Date (the first “Anniversary Date”), BMS shall at its option have the
right (the “BMS Option”), to gain access to up to forty-four (44) additional Collaboration Cell
Lines as follows: BMS shall have the initial right to designate the construction by Athersys of up
to a maximum of fifteen (15) additional Collaboration Cell Lines, each of which shall become
subject to the terms and conditions of this Agreement. Upon the achievement of the “HTPS
Completion for Accepted Cell Line” milestone for the 10th of such additional Cell Lines, BMS would
have the right to designate up to fifteen (15) more Collaboration Cell Lines for production
hereunder, and the foregoing process would be repeated for up to a maximum of forty-four (44)
additional Collaboration Cell Lines. The foregoing is subject to the additional proviso that
Athersys shall not be required to provide to BMS more than fifteen (15) Collaboration Cell Lines
per year commencing on the Anniversary Date. Notwithstanding any provision of this Section 2.5 to
the contrary, the Parties will meet on or about each subsequent Anniversary Date to discuss in good
faith whether continuation of the collaboration, as contemplated by this Section 2, is reasonably
in accordance with the scientific and business objectives of the Parties. In the event the Parties
determine that such continuation is not reasonably within Athersys’s business objectives, any
different terms the Parties may negotiate with respect to any continued collaboration hereunder
shall be reasonably consistent with the terms on which Athersys is then performing, or reasonably
proposing to perform, services of similar character and quantity for Third Parties.
2.6 Project Coordinators.
Each Party shall designate an individual (a “Project Coordinator”)
to coordinate, on such Party’s behalf, the day-to-day interaction of and communication between the
parties under this Agreement. Each Project Coordinator shall possess the education, training and
experience necessary to make him or her reasonably technically qualified to serve as a Project
Coordinator. Each Party shall be free to replace its Project Coordinator with new a appointee who
has authority to act on behalf of such Party, upon notice to the other Party.
2.7 Use of Accepted Cell Lines as Validation Tools.
The Parties acknowledge and agree that in
the future BMS may wish to use one or more particular Accepted Cell Lines to validate and confirm
characteristics and properties of compounds whose activity with respect to the applicable target
protein was identified other than by use of such Accepted Cell Line (or materials derived
therefrom), and thus which do not fall within the definition of Candidate Compounds. If BMS
decides that it wishes to obtain a license to make such use of an Accepted Cell Line, BMS shall so
notify Athersys at any time during the term of the License with respect to such Accepted Cell Line.
Following Athersys’ receipt of such notice, the Parties shall negotiate, diligently and in good
faith, commercially reasonable terms and conditions upon which Athersys shall grant BMS such a
license. Such negotiations shall continue for a period of 120 days (or such longer period as the
Parties may agree to).
3.
Licenses.
3.1 Evaluation License.
Subject to the terms of this Agreement, as to each Collaboration Cell
Line provided to BMS by Athersys hereunder, Athersys grants to BMS a royalty-free, non-exclusive
,
worldwide license, without the right to sublicense, under the Athersys Technology solely to conduct
internal research evaluation of such Collaboration Cell
7
Line as provided in Section 2.3 of this
Agreement during the forty-five (45) day period after BMS first receives such Collaboration Cell
Line.
3.2 Research and Development License.
Subject to the terms of this Agreement, and effective
upon BMS’s acceptance of a particular Accepted Cell Line, Athersys grants to BMS a royalty-bearing,
nonexclusive, worldwide license, without the right to sublicense, under the Athersys Technology
solely to use each such Accepted Cell Line in the Field (the “License”).
3.3 General Improvement License.
Subject to the terms of this Agreement, BMS grants to
Athersys a royalty-free, non-exclusive, worldwide, perpetual, irrevocable license, without the
right to sublicense, under BMS’s intellectual property interests in the General Improvements,
solely for the conduct of Athersys’s internal research and development activities.
3.4 Duration of Athersys License.
(a) Initial License Duration.
The License shall terminate, as to a particular Accepted Cell
Line, three (3) years after the date that BMS first accepts such Accepted Cell Line from Athersys
hereunder, unless extended as provided in subsection (b) below.
(b) Extended License Duration.
BMS shall have the right to extend the term of a particular
License, as to each Accepted Cell Line, for additional periods beyond the initial License term,
upon notice to Athersys at least thirty (30) days before the expiration of the existing term and
upon payment of the applicable Extended License Fee pursuant to Section 4.1(b).
3.5 Negative Covenants.
(a) No Other Use by BMS.
BMS covenants and agrees that it shall not use the Collaboration
Cell Lines for any purpose other than as set forth in Section 3.1 and shall not use the Accepted
Cell Lines or any materials derived
therefrom for any purpose other than as set forth in Section 3.2. BMS further covenants and
agrees that it shall not use or practice the Athersys Technology for any purpose except as
expressly permitted in the licenses granted to BMS under Sections 3.1 and 3.2 of this Agreement.
(b) No Transfer to Third Parties.
BMS covenants and agrees that BMS shall not transfer
Collaboration Cell Lines or Accepted Cell Lines, or any Information pertaining thereto or any
materials derived therefrom, to any Third Party for any purpose, except that BMS may transfer such
Information and materials to collaborators to the extent necessary for BMS to exercise its right to
use the Accepted Cell Lines in connection with bona fide collaborations with academic and/or
commercial partners in the Field, but may not transfer the Accepted Cell Lines to such entities
except with Athersys’ prior written consent.
(c) No Other Use by Athersys.
Athersys covenants and agrees that it shall not use or practice
the General Improvements for any purpose except as expressly permitted in the licenses granted to
Athersys under Section 3.3.
3.6 Athersys Reserved Rights.
BMS understands and agrees that Athersys owns and reserves to
itself all rights, title and interest in the Athersys Technology, and to the Collaboration
8
Cell
Lines and the Accepted Cell Lines, subject only to the licenses granted in Sections 3.1 and 3.2,
respectively.
3.7 Records And Reports.
(a) Records.
BMS shall maintain complete and accurate records that fully and properly reflect
all work done and all results achieved, including raw data, in the evaluation of Collaboration Cell
Lines, the use of Accepted Cell Lines and the discovery, research and development of Candidate
Compounds (“Records”). The Records shall be kept with sufficient detail and in good scientific
manner appropriate for patent and regulatory purposes and shall be kept separate and distinct from
other work conducted by BMS, all in a manner consistent with BMS’ other internal research and
development record keeping.
(b) Copies and Inspection of Records.
Athersys shall have the right, during normal business
hours and upon reasonable notice, to inspect the Records for purposes consistent with this
Agreement. Athersys shall maintain all Information learned from such inspection of the Records in
confidence in accordance with Article 7. All inspections, copying and visits hereunder shall be
conducted in a manner and frequency so as not to disrupt BMS’s business and in a manner so as not
to cause any disclosure of any other BMS Confidential Information.
(c) Semi-Annual Reports.
Within 30 days following the end of each six (6) month period during
the term of the License with respect to each Accepted Cell Line, BMS shall provide to Athersys a
written progress report that shall describe the results and developments of the use of such
Accepted Cell Line, and the discovery, research and development of Candidate Compounds therewith.
With such reports, BMS shall disclose to Athersys in summary form (
i.e.,
in a manner that does not
require BMS to disclose
sensitive or competitively-enabling data or information) the development, making, conception
or reduction to practice of all Candidate Compounds that are discovered, made, investigated,
conceived or reduced to practice by use of such Accepted Cell Line or assays based thereon. In
addition, BMS shall fully disclose to Athersys in each such report any Improvements that BMS may
have developed during the period covered by such report.
4.
Payments.
4.1 License Fees.
(a) Initial License Fees.
For each Accepted Cell Line, BMS shall pay Athersys a license fee
of [$*]
*
(each, an “Initial License Fee”). The Initial License Fees shall be payable
within thirty (30) days after the date of acceptance by BMS of the applicable Accepted Cell Line.
(b) Extended License Fee.
If BMS elects to exercise its rights under Section 3.4(b) to extend
the term of the License as to a particular Accepted Cell Line, then BMS shall at its option pay
Athersys for each Accepted Cell Line subject to such extension either (i) [$*] for
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Confidential treatment has been requested for
the redacted portions of this exhibit, and such confidential portions have been
omitted and filed separately with the Securities and Exchange Commission.
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each successive
additional one-year extension of such License term or (ii) a
one-time payment of
[$*]
*
for the use of such Accepted Cell Line in perpetuity (either, the “Extended License Fee”).
4.2 Milestone Payments.
For each Accepted Cell Line, and for each Candidate Compound
identified for clinical development by BMS or its Affiliate or sublicensee, BMS shall pay Athersys
the milestone payments set forth in Exhibit B and Exhibit C, respectively, within forty-five (45)
days after each milestone event has been achieved for the particular Accepted Cell Line or
Candidate Compound (as applicable).
4.3 Royalty Payments.
BMS shall pay Athersys a royalty equal to [*] percent [*%]
of Net Sales of all Products worldwide. Each payment of royalties under this Agreement shall be
accompanied by a statement of the amount of the total amounts received and calculated as Net Sales
during such period, and all other information necessary to determine the appropriate amount of such
payments.
4.4 Royalty Term.
For each Product, on a country-by-country basis, BMS shall pay to Athersys
royalties under Section 4.3 commencing on the first commercial sale in the applicable country and
continuing until the later of (a) the last to expire Patent in such country owned or controlled by
BMS or its affiliate or licensee containing a Valid Claim covering such Product or the Candidate
Compound therein, or covering the manufacture, use or formulation of such Product or compound, or
(b) ten (10) years from the date of such first commercial sale in such country.
4.5 Blocked Currency.
In each country where the local currency is blocked and cannot be
removed from the country, at the election of Athersys, royalties accrued in that country shall be
paid to Athersys in such country in local currency by deposit in a local bank designated by
Athersys.
4.6 Non-Monetary Consideration.
In the event BMS (or its Affiliates or sublicensees) receives
any non-monetary consideration in connection with the sale or other commercial disposition of
Products, Athersys’s royalty shall be based on the fair monetary value of such other consideration.
In such case, BMS shall disclose to Athersys, on a confidential basis, the terms of such
arrangement, and the Parties shall agree in good faith on such monetary value, which shall then be
included in Net Sales for the period in which it was received by BMS (or its Affiliates or
sublicensees).
5.
Records and Audit.
5.1 Records and Audit.
During the term of this Agreement and for a period of three (3) years
thereafter, BMS shall keep complete and accurate records pertaining to the sale or other
disposition of all Products, in sufficient detail to permit Athersys to confirm the accuracy of all
payments due hereunder. Athersys shall have the right to cause an independent, certified public
accountant to audit such records to confirm BMS’s Net Sales and royalty payments and payments under
Section 4.2; provided, however, that such auditor shall not disclose BMS’s Confidential Information
to Athersys, except to the extent such disclosure is necessary to verify
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Confidential treatment has been requested for
the redacted portions of this exhibit, and such confidential portions have been
omitted and filed separately with the Securities and Exchange Commission.
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the portion of the amount
of royalties and payments due under this Agreement. Such audits may be exercised once a year,
within three (3) years after the period to which such records relate, upon notice to BMS and during
normal business hours. Athersys shall bear the full cost of such audit unless such audit discloses
a variance of more than five percent (5%) from the amount of royalties and payments under Section
4.2 previously paid for such year. In such case, BMS shall bear the full cost of such audit. The
terms of this Section 5.1 shall survive any termination or expiration of this Agreement for a
period of three (3) years.
6.
Intellectual Property.
6.1 Ownership
.
(a) Athersys.
Athersys shall remain the sole owner of the Athersys Technology, the RAGE
Technology, the Collaboration Cell Lines and the Accepted Cell Lines, including any improvements
thereto made by Athersys. Athersys shall have the sole responsibility, at its discretion, for
patent prosecution and choice of patent counsel in relation to Athersys Patents, and shall pay all
expenses associated therewith. BMS hereby assigns and agrees to assign to Athersys its entire
interest in any Specific Improvements, which shall be deemed to be part of the Athersys Technology.
(b) BMS.
BMS shall be the sole owner of any inventions and information resulting from BMS’
use of the Accepted Cell Lines, including any Products and General Improvements, but excluding any
and all Specific Improvements. BMS shall have the sole responsibility, at its discretion, for
patent prosecution and choice of patent
counsel in relation to such BMS-owned inventions and the Products and shall pay all expenses
associated therewith.
6.2 Enforcement of Patent Rights
. Each Party shall have the sole right, but not the
obligation, to institute, prosecute or control any action or proceeding with respect to
infringement by a Third Party of one or more issued Patents owned by such Party.
7.
Confidentiality.
7.1 Confidential Information.
The Parties agree that, for the Term of this Agreement and for
five (5) years thereafter, the receiving Party shall keep completely confidential and shall not
publish or otherwise disclose and shall not use for any purpose, except for the purposes expressly
permitted by this Agreement, any Confidential Information furnished to it by the disclosing Party.
The foregoing obligation shall not apply to any information received by a Party to the extent that
it can be established by such receiving Party by competent evidence that such information:
(a)
was already known to the receiving Party, other than under an obligation of
confidentiality, at the time of disclosure;
(b)
was generally available to the public or otherwise part of the public domain at the time
of its disclosure to the receiving Party;
11
(c)
became generally available to the public or otherwise part of the public domain after its
disclosure and other than through any act or omission of the receiving Party in breach of this
Agreement;
(d)
was independently developed by the receiving Party as demonstrated by competent written
evidence prepared contemporaneously with such independent development; or
(e)
was subsequently lawfully disclosed to the receiving Party by a person other than a Party
hereto.
7.2 Authorized Disclosure
. Notwithstanding the foregoing, a Party may disclose the
Confidential Information of the other Party to the extent such disclosure is necessary to be
disclosed in the following instances:
(a)
Regulatory filings made by BMS;
(b)
Prosecuting or defending litigation or responding to valid subpoenas;
(c)
Complying with applicable governmental regulations;
(d)
Conducting clinical trials of BMS, its Affiliates and sublicensees;
(e)
Disclosure, in connection with the performance of this Agreement, to Affiliates,
employees, consultants, or agents, each of whom prior to disclosure must be bound by similar
obligations of confidentiality and non-use at least equivalent in scope to those set forth in this
Section 7;
(f)
Disclosure that is required by applicable law or governmental regulation; and
(g)
Disclosure of the existence and terms of this Agreement and of general summaries of the
progress made by the Parties under this Agreement (but excluding the identification of any target
nominated by BMS under Section 2.1 and of any Collaboration Cell Line or Accepted Cell Line
developed by Athersys hereunder) to existing or potential investment bankers, investors and/or
merger or acquisition parties, provided that the disclosing Party obtains from such recipient prior
to disclosure an agreement to be bound by obligations of confidentiality and non-use at least
similar in scope to those set forth in this Section 7.
7.3 Disclosure.
If a Party is required to make any disclosure of another Party’s Confidential
Information that is authorized under subsections (a), (b), (c), (d) or (f) of this Section 7.2, it
will give reasonable advance notice to the latter Party of such disclosure and will afford the
latter Party a reasonable opportunity, and will cooperate reasonably with such Party, to secure
confidential treatment of such information prior to its disclosure (whether through protective
orders or otherwise) and to limit the extent of the disclosure as much as possible. Except as
otherwise required by law, neither Party shall issue a press release or make any other disclosure
of the terms of this Agreement or any aspect of the research conducted pursuant to this Agreement
without the prior approval of such press release or disclosure by the other Party hereto. Each
Party shall submit any such press release or disclosure to the other Party, and the
12
receiving Party
shall have ten (10) business days to review and approve any such press release or disclosure, which
approval shall not be unreasonably withheld. If the receiving Party does not respond within such
ten (10) day period, the press release or disclosure shall be deemed approved. In addition, if a
public disclosure is required by law, including without limitation in a filing with the Securities
and Exchange Commission, the disclosing Party shall provide copies of the disclosure reasonably in
advance of such filing or other disclosure for the nondisclosing Party’s prior review and comment.
7.4 Confidential Terms.
Except as expressly provided herein, each Party agrees not to
disclose any terms of this Agreement or any aspect of the research conducted pursuant to this
Agreement to any Third Party without the consent of the other Party.
8.
Representations and Warranties.
8.1 Athersys.
Athersys represents and warrants that: (i) it is a corporation duly organized
validly existing and in good standing under the laws of the State of Delaware; (ii) the execution,
delivery and performance of this Agreement have been duly authorized by all necessary corporate
action on the part of Athersys; (iii) the performance of Athersys’s obligations under this
Agreement will not conflict with its charter documents or result
in a material breach of any agreements, contracts or other arrangements to which it is a
party; (iv) Athersys will not, during the Term of this Agreement, enter into any agreements,
contracts or other arrangements that would be materially inconsistent with its obligations under
this Agreement; (v) Athersys has sufficient facilities, experienced personnel and other
capabilities reasonably suited to enable it to perform its obligations under this Agreement; (vi)
Athersys is the owner of, or has licensed rights to, all of the Athersys Patents in existence on
the Effective Date, and has the right to grant the licenses or sublicenses, as the case may be,
therefor granted under this Agreement; and (vii) as of the Effective Date, Athersys is not aware of
any asserted or unasserted claim or demand which is being, or which Athersys believes can be,
rightfully enforced by a Third Party against any of the Athersys Patents that would materially
limit, hinder, delay or otherwise adversely affect BMS’s enjoyment of its rights and satisfaction
of its obligations under this Agreement.
8.2 BMS.
BMS represents and warrants that: (i) it is a corporation duly organized validly
existing and in good standing under the laws of the State of Delaware; (ii) the execution, delivery
and performance of this Agreement have been duly authorized by all necessary corporate action on
the part of BMS; (iii) the performance of BMS’s obligations under this Agreement will not conflict
with its charter documents or result in a material breach of any agreements, contracts or other
arrangements to which it is a party; ); (iv) BMS has sufficient facilities, experienced personnel
and other capabilities reasonably suited to enable it to perform its obligations under this
Agreement; and (v) BMS will not, during the Term of this Agreement, enter into any agreements,
contracts or other arrangements that would be materially inconsistent with its obligations under
this Agreement.
8.3 Disclaimer of Warranties.
THE ATHERSYS KNOW-HOW, ATHERSYS PATENTS AND COLLABORATION CELL
LINES ARE PROVIDED AND LICENSED TO BMS “AS IS”, AND ATHERSYS AND ITS RESPECTIVE AFFILIATES MAKE NO
REPRESENTATIONS AND EXTEND NO WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH
RESPECT THERETO OR TO THE
13
PRODUCTS OR ATHERSYS TECHNOLOGY, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF THE PATENT RIGHTS
LICENSED HEREUNDER, OR NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
8.4 Unknown Biological Properties.
BMS understands and agrees that the Collaboration Cell
Lines may have unpredictable and unknown biological and/or chemical properties, that they are to be
used with caution, and that they are not to be used for testing in or treatment of humans. BMS
shall use the Collaboration Cell Lines in compliance with all applicable laws and regulations,
including, but not limited to, any laws or regulations relating to the research, testing,
production, storage, transportation, export, packaging, labeling or other authorized use of the
Collaboration Cell Lines.
9.
Dispute Resolution.
9.1 Mediation.
If a dispute arises out of or relates to this Agreement, or the breach thereof,
and if said dispute cannot be settled through negotiation, the Parties agree first to try in good
faith to settle the dispute by good faith discussions by the Vice President of External Science and
Technology of BMS and the CEO or senior executive officer of Athersys (or each such person’s
designee), and failing resolution thereby by mediation under the Commercial Mediation Rules of the
American Arbitration Association, before resorting to arbitration, litigation, or some other
dispute resolution procedure.
9.2 Arbitration.
Subject to Section 9.1, Athersys and BMS agree that any dispute or
controversy arising out of, in relation to, or in connection with this Agreement, or the validity,
enforceability, construction, performance or breach thereof, shall be settled by binding
arbitration in New York, New York, under the then-current Rules of Commercial Arbitration of the
American Arbitration Association by one (1) arbitrator appointed in accordance with such Rules.
The arbitrator shall determine what discovery will be permitted, based on the principle of limiting
the cost and time that the Parties must expend on discovery; provided, however, that the arbitrator
shall permit such discovery as he or she deems necessary to achieve an equitable resolution of the
dispute. The decision and/or award rendered by the arbitrator shall be written, final and
non-appealable, absent manifest error, and may be entered in any court of competent jurisdiction.
The Parties agree that, any provision of applicable law notwithstanding, they will not request, and
the arbitrator shall have no authority to award punitive or exemplary damages against any Party.
The costs of any arbitration, including administrative fees and fees of the arbitrator, shall be
shared equally by the Parties, unless the arbitrator determines otherwise.
10.
Indemnification.
10.1 By BMS.
Subject to Section 10.3, BMS shall indemnify, defend and hold harmless Athersys
and its directors, officers and employees (each an “Athersys Indemnitee”) from and against any and
all liabilities, damages, losses, costs or expenses (including attorneys’ and professional fees and
other expenses of litigation and/or arbitration) (each a “Liability”) resulting from a claim, suit
or proceeding made or brought by a Third Party against an Athersys
14
Indemnitee arising from or
occurring as a result of (i) any breach of the representations and warranties set forth in Section
8.2, or (ii) the performance by BMS of its obligations hereunder.
10.2 By Athersys.
Subject to Section 10.3, Athersys shall indemnify, defend and hold harmless
BMS and its directors, officers and employees (each a “BMS Indemnitee”) from and against any and
all Liabilities resulting from a claim, suit or proceeding made or brought by a Third Party against
a BMS Indemnitee arising from or occurring as a result of (i) any breach of the representations and
warranties set forth in Section 8.1, or (ii) the performance by Athersys of its obligations
hereunder.
10.3 Limitation on Indemnity Obligations.
(a) Negligence, etc.
No Athersys Indemnitee or BMS Indemnitee (each, an “Indemnitee”) shall
be entitled to the indemnification under Section 10.1 or 10.2, as the case may
be, to the comparative extent the Liability for which indemnification is sought was caused by
a grossly negligent, reckless or intentional act or omission by the Party with which such
Indemnitee is affiliated or any of such Party’s Affiliates or sublicensees or any of their
respective directors, officers, employees or authorized agents.
(b) Target Proteins and Collaboration Cell Lines.
Athersys acknowledges and agrees that it
will conduct a reasonable intellectual property investigation of each target protein that is the
basis of a particular Collaboration Cell Line, and of matters relating to the creation of the
Collaboration Cell Line, that BMS selects and Athersys agrees to produce pursuant to Section 2.1,
which shall be in addition to any such investigation that BMS may have conducted. BMS also
acknowledges and agrees that it will conduct a reasonable intellectual property investigation of
each target protein that BMS proposes for selection by Athersys as the basis for producing a
Collaboration Cell Line pursuant to Section 2.1, which shall be in addition to any such
investigation that Athersys may conduct, and shall disclose to Athersys the results of such
investigation. BMS shall not be obligated to provide indemnification under Section 10.1 against
any Liabilities resulting from a claim, suit or proceeding to the extent it is alleged, proven or
agreed in such claim, suit or proceeding that any such target protein (or the creation of the
corresponding Collaboration Cell Line) infringes upon or otherwise violates the intellectual
property rights of any Third Party, except to the comparative extent such infringement or violation
results from a grossly negligent, reckless or intentional act or omission by BMS or any of BMS’
Affiliates or any of their respective directors, officers, employees or authorized agents.
10.4 Procedure.
In the event that an Indemnitee intends to claim indemnification under this
Article 10, it shall promptly notify the indemnifying Party in writing of such alleged Liability.
The indemnifying Party shall have the sole right to control the defense and settlement thereof.
The indemnifying Party shall have the right to settle or compromise any Liabilities for which it is
providing indemnification under this Article 10, provided that the consent of the Indemnitee (which
shall not be unreasonably withheld or delayed) shall be required in the event any such settlement
or compromise would adversely affect the interests of such Indemnitee. The Indemnitees shall
cooperate with the indemnifying Party and its legal representatives in the investigation of any
action, claim or liability covered by this Article 10. The Indemnitees shall not, except at their
own cost, voluntarily make any payment or incur any expense with respect to
15
any claim or suit
without the prior written consent of the indemnifying Party, which the indemnifying Party shall not
be required to give.
11.
Term and Termination.
11.1 Term of Agreement.
The term of this Agreement (the “Term”) shall commence on the
Effective Date and continue until expiration upon the end of all royalty and payment obligations of
BMS under Article 4, or until such earlier date as the Parties agree in writing to terminate the
Agreement or the Agreement terminates as provided below.
11.2 Termination for Cause.
Either Party may terminate this Agreement in the event the other
Party has materially breached or defaulted in the performance of any of its obligations hereunder,
and such default has continued without cure for sixty (60) days after written notice thereof was
provided to the breaching Party by the
non-breaching Party. Any termination shall become effective at the end of such sixty (60) day
period unless the breaching Party has cured any such breach or default prior to the expiration of
the sixty (60) day period. Notwithstanding the above, in the case of a failure to timely pay any
amounts due hereunder, the period for cure of any subsequent default following notice thereof shall
be thirty (30) days and, unless payment is made within such period the termination shall become
effective at the end of such period.
11.3 Effect of Termination.
(a) Accrued Rights and Obligations.
Termination of this Agreement for any reason shall not
release any Party hereto from any liability which, at the time of such termination, has already
accrued to the other Party or which is attributable to a period prior to such termination nor
preclude either Party from pursuing any rights and remedies it may have hereunder or at law or in
equity with respect to any breach of this Agreement. It is understood and agreed that monetary
damages may not be a sufficient remedy for any breach of this Agreement and that the non-breaching
Party may be entitled to injunctive relief as a remedy for any such breach.
(b) Return of Confidential Information.
Upon any termination of this Agreement, each of
Athersys and BMS shall promptly return to the other Party all Confidential Information of the
other; provided that counsel of each Party may retain one (1) copy of such Confidential Information
solely for archival purposes.
(c) Survival.
Sections 3.3, 3.5 and 11.3, and Articles 4, 5, 6, 7, 9, 10 and 12 of this
Agreement shall survive termination of this Agreement for any reason.
12.
Miscellaneous.
12.1 Governing Law.
This Agreement and any dispute, including without limitation any
arbitration, arising from the performance or breach hereof shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving effect to its
conflict of laws rules and regulations.
12.2 Independent Contractors.
The relationship of the parties hereto is that of independent
contractors. The parties hereto are not deemed to be agents, partners or joint
16
venturers of the
others for any purpose as a result of this Agreement or the transactions contemplated thereby.
12.3 Assignment.
Neither Party may assign its rights or obligations under this Agreement
absent the prior written consent of the other Party, not to be unreasonably withheld; provided,
however, that either Party may assign this Agreement without such consent to any of its Affiliates
or to any successor in interest by merger, acquisition or sale of all or substantially all of its
assets in a manner such that the assignee will be liable and responsible for the performance and
observance of all its duties and obligations hereunder. This Agreement shall be binding upon the
successors and permitted assigns of the Parties. Any
attempted delegation or assignment not in accordance with this Section 12.3 shall be void and
of no force or effect.
12.4 Notices.
All notices, requests and other communications hereunder shall be in writing
and shall be personally delivered or sent by telecopy or other electronic facsimile transmission or
by registered or certified mail, return receipt requested, postage prepaid, in each case to the
respective address specified below, or such other address as may be specified in writing to the
other parties hereto:
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If to BMS:
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Bristol-Myers Squibb Company
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Route 206 and Province Line Road
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P. O. Box 4000
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Princeton, New Jersey 08543-4000
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Attn: Vice President and Senior Counsel,
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Pharmaceutical Research Institute and
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Worldwide Business Development
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Fax No.: (609) 252-4232
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If to Athersys:
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Athersys, Inc.
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3201 Carnegie Avenue
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Cleveland, Ohio 44115-2634
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Attn: President
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Fax No.: (216) 361-9495
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12.5 Force Majeure.
Neither Party shall lose any rights hereunder or be liable to the other
Party for damages or losses (except for payment obligations) on account of failure of performance
by the defaulting Party if the failure is occasioned by war, strike, fire, Act of God, earthquake,
flood, lockout, embargo, governmental acts or orders or restrictions, failure of suppliers, or any
other reason where failure to perform is beyond the reasonable control and not caused by the
negligence, intentional conduct or misconduct of the nonperforming Party has exerted all reasonable
efforts to avoid or remedy such force majeure; provided, however, that in no event shall a Party be
required to settle any labor dispute or disturbance.
12.6 Advice of Counsel.
BMS and Athersys have each consulted counsel of their choice
regarding this Agreement, and each acknowledges and agrees that this Agreement shall not be deemed
to have been drafted by one Party or another and will be construed accordingly.
17
12.7 Compliance with Laws.
Each Party will comply with all applicable laws and regulations in
connection with its performance under this Agreement. Each Party shall furnish to the other Party
any information requested or required by that Party during the term of this Agreement or any
extensions hereof to enable that Party to comply with the requirements of any U.S. or foreign
federal, state and/or government agency.
12.8 Severability.
In the event that any provisions of this Agreement are determined to be
invalid or unenforceable by a court of competent jurisdiction, the remainder of the Agreement shall
remain in full force and effect without said provision. In such event, the parties shall in good
faith attempt to negotiate a substitute clause for any provision declared invalid or unenforceable,
which substitute clause shall most nearly approximate the intent of the Parties in agreeing to such
invalid provision, without itself being invalid.
12.9 Waiver.
It is agreed that no waiver by either Party hereto of any breach or default of
any of the covenants or agreements herein set forth shall be deemed a waiver as to any subsequent
and/or similar breach or default.
12.10 Complete Agreement.
This Agreement, together with its Exhibits, constitutes the entire
agreement, both written and oral, between the Parties with respect to the subject matter hereof,
and that all prior agreements, including the term sheet, respecting the subject matter hereof,
either written or oral, expressed or implied, are merged and canceled, and are null and void and of
no effect. No amendment or change hereof or addition hereto shall be effective or binding on
either of the parties hereto unless reduced to writing and duly executed on behalf of both parties.
12.11 Use of Name.
Unless otherwise permitted by this Agreement or required by applicable
laws or regulations, neither Party shall use the name or trademarks of the other Party without the
prior written consent of such other Party.
12.12 Headings.
The captions to the several Sections and Articles hereof are not a part of
this Agreement, but are included merely for convenience of reference only and shall not affect its
meaning or interpretation.
12.13 Counterparts.
This Agreement may be executed in two counterparts, each of which shall
be deemed an original and which together shall constitute one instrument.
18
In Witness Whereof
, BMS and Athersys have executed this Agreement by their respective
duly authorized representatives.
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Bristol-Myers Squibb Company
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Athersys, Inc.
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By:
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By:
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Print Name:
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Print Name:
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Title:
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Title:
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19
Exhibit A
RAGE-VT CELL LINES
Promptly after the Effective Date the Parties shall agree upon an initial list of specific proteins
with respect to which Athersys will create RAGE libraries and promptly thereafter screen and
isolate Athersys Cell Lines expressing such proteins. Such list shall be deemed to constitute a
part of this Exhibit A. Such list may be supplemented from time to time by mutual agreement of the
Parties or by designation of additional specific proteins by BMS and acceptance of such proteins by
Athersys, as provided in Section 2.1 (and Section 2.5, to the extent applicable) and in accordance
with the procedure provided below.
From time to time, BMS may nominate specific proteins for consideration by Athersys under Section
2.1 (and Section 2.5, to the extent applicable), for use in constructing a Collaboration Cell Line
using its RAGE technology and other Athersys Know-How. Any such Collaboration Cell Line shall
conform to the general specifications set forth in Exhibit B and to any other specific requirements
agreed to by the Parties.
Athersys shall have the right, before accepting such request of a particular protein by BMS
hereunder, to review and approve the technical and intellectual property feasibility of
constructing the requested Collaboration Cell Line. If requested by Athersys, BMS shall promptly
provide to Athersys the relevant technical requirements of BMS for the requested Collaboration Cell
Line. Athersys shall make its determination of technical feasibility, intellectual property
analysis and/or conflict with preexisting exclusive research obligations to Third Parties or
preexisting internal research programs for which screening has commenced prior to receiving notice
(a “Pre-existing Program”), within thirty (30) days of the request by BMS. If Athersys believes
that the project is not constrained by any of these considerations or fails to provide any such
notice within such thirty (30) day period, then the nominated protein (and corresponding
Collaboration Cell Line) shall be deemed to be added to this Exhibit A. If Athersys believes the
project is constrained by any of such considerations and provides such notice within such thirty
(30) day period, such protein and cell line shall not be added to Exhibit A; provided that Athersys
shall provide to BMS all pertinent information Controlled by Athersys regarding the basis for its
rejection of such request. In that event, BMS shall be entitled to nominate another protein (with
the foregoing process being repeated), until a protein nominated by BMS hereunder is accepted by
Athersys. For purposes of calculating the maximum number of cell lines permitted under this
Agreement, any substitute request made by BMS shall be deemed to have been made as of the date of
the original request.
In addition, in the event Athersys commences a Pre-existing Program with respect to a target
(either internally or with a Third Party), and BMS subsequently proposes such target under Section
2.1, Athersys shall promptly inform BMS of such program and request that BMS propose a substitute
target. In such event, Athersys shall, upon BMS’ request, provide, on a confidential basis, a
reasonable demonstration of such commencement and prosecution of any such Pre-existing Program for
a given target prior to the date of BMS’ proposal of such target under Section 2.1.
20
Exhibit B
MILESTONE PAYMENTS – ACCEPTED CELL LINES
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Milestone
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Payment
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HTS Completion for Accepted Cell Line
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[$*]
*
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•
Verification of target amplification
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Provide quantitation of target mRNA expression level in
the selected clonal cells, with comparison to basal level
expression in cells without target amplification. When
known regulators of the target pathway give the expected
physiological response.
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Quantitative assay performance
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Calculated signal window of Z’ assay performance
parameters will be determined, on a cell line-by-cell
line basis, during the validation study, but in each case
will be equal to, or greater than, 0.4, with an optimal
level of 0.5 or greater, and meet screening requirements;
performance in such range for the duration of the screen,
or three months, whichever is less.
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Screening deck size
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To be specified upon completion of analysis by BMS.
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Potency determination
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Potency values for reference compounds vary by less than
a factor of 5 during the course of the screen and
evaluation of the screen “hits.”
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Transition to Full Discovery
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[$*]
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Upon Program Transition to Full Discovery, as passed by
BMS’ Lead Discovery Operating Committee, of a Candidate
Compound the activity of which was initially discovered
through the use of an Accepted Cell Line or materials or
assays developed from such Accepted Cell Line;
provided,
however,
that after BMS has made this milestone payment
with respect to any Candidate Compound initially
discovered through the use of an Accepted Cell Line (or
such related materials or assays), BMS shall not be
required to make this payment with respect to any other
Candidate Compounds discovered through the use of such
Accepted Cell Line (or such related materials or assays).
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Early Candidate Notice (“ECN”)
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[$*]
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Upon delivery of an ECN to BMS’ Early Development
Operating Committee that a Candidate Compound has been
selected for exploratory development and a first-in-man
study;
provided, however,
that after BMS
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*
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Confidential treatment has been
requested for
the redacted portions of this exhibit, and such confidential portions have been
omitted and filed separately with the Securities and Exchange Commission.
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21
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Milestone
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Payment
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has made this
milestone payment with respect to any Candidate Compound
initially discovered through the use of an Accepted Cell
Line (or such related materials or assays), BMS shall not
be required to make this payment with respect to any
other Candidate Compounds discovered through the use of
such Accepted Cell Line (or such related materials or
assays).
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BMS shall promptly notify Athersys of the first occurrence of any of the foregoing milestones.
22
Exhibit c
MILESTONE PAYMENTS – CANDIDATE COMPOUNDS
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Milestone
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Payment
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Filing of first IND for the Candidate Compound directed against a
designated target expressed by an Accepted Cell Line
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[$*]
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Initiation of first Phase II clinical study for the Candidate Compound
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[$*]
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Initiation of first Phase III clinical study for the Candidate Compound
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[$*]
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Approval of a Product containing the Candidate Compound by Food and
Drug Administration as drug
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[$*]
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As used in this Exhibit C, the phrase “Initiation of first Phase III clinical study” shall be
deemed to include, if a party conducts a Phase II/III study on a Candidate Compound, the point
during such Phase II/III clinical trial when the party conducting the trial has the regulatory
approval to proceed with such trial as a pivotal trial.
BMS shall promptly notify Athersys of the first occurrence of any milestone with respect to each
Candidate Compound. Milestone payments shall be made only once with respect to any given Candidate
Compound, regardless of the number of indications sought (or approvals obtained) with respect to
such Candidate Compound, whether alone or in combination with other compounds or products, and
regardless of any new dosage strengths, preparations or forms of administration for such Candidate
Compound.
If BMS develops as a back-up compound that inhibits or otherwise modulates the activity of a
particular molecular target of a Candidate Compound on which BMS is already making milestone
payments, then BMS may conduct clinical development on such back-up or follow-on compounds and
shall not be obligated to make any milestone payments with respect to any such back-up or follow-on
compound, except as otherwise provided below. In the event that a particular Candidate Compound is
dropped from active clinical development work or marketing for safety or efficacy reasons and is
specifically replaced with a different compound targeting the same molecular target as such dropped
Candidate Compound, such new compound shall be deemed a “Replacement Compound.” BMS shall not be
obligated to make milestone payments that were earlier made with respect to a dropped Candidate
Compound and replaced by a Replacement Compound, but, subject to the preceding paragraph, BMS shall
pay all milestone payments for milestone events achieved by such Replacement Compound that had not
been achieved by such dropped Candidate Compound.
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*
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Confidential treatment has been requested for
the redacted portions of this exhibit, and such confidential portions have been
omitted and filed separately with the Securities and Exchange Commission.
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23
Table Of Contents
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Page
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1.
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Definitions
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1
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1.1
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“Accepted Cell Line”
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1
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1.2
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“Affiliate”
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1
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1.3
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“Athersys Know How”
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1
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1.4
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“Athersys Patents”
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2
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1.5
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“Athersys Technology”
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2
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1.6
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“Candidate Compound”
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1.7
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“Collaboration Cell Line”
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2
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1.8
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“Confidential Information”
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2
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1.9
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“Controlled”
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2
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1.10
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“Field”
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2
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1.11
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“Improvement”
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2
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1.12
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“Information”
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2
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1.13
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“License”
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3
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1.14
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“Net Sales”
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3
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1.15
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“Patents”
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4
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1.16
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“Product”
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4
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1.17
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“RAGE Technology”
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4
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1.18
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“Term”
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4
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1.19
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“Third Party”
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4
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2.
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Collaboration Program
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5
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2.1
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Review of Proposed Cell Lines by Athersys
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5
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2.2
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Supply of Collaboration Cell Lines
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5
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2.3
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Review of Collaboration Cell Lines by BMS
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5
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2.4
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Option To Expand Collaboration Cell Lines
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5
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3.
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Licenses.
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5
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3.1
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Evaluation License
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5
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3.2
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Research and Development License
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6
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3.3
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Term of Athersys License
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6
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(a) Initial License Term
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6
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(b) Extended License Term
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6
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i.
Table Of Contents
(continued)
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Page
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3.4
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Negative Covenants
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6
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(a) No Other Use
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6
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(b) No Transfer to Third Parties
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6
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3.5
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Athersys Reserved Rights
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6
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3.6
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Records And Reports
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6
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(a) Records
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6
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(b) Copies and Inspection of Records
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7
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(c) Quarterly Reports
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7
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4.
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Payments
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7
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4.1
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License Fees
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7
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(a) Initial License Fees
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7
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(b) Extended License Fee
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7
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4.2
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Milestone Payments
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7
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4.3
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Royalty Payments
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7
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4.4
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Royalty Term
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8
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4.5
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Blocked Currency
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8
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4.6
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Non-Monetary Consideration
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8
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5.
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Records and Audit
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8
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5.1
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Records and Audit
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8
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6.
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Intellectual Property
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8
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6.1
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Ownership
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8
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(a )Athersys
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8
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(b) BMS
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8
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6.2
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Enforcement of Patent Rights
|
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9
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7.
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Confidentiality
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9
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7.1
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Confidential Information
|
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9
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7.2
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Authorized Disclosure
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9
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7.3
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Public Disclosure
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10
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7.4
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Confidential Terms
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10
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8.
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Representations and Warranties
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10
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8.1
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Athersys
|
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10
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|
ii.
Table Of Contents
(continued)
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Page
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8.2
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BMS
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10
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8.3
|
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Disclaimer of Warranties
|
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10
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8.4
|
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Unknown Biological Properties
|
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11
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9.
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Dispute Resolution
|
|
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11
|
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9.1
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Mediation
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11
|
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9.2
|
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Arbitration
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11
|
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10.
|
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Indemnification
|
|
|
11
|
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10.1
|
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BMS
|
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11
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10.2
|
|
Athersys
|
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12
|
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10.3
|
|
Procedure
|
|
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12
|
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11.
|
|
Term and Termination
|
|
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12
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11.1
|
|
Term of Agreement
|
|
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12
|
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11.2
|
|
Termination for Cause
|
|
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12
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11.3
|
|
Effect of Termination
|
|
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12
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|
(a) Accrued Rights and Obligations
|
|
|
12
|
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|
|
(b) Return of Confidential Information
|
|
|
13
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(c) Survival
|
|
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13
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12.
|
|
Miscellaneous
|
|
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13
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12.1
|
|
Governing Law
|
|
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13
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12.2
|
|
Independent Contractors
|
|
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13
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12.3
|
|
Assignment
|
|
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13
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12.4
|
|
Notices
|
|
|
13
|
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12.5
|
|
Force Majeure
|
|
|
14
|
|
|
|
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12.6
|
|
Advice of Counsel
|
|
|
14
|
|
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|
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12.7
|
|
Compliance with Laws
|
|
|
14
|
|
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|
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12.8
|
|
Further Assurances
|
|
|
14
|
|
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|
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12.9
|
|
Severability
|
|
|
14
|
|
|
|
|
12.10
|
|
Waiver
|
|
|
14
|
|
|
|
|
12.11
|
|
Complete Agreement
|
|
|
14
|
|
|
|
|
12.12
|
|
Use of Name
|
|
|
15
|
|
|
|
|
12.13
|
|
Headings
|
|
|
15
|
|
|
|
|
12.14
|
|
Counterparts
|
|
|
15
|
|
iii.
An extra section break has been inserted above this paragraph. Do not delete this section break if
you plan to add text after the Table of Contents/Authorities. Deleting this break will cause Table
of Contents/Authorities headers and footers to appear on any pages following the Table of
Contents/Authorities.
5.
EXHIBIT
10.2
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE REDACTED PORTIONS OF THIS EXHIBIT, AND SUCH
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
CELL LINE COLLABORATION AND LICENSE AGREEMENT
This Cell Line Collaboration and License Agreement
(the “Agreement”) is made and
entered into as of July 1, 2002 (the “Effective Date”), by and between
Athersys, Inc.
, a
Delaware corporation having its principal offices at 3201 Carnegie Avenue, Cleveland, Ohio 44115
(“Athersys”), and
Bristol-Myers Squibb Company
, a Delaware corporation having offices at
Route 206 and Province Line Road, Princeton, New Jersey 08543 (“BMS”). Athersys and BMS may be
referred to herein individually as a “Party” and collectively as the “Parties.”
Recitals
A.
Athersys has developed and owns technology and intellectual property rights relating to
methods for activating gene or protein expression in cells, referred to by Athersys as the Random
Activation of Gene Expression or RAGE technology, which includes the RAGE-VT technology useful for
creating cell lines that express particular desired proteins.
B.
BMS desires to engage Athersys to create certain such cell lines, using the RAGE-VT
technology, each of which expresses a specific cell surface or cellular protein of interest to BMS,
and to obtain license rights to use such cell lines for internal research, development and
commercialization of pharmaceutical products.
C.
Athersys is willing to create and provide BMS with the desired cell lines pursuant to the
terms of this Agreement.
D.
Concurrently with entering into this Agreement, Athersys and BMS are amending that certain
Research Collaboration and License Agreement between the Parties dated December 8, 2000 (the
“Original Agreement”), regarding a pilot program relating to Athersys creating certain cell lines
for BMS expressing particular desired proteins using the RAGE-VT technology. For the avoidance of
doubt, the Parties’ respective rights and obligations with respect to such cell lines shall
continue to be governed by the Original Agreement (as may be amended from time to time) and not
this Agreement.
Now, Therefore
, in consideration of the foregoing and the covenants and promises
contained in this Agreement, the Parties agree as follows:
As used herein, the following capitalized terms shall have the following meanings (with terms
defined in the singular having the same meanings when used in the plural):
1.1 “Accepted Cell Line”
shall have the meaning assigned to such term in Section 2.3(a).
1.2 “Affiliate”
shall mean, with respect to a Party, any corporation or other entity that,
directly or indirectly, controls, is controlled by or is under the common control with such Party.
For the purpose of this definition, “control” shall mean (a) the direct or indirect ownership of
fifty percent (50%) or more of the outstanding shares or other voting rights of the subject entity
to elect directors, or (b) if such amount of ownership of a foreign entity is not permitted by law,
ownership of the maximum amount of such entity as permitted by law, or (c) the actual ability to
control and direct the management of the subject entity.
1.3 “Athersys Know-How”
shall mean the Information that is Controlled by Athersys during the
term of this Agreement and relates directly to Collaboration Cell Lines or their method of
manufacture or use in the Field or for Counterscreening, as applicable, but excluding Athersys
Patents.
1.4 “Athersys Patents”
shall mean all Patents that are Controlled by Athersys during the term
of the Agreement and contain a Valid Claim covering a Collaboration Cell Line or its method of
manufacture or use in the Field or for Counterscreening, as applicable.
1.5 “Athersys Technology”
shall mean the Athersys Know-How and Athersys Patents collectively.
1.6 “Candidate Compound”
shall mean:
(a)
any compound that has activity, with respect to the target protein expressed by the
applicable Accepted Cell Line, which activity is initially discovered or detected by using an
Accepted Cell Line or materials or assays derived from an Accepted Cell Line, where such activity
is potentially useful for therapeutic or prophylactic use, or
(b)
any compound that is an analog, homolog, isomer or other chemical derivative of a compound
that meets the criteria in subsection (a) above (the “Parent Compound”), provided that such
compound (i) was made by or on behalf of BMS or its Affiliate or sublicensee based on information
relating to the Parent Compound, and (ii) has activity that is potentially useful for therapeutic
or prophylactic use and is similar or related to the activity of such Parent Compound (with the
understanding that such activity may be superior to the activity of the Parent Compound, in any
appropriate criteria).
1.7 “Collaboration Cell Line”
shall have the meaning assigned to such term in Section 2.1(b).
1.8 “Confidential Information”
shall mean (a) any proprietary or confidential information or
material of a Party in tangible form disclosed hereunder that is (i) marked as “Confidential” at
the time it is delivered to the receiving Party, or (ii) designated as confidential or proprietary
in a written memorandum provided to the receiving Party by the disclosing Party within thirty (30)
days of such disclosure, or (b) any proprietary or confidential information of a Party disclosed
orally hereunder that is identified as confidential or proprietary when disclosed and designated as
confidential or proprietary in a
written memorandum provided to the receiving Party by the disclosing Party within thirty (30)
days of such oral disclosure by the disclosing Party. Further, it is agreed that if Athersys
discloses to BMS that it is working on a particular protein or gene target, such information shall
be treated by BMS as the Confidential Information
of Athersys. Still further, it is agreed that
Athersys shall treat the fact that BMS has nominated a specific target under Section 2.1 and the
fact that Athersys has provided BMS with a corresponding Collaboration Cell Line under Section 2.2
as Confidential Information of BMS.
1.9 “Controlled”
shall mean, with respect to any material, Information or intellectual
property right, that a Party owns or has a license to such material, Information or intellectual
property right and has the ability to grant to the other Party the licenses or sublicenses thereto
as provided for herein without violating the terms of any agreement with any Third Party.
1.10 “Counterscreening”
shall mean testing a BMS compound, which has known activity against
one target, for activity against another target that is expressed in an Accepted Cell Line, for the
purpose of determining the relative selectivity and potency of the BMS compound for the first
target.
1.11 “Counterscreening Cell Line”
shall mean an Accepted Cell Line that was selected by BMS to
be used in Counterscreening as provided in Section 2.5.
1.12 “Counterscreening License”
shall have the meaning assigned to it in Section 3.3.
1.13 “Field”
shall mean use of the Accepted Cell Lines by BMS solely for BMS’s internal
discovery, research, development and/or commercialization of Products. For the avoidance of doubt,
subject to Section 3.5(b), the Field shall include BMS’s use of the Accepted Cell Lines in
connection with any bona fide collaboration between BMS and an academic and/or corporate
collaborator, provided that any compounds initially discovered or detected pursuant to such
collaboration by using an Accepted Cell Line or materials or assays derived from an Accepted Cell
Line shall be deemed to be Candidate Compounds. The Field expressly excludes the use of Accepted
Cell Lines by BMS for Counterscreening.
1.14 “HTS”
shall mean high throughput screening using BMS’ test deck of compounds in primary
screening of the Accepted Cell Line. HTS shall be deemed “completed” when BMS has screened the
test deck, confirmed positive responses, and completed standard data analysis.
1.15 “Improvement”
shall mean any improvement, modification or enhancement to the Athersys
Know-How or the inventions claimed in the Athersys Patents (and/or the practice thereof), and any
Information and intellectual property rights relating thereto, that the possessing Party has the
right to disclose to the other Party without violating contractual obligations to a Third Party.
For the avoidance of doubt, the following shall be owned by BMS and shall not comprise
Improvements: (i) Information comprising the results of any assays or other screening or testing
generated by BMS through use of the Accepted Cells Lines under the terms of this Agreement, and any
Information
developed based on evaluating or using such results (which shall exclude, for clarity, any
such Information that relates to the manufacture of such Accepted Cell Lines via the RAGE-VT method
or use of same); (ii) any methodology, process or tool, whether previously existing or created
during the Term (without use of an Accepted Cell Line), that is proprietary to BMS and that BMS
uses to generate the Information referred to in clause (i); and (iii) any invention based on, or
improvement, modification, or enhancement of, the
proprietary know-how of BMS that is created in
connection with the subject matter of this Agreement and the use or practice of which does not
involve the use of any Athersys Technology.
1.16 “Information”
shall mean information, results and/or data of any type whatsoever, in any
tangible or intangible form, including without limitation databases, inventions, practices,
methods, techniques, specifications, formulations, formulae, knowledge, know-how, skill,
experience, test data including pharmacological, biological, chemical, biochemical, toxicological
and clinical test data, analytical and quality control data, stability data, studies and
procedures, and patent and other legal information or descriptions.
1.17 “License”
shall have the meaning assigned to it in Section 3.2.
1.18 “Net Sales”
shall mean the amount invoiced or otherwise billed by BMS or its Affiliate or
licensee for sales or other commercial disposition of a Product to a Third Party purchaser, less
the following to the extent included in such billing or otherwise actually allowed or incurred with
respect to such sales: (i) discounts, including cash, trade and quantity discounts, price reduction
programs, retroactive price adjustments with respect to sales of a product, charge-back payments
and rebates granted to managed health care organizations or to federal, state and local governments
(or their respective agencies, purchasers and reimbursers) or to trade customers, including but not
limited to, wholesalers and chain and pharmacy buying groups; (ii) credits or allowances actually
granted upon rejections or returns of Products, including for recalls or damaged goods; (iii)
freight, postage, shipping and insurance charges actually allowed or paid for delivery of Products,
to the extent billed; (iv) customs duties, tariffs, surcharges and other governmental charges
incurred in connection with the exportation or importation of a Product; (v) bad debts relating to
sales of Products that are actually written off by BMS in accordance with generally accepted
accounting principles, consistently applied, during the applicable royalty calculation period, and
(vi) taxes, duties or other governmental charges levied on, absorbed or otherwise imposed on sale
of Products, including without limitation value-added taxes, or other governmental charges
otherwise measured by the billing amount, when included in billing, as adjusted for rebates and
refunds, but specifically excluding taxes based on net income of the seller; provided that all of
the foregoing deductions are calculated in accordance with generally accepted accounting principles
consistently applied throughout the party’s organization.
Notwithstanding the foregoing, if any Product is sold under a bundled or capitated arrangement with
other BMS products, then, solely for the purpose of calculating Net Sales for royalty purposes
hereunder, any discount on such Product sold under such an arrangement shall be no greater, on a
percentage basis based on the gross selling price prior to discount, than the largest percentage
discount applied on the other pharmaceutical products sold within such bundled
arrangement for the applicable accounting period. In case of any dispute as to the applicable
discount numbers under the preceding sentence, the determination of same shall be calculated and
certified by BMS’ independent public accountants, whose decision shall be binding.
A sale of a Product is deemed to occur upon the earliest of invoicing or transfer of title in the
Product to the Third Party purchaser. In the event that BMS, after reasonable efforts, cannot
calculate accurately the Net Sales of a sublicensee in a particular country, the Parties will meet
and negotiate in good faith an appropriate means for calculating “Net Sales” in such a situation.
For sake of clarity and avoidance of doubt, sales by BMS, its Affiliates or sublicensees of a
Product to a Third Party distributor of such Product in a given country shall be considered sales
to a Third Party customer, but sales and/or transfers of a Product between or among BMS, its
Affiliates or sublicensees shall not be considered sales to a Third Party customer, so long as such
recipient subsequently resells the Product. Any Products used (but not sold for consideration) for
promotional or advertising purposes or used for clinical or other research purposes shall not be
considered in determining Net Sales hereunder.
In the event a Product is sold as an end-user product consisting of a combination of active
functional elements or as a combined product and/or service, Net Sales, for purposes of determining
royalty payments on such Product, shall be calculated by multiplying the Net Sales of the end-user
product and/or service by the fraction A over A+B, in which A is the gross selling price of the
Product portion of the end-user product and/or service when such Product is sold separately during
the applicable accounting period in which the sales of the end-user product were made, and B is the
gross selling price of the other active elements and/or service, as the case may be, of the
end-user product and/or service sold separately during the accounting period in question. All
gross selling prices of the elements of such end-user product and/or service shall be calculated as
the average gross selling price of the said elements during the applicable accounting period for
which the Net Sales are being calculated. In the event that, in any country or countries, no
separate sale of either such above-designated Product or such above designated elements of the
end-user product and/or service are made during the accounting period in which the sale was made or
if gross retail selling price for an active functional element, component or service, as the case
may be, cannot be determined for an accounting period, Net Sales allocable to the Product in each
such country shall be determined by mutual agreement reached in good faith by the Parties prior to
the end of the accounting period in question based on an equitable method of determining same that
takes into account, on a country by country basis, variations in potency, the relative contribution
of each active agent, component or service, as the case may be, in the combination, and relative
value to the end user of each active agent, component or service, as the case may be.
Notwithstanding the foregoing, it is agreed that drug delivery vehicles, adjuvants, and excipients
shall not be deemed to be “active ingredients” or “active functional elements,” the presence of
which in a Product would be deemed to create a combination product subject to the terms of the
preceding paragraph.
1.19 “Patents”
shall mean all issued United States and foreign patents (including all
reissues, extensions, renewals, substitutions, re-examinations,
supplementary protection certificates and the like, and patents of addition) and pending
United States and foreign patent applications (including, without limitation, all provisional and
nonprovisional applications and all continuations, continuations-in-part and divisions thereof).
1.20 “Product”
shall mean any product containing a Candidate Compound, including any
formulation, dosage form, packaged form or delivery means thereof.
1.21 “RAGE Technology”
shall mean any and all intellectual property, whether or not
patentable, that is owned or licensed by Athersys and relates to Athersys’ techniques for
activating gene expression, which are referred to by Athersys collectively as Random Activation of
Gene Expression or RAGE technology.
1.22 “Term”
shall have the meaning assigned to it in Section 11.1.
1.23 “Third Party”
means any entity other than Athersys, BMS or an Affiliate of either of
them.
1.24 “Valid Claim”
shall mean either (i) a claim of issued and unexpired letters patent which
has not been held permanently revoked, unenforceable or invalid by a decision of a court or other
governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed
for appeal and that is not admitted to be invalid or unenforceable through reissue, disclaimer or
otherwise, or (ii) a claim of a pending patent application that has not been pending for more than
seven (7) years and that has not been abandoned or finally rejected without the possibility of
appeal or refiling.
2.1 Review of Proposed Cell Lines by Athersys.
(a)
Subject to the limits set forth in Section 2.2, Athersys shall create new Accepted Cell
Lines based on RAGE-VT cell lines that BMS proposes, as set forth in Exhibit A, and Athersys has
accepted as provided below. BMS shall use reasonable, good faith efforts to assure that the
aggregate level of technical difficulties and legal risks associated with the cell lines that BMS
nominates is balanced and provides Athersys a reasonable opportunity to perform hereunder.
Athersys shall have the right to review and approve, as provided in Exhibit A, the target protein
to be expressed in each RAGE-VT cell line that BMS proposes be made under this Agreement. Athersys
shall complete such review within forty-five (45) days after the date Athersys receives information
from BMS regarding a proposed target to be expressed in a RAGE-VT cell line, or upon any other
schedule to which the Parties may mutually agree in writing. Athersys shall use reasonable, good
faith efforts to assure that the aggregate level of technical difficulties and legal risks
associated with the cell lines that Athersys accepts is balanced and provides a reasonable
opportunity for the generation of Accepted Cell Lines hereunder.
(b)
While Athersys is completing such review, the Parties shall promptly negotiate specific
Acceptance Criteria for such cell line based upon the Acceptance Criteria as generically set forth
in Exhibit A. Upon agreement by the Parties on the specific Acceptance Criteria for a particular
proposed RAGE-VT cell line, such Acceptance Criteria shall be included in Exhibit A, and, subject
to review and subsequent approval of the target protein by Athersys under this Section 2.1,
Athersys shall promptly thereafter commence work under Section 2.2 to create a RAGE-VT cell line
based thereon, and any such cell line shall be a “Collaboration Cell Line.”
(c)
If Athersys rejects any of the proposed RAGE-VT cell lines in accordance with the
parameters set forth in Exhibit A, Athersys shall promptly notify BMS, and BMS shall have the right
to amend Exhibit A in order to designate a replacement RAGE-VT cell line (for each one of the
RAGE-VT cell lines originally proposed and rejected by Athersys) within sixty
(60) days after
receiving notice of the rejection; provided, however, that Athersys shall again have the right to
review and approve any such proposed replacement cell line, as above.
(d)
BMS shall propose RAGE-VT cell lines hereunder from time to time in quantities reasonably
believed (taking into account, among other things, Athersys’ right under this Section 2.1, to
reject cell lines that BMS proposes) to be sufficient for Athersys to generate, and for BMS to
accept (subject to satisfaction of the acceptance criteria agreed upon by the Parties), a minimum
of fifteen (15) Collaboration Cell Lines over a three (3) year period (subject to Section 2.9),
beginning on the Effective Date, with five (5) in year one, five (5) in year two and five (5) in
year three; provided, however, that in the event Athersys rejects a RAGE-VT cell line nominated by
BMS, BMS shall always have a full sixty (60) day period within which to nominate a replacement cell
line, regardless of the deadline for meeting any applicable minimum under this Section 2.1.
2.2 Supply of Collaboration Cell Lines; Status Reports.
Athersys shall use reasonable efforts
to deliver to BMS each Collaboration Cell Line that Athersys approves under Section 2.1 within six
(6) months after such approval. Athersys shall provide BMS with summary reports, which shall be
written, of the status and progress of Athersys’s efforts to provide Collaboration Cell Lines every
eight (8) weeks. Such reports shall be sent to the attention of the BMS Project Coordinator.
Athersys shall not be obligated to supply to BMS more than a total of eight (8) Collaboration Cell
Lines per year over the Term.
2.3 Review of Collaboration Cell Lines by BMS.
(a)
BMS shall have the right, for a period of forty-five (45) days after receiving a
particular Collaboration Cell Line, to review such Collaboration Cell Line for the purpose of
evaluating whether or not the production of protein meets the specific Acceptance Criteria for the
particular Collaboration Cell Line as agreed by the Parties (pursuant to Section 2.1) and set forth
in Exhibit A. Unless BMS provides written notice to Athersys that such Collaboration Cell Line
does not meet such specific Acceptance Criteria within such period, such Collaboration Cell Line
shall be accepted by BMS and shall be an “Accepted Cell Line” for all purposes hereunder. Even if
any Collaboration Cell Line fails to produce the amount of protein
meeting the specific Acceptance Criteria set forth in Exhibit A, BMS shall nonetheless have
the right, but not the obligation, to accept such Collaboration Cell Line as an Accepted Cell Line,
by written notice to Athersys within such forty-five (45) day period. If BMS does not accept a
Collaboration Cell Line, BMS and Athersys shall discuss the reason(s) such Collaboration Cell Line
was not accepted, and if BMS and Athersys agree that modifying the approach to creating a
Collaboration Cell Line is feasible and desirable, Athersys shall make such modification and
present such modified Collaboration Cell Line to BMS for evaluation and acceptance (if applicable)
as provided herein.
(b)
Athersys shall provide the BMS Project Coordinator with at least two (2) weeks’ advance
notice of Athersys’ intent to deliver a Collaboration Cell Line to BMS for review under Section
2.3(a), so that BMS may attempt to allocate internal resources appropriately. In the event
Athersys fails to give such notice with respect to any given Collaboration Cell Line, the BMS
review period therefor shall be extended to sixty (60) days.
2.4 Infringement by Accepted Cell Lines.
If at any time during the term of the License or
Counterscreening License applicable to a particular Accepted Cell Line, such Accepted Cell Line
becomes, or in Athersys’ opinion is likely to become, the subject of a Third Party patent
infringement claim based on BMS’ practice of such License or Counterscreening License, then
Athersys shall use commercially reasonable efforts, at its sole expense, either (i) to procure for
BMS the right to continue using such Accepted Cell Line, or (ii) to replace or modify such Accepted
Cell Line so that it becomes noninfringing while still having substantially the same functionality
and efficacy as prior to such replacement or modification. In the event Athersys is not successful
in its efforts under clause (i) and/or (ii) of the preceding sentence within three (3) months after
any such claim arises, Athersys shall, at BMS’s request, meet to discuss in good faith other
possible solutions to the claim.
2.5 Selection of Counterscreening Cell Lines.
As to a particular cell line that BMS requests
to be made under Section 2.1, BMS may specify in writing, at the time the request for such cell
line is made, that such cell line will be a Counterscreening Cell Line when accepted under Section
2.3, and such cell line then would be used solely for Counterscreening pursuant to the
Counterscreening License. BMS may so specify no more than fifty percent (50%) of the Collaboration
Cell Lines requested in a particular year be used for Counterscreening.
2.6 Project Coordinators.
Each Party shall designate an individual (a “Project Coordinator”)
to coordinate, on such Party’s behalf, the day-to-day interaction of and communication between the
Parties under this Agreement. Each Project Coordinator shall possess the education, training and
experience necessary to make him or her reasonably technically qualified to serve as a Project
Coordinator. Each Party shall be free to replace its Project Coordinator with new a appointee who
has authority to act on behalf of such Party, upon notice to the other Party.
2.7 BMS Diligence.
BMS agrees that, for each Accepted Cell Line (but excluding all
Counterscreening Cell Lines), BMS shall initiate and use reasonably diligent efforts to complete an
HTS program for such Accepted Cell Line as soon as practicable after the date such cell line
is designated or deemed an Accepted Cell Line. Notwithstanding the preceding sentence, an
Accepted Cell Line shall be deemed to have completed HTS twelve (12) months after acceptance unless
the Cell Line fails to perform as prescribed in Exhibit A. BMS shall provide Athersys with
reasonable reports regarding its progress in conducting such HTS screening.
2.8 BMS Termination of Cell Lines.
(a) Prior to Cell Line Acceptance.
With respect to Collaboration Cell Lines for which
acceptance has not yet occurred, upon thirty (30) days notice to Athersys, BMS may terminate
Athersys’ development of one Collaboration Cell Line per year during the period prior to which the
Collaboration Cell Line is eligible to be deemed an Accepted Cell Line pursuant to Section 2.3(a).
If a Collaboration Cell Line is so terminated, then BMS shall be obligated to pay Athersys fifty
percent (50%) of the payment due for achievement of the milestone subsequent to the last previously
achieved milestone, under Section 4.1(a) or 4.1(c), as the case may be, for such Collaboration Cell
Line.
(b) Following HTS Completion.
With respect to any Accepted Cell Line (other than
Counterscreening Cell Lines) for which HTS completion has occurred and BMS has paid the
corresponding milestone payment under Section 4.1(a), upon thirty (30) days notice to Athersys, BMS
may, for reasonable business, scientific and/or technical reasons (which shall be disclosed to
Athersys, on a confidential basis), terminate its License with respect to such Accepted Cell Line,
which termination shall be effective after payment of the next license fee due under Section
4.1(b). On the due date of such payment the license to such Accepted Cell Line granted under
Section 3.2 shall automatically terminate, and after payment of such license fee BMS shall have no
further payment obligations to Athersys with respect to such Accepted Cell Line subject to the
following covenant. With respect to any such Accepted Cell Line for which BMS has terminated its
license rights pursuant to this Section 2.8(b), BMS covenants that BMS and its Affiliates and
licensees shall not use, develop or commercialize any materials, results, data or information
(including, without limitation, any compound or composition, or any derivative, homolog or isomer
thereof) that was originally created or originally identified through BMS’ prior use of such
Accepted Cell Line; provided, however, that the foregoing covenant shall not preclude BMS and its
Affiliates from continuing to conduct discovery, research, development and commercialization
activities with respect to the target protein expressed by such Accepted Cell Line so long as BMS
and its Affiliates abide by such covenant in so doing.
2.9 BMS Termination of Collaboration Program.
BMS shall have the right to terminate the
collaboration program contemplated by this Section 2 at the end of the second year of the
collaboration program, by giving Athersys written notice of such termination at least ninety (90)
days prior to the second anniversary of the commencement of the collaboration program. BMS
acknowledges that Athersys will incur certain wind-down and FTE re-allocation costs and expenses in
the event of any such early termination and, therefore, agrees to pay Athersys the sum of $125,000
to help offset such costs. Such payment shall be made within thirty (30) days after delivery of
BMS’ termination notice pursuant to this Section 2.9.
3.1 Evaluation License.
Subject to the terms of this Agreement, as to each Collaboration Cell
Line provided to BMS by Athersys hereunder, Athersys grants to BMS a royalty-free, non-exclusive
,
worldwide license, without the right to sublicense, under the Athersys Technology solely to conduct
internal research evaluation of such Collaboration Cell Line as provided in Section 2.3 of this
Agreement during the forty-five (45) day period after BMS first receives such Collaboration Cell
Line.
3.2 Research and Development License.
Subject to the terms of this Agreement, and effective
upon BMS’s acceptance of a particular Accepted Cell Line (other than a Counterscreening Cell Line),
Athersys grants to BMS a royalty-bearing, non-exclusive, worldwide license, without the right to
sublicense, under the Athersys Technology solely to use such Accepted Cell Line in the Field (the
“License”).
3.3 Counterscreening License.
Subject to the terms of this Agreement, and effective only upon
BMS’s acceptance of a particular Accepted Cell Line that BMS elected under Section
2.5 to be a
Counterscreening Cell Line, Athersys hereby grants to BMS a non-exclusive, worldwide license (the
“Counterscreening License”), without the right to sublicense, under the Athersys Technology solely
to use each such Counterscreening Cell Line for Counterscreening. For clarity, a particular
Accepted Cell Line may not be used by BMS (or its Affiliate) for use both in the Field and for
Counterscreening except as specified in 4.1 (e).
3.4 Duration of Athersys Licenses.
(a) Field License Duration.
The License granted in Section 3.2, as to a particular Accepted
Cell Line, shall be perpetual, subject to payment of all applicable fees, unless terminated by BMS
as provided in Section 2.8(b).
(b) Counterscreening License Duration.
Subject to payment of all applicable fees, the
Counterscreening License granted in Section 3.3 shall be perpetual, as to a particular
Counterscreening Cell Line.
3.5 Negative Covenants.
(a) No Other Use by BMS.
BMS covenants and agrees that it shall not use the Collaboration
Cell Lines for any purpose other than as set forth in Section 3.1 and shall not use the Accepted
Cell Lines or any materials derived therefrom for any purpose other than as set forth in Sections
3.2 and 3.3, as applicable. BMS further covenants and agrees that it shall not use or practice the
Athersys Technology for any purpose except as expressly permitted in the licenses granted to BMS
under Sections 3.1, 3.2 and 3.3, as applicable.
(b) No Transfer to Third Parties.
BMS covenants and agrees that BMS shall not transfer
Collaboration Cell Lines or Accepted Cell Lines or any Information pertaining thereto or any
materials derived therefrom, to any Third Party for any purpose, except that BMS may transfer such
Information and materials to collaborators to the extent necessary for BMS to exercise its right to
use the Accepted Cell
Lines in connection with bona fide collaborations with academic and/or commercial partners in
the Field, but may not transfer the Accepted Cell Lines to such entities except with Athersys’
prior written consent. For clarity, BMS covenants and agrees that BMS shall not transfer
Collaboration Cell Lines or Accepted Cell Lines, or any Information pertaining thereto or any
materials derived therefrom, to any Third Party for Counterscreening.
3.6 Athersys Reserved Rights.
BMS understands and agrees that Athersys owns and reserves to
itself all rights, title and interest in the Athersys Technology, and to the Collaboration Cell
Lines and the Accepted Cell Lines, subject only to the licenses granted in Sections 3.1, 3.2 and
3.3, respectively.
3.7 Records And Reports.
(a) Records.
BMS shall maintain complete and accurate records that fully and properly reflect
all work done and all results achieved, including raw data, in the evaluation of Collaboration Cell
Lines, the use of Accepted Cell Lines and the discovery, research and development of Candidate
Compounds (“Records”). The Records shall be kept with sufficient detail and in good scientific
manner appropriate for patent and regulatory purposes and shall be
kept separate and distinct from
other work conducted by BMS, all in a manner consistent with BMS’ other internal research and
development record keeping.
(b) Copies and Inspection of Records.
Athersys shall have the right, during normal business
hours and upon reasonable notice, to inspect the Records for purposes consistent with this
Agreement. Athersys shall maintain all Information learned from such inspection of the Records in
confidence in accordance with Article 7. All inspections, copying and visits hereunder shall be
conducted in a manner and frequency so as not to disrupt BMS’s business and in a manner so as not
to cause any disclosure of any other BMS Confidential Information.
(c) Semi-Annual Reports.
Within thirty (30) days following the end of each six (6) month
period during the term of the License with respect to each Accepted Cell Line, BMS shall provide to
Athersys a written progress report that shall describe the results and developments of the use of
such Accepted Cell Line, and the discovery, research and development of Candidate Compounds
therewith. With such reports, BMS shall disclose to Athersys in summary form (
i.e.,
in a manner
that does not require BMS to disclose sensitive or competitively-enabling data or information) the
development, making, conception or reduction to practice of all Candidate Compounds that are
discovered, made, investigated, conceived or reduced to practice by use of such Accepted Cell Line
or assays based thereon. In addition, BMS shall fully disclose to Athersys in each such report any
Improvements that BMS may have developed during the period covered by such report.
4.1 License Fees.
1
Confidential treatment has been requested for the redacted portions of this
exhibit, and such confidential portions have been omitted and filed separately with the Securities
and Exchange Commission.
(a) Screening License Fees.
For each Collaboration Cell Line requested by BMS that is to
be used in the Field (
i.e.,
excluding the Counterscreening Cell Lines), BMS shall pay Athersys
non-refundable license fees upon achievement of the milestone events as provided in the following
schedule:
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Event
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Payment
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Agreed upon Acceptance Criteria
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$
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[*]
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•
Athersys accepts BMS’ request for the development of a
Collaboration Cell Line, and the Parties mutually agree upon
Acceptance Criteria therefor
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Clonal Cell Line Isolated
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$
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[*]
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•
Verified through RT- PCR proof of appropriate vector
integration
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Cell Line Acceptance (designation of Accepted Cell Line)
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$
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[*]
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•
Achievement, pursuant to Section 2.3(a), of all
specific Acceptance Criteria mutually previously agreed upon
by the Parties for the proposed Accepted Cell Line
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HTS Completion for Accepted Cell Line
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$
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[*]
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BMS and Athersys shall jointly determine the occurrence of any of the foregoing milestone events
with respect to a particular Collaboration Cell Line, and the applicable payments for each event
shall be due and payable within thirty (30) days of the Parties’ having made such a determination.
(b) Additional Annual License Fees.
For each Accepted Cell Line that is to be used in the
Field (
i.e.,
excluding the Counterscreening Cell Lines) with respect to which the License has not
terminated due to BMS previously exercising its right to terminate its License under Section
2.8(b), BMS shall also pay Athersys non-refundable license fees upon achievement of the milestone
events as provided in the following schedule:
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Event
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Payment
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Six (6) Month Anniversary of Completion of HTS for Accepted Cell
Line
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$
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[*]
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•
Payable at the end of the six (6) month period
beginning on the date BMS completes HTS for such Accepted
Cell Line
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Twelve (12) Month Anniversary of Completion of HTS for Accepted
Cell Line
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$
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[*]
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•
Payable at the end of the twelve (12) month period
beginning on the date BMS completes HTS for such Accepted
Cell Line
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Eighteen (18) Month Anniversary of Completion of HTS for Accepted
Cell Line
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$
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[*]
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•
Payable at the end of the eighteen (18) month period
beginning on the date BMS completes HTS for such Accepted
Cell Line
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Twenty-Four (24) Month Anniversary of Completion of HTS for
Accepted Cell Line
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$
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[*]
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•
Payable at the end of the twenty-four (24) month
period beginning on the date BMS completes HTS for such
Accepted Cell Line
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For clarity, if BMS exercises its right to terminate the License as provided in Section 2.8(b) as
to a particular Accepted Cell Line, BMS shall make the next payment due as provided above after
serving notice of such termination.
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1
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Confidential treatment has been requested for the redacted portions of this
exhibit, and such confidential portions have been omitted and filed separately with the Securities
and Exchange Commission.
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(c) Counterscreening License Fees.
For each Counterscreening Cell Line requested to be
made by BMS, BMS shall pay Athersys non-refundable license fees upon achievement of the milestone
events as provided in the following schedule:
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Event
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Payment
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Agreed upon Acceptance Criteria
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$
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[*]
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•
Athersys accepts BMS’ request for the development of
a Collaboration Cell Line, and the Parties mutually agree
upon Acceptance Criteria therefor
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Clonal Cell Line Isolated
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$
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[*]
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•
Verified through RT- PCR proof of appropriate vector
integration
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Cell Line Acceptance (designation of Counterscreening Cell Line)
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$
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[*]
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•
Achievement, pursuant to Section 2.3(a), of all
specific Acceptance Criteria previously mutually agreed upon
by the Parties for the proposed Counterscreening Cell Line
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1
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Confidential treatment has been requested for the redacted portions of this
exhibit, and such confidential portions have been omitted and filed separately with the Securities
and Exchange Commission.
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BMS and Athersys shall jointly determine the occurrence of any of the foregoing milestone
events with respect to a particular Counterscreening Cell Line, and the applicable payments for
each event shall be due and payable within thirty (30) days of the Parties’ having made such a
determination.
(d) Additional Counterscreening License Fees.
For each Accepted Cell Line specified as a
Counterscreening Cell Line pursuant to Section 2.5 that is accepted by BMS pursuant to Section 2.3,
BMS shall pay Athersys a non-refundable license fee of either: (i) an aggregate of [*] dollars
($[*]) license fee, which shall be payable in six (6) installments of [*] dollars ($[*]) each, to
be paid at the end of each six (6) month period after the date of acceptance by BMS of the
applicable Accepted Cell Line; or (ii) [*] dollars ($[*]) for the use, in perpetuity, of the
Counterscreening License, such fee to be payable on the six (6) month anniversary of the date of
acceptance by BMS of the applicable Accepted Cell Line.
(e) Counterscreening License Fee for Accepted Cell Line.
For any particular Accepted Cell
Line used in the Field for which BMS has completed payment of all milestone payments under Sections
4.1(a) and (b) (
i.e.
, a total of $[*] for such Accepted Cell Line), BMS may elect in writing to
Athersys to obtain the perpetual right to use such Accepted Cell Line in Counterscreening (under
the terms of a Counterscreening License under Section 3.3) by a one-time payment of $[*] to be made
within thirty (30) days of such notice.
4.2 Milestone Payments.
For each Accepted Cell Line used in the Field, BMS shall pay Athersys
the milestone payments set forth in Exhibit B within thirty (30) days after each milestone event
has been achieved for each Candidate Compound identified for clinical development by BMS or its
Affiliate or sublicensee for the particular Accepted Cell Line.
4.3 Royalty Payments.
BMS shall pay Athersys a royalty equal to [*] percent ([*]%) of Net
Sales of all Products worldwide. Each payment of royalties under this Agreement shall be
accompanied by a statement of the amount of the total amounts received and calculated as Net Sales
during such period, and all other information necessary to determine the appropriate amount of such
payments.
4.4 Royalty Term.
For each Product, on a country-by-country basis, BMS shall pay to Athersys
royalties under Section 4.3 commencing on the first commercial sale in the applicable country and
continuing until the later of (a) the last to expire Patent in such country owned or controlled by
BMS or its affiliate or licensee containing a Valid Claim covering such Product or the Candidate
Compound therein, or covering the manufacture, use or formulation of such Product or compound, or
(b) ten (10) years from the date of such first commercial sale in such country.
4.5 Blocked Currency.
In each country where the local currency is blocked and cannot be
removed from the country, at the election of Athersys, royalties accrued in that country shall be
paid to Athersys in such country in local currency by deposit in a local bank designated by
Athersys.
4.6 Non-Monetary Consideration.
In the event BMS (or its Affiliates or sublicensees) receives
any non-monetary consideration in connection with the sale or other commercial disposition of
Products, Athersys’s
royalty shall be based on the fair monetary value of such other consideration. In such case,
BMS shall disclose to Athersys, on a confidential basis, the terms of such arrangement, and the
Parties shall agree in good faith on such monetary value, which shall then be included in Net Sales
for the period in which it was received by BMS (or its Affiliates or sublicensees).
5.1 Records and Audit.
During the term of this Agreement and for a period of three (3) years
thereafter, BMS shall keep complete and accurate records pertaining to the sale or other
disposition of all Products, in sufficient detail to permit Athersys to confirm the accuracy of all
payments due hereunder. Athersys shall have the right to cause an independent, certified public
accountant to audit such records to confirm BMS’s Net Sales and royalty payments and payments under
Section 4.2; provided, however, that such auditor shall not disclose BMS’s Confidential Information
to Athersys, except to the extent such disclosure is necessary to verify the portion of the amount
of royalties and payments due under this Agreement. Such audits may be exercised once a year,
within three (3) years after the period to which such records relate, upon notice to BMS and during
normal business hours. Athersys shall bear the full cost of such audit unless such audit discloses
a variance of more than five percent (5%) from the amount of royalties and payments under Section
4.2 previously paid for such year. In such case, BMS shall bear the full cost of such audit. The
terms of this Section 5.1 shall survive any termination or expiration of this Agreement for a
period of three (3) years.
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1
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Confidential treatment has been requested for the redacted portions of this
exhibit, and such confidential portions have been omitted and filed separately with the Securities
and Exchange Commission.
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6.
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Intellectual Property.
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6.1 Ownership
.
(a) Athersys.
Athersys shall remain the sole owner of the Athersys Technology, the RAGE
Technology, the Collaboration Cell Lines and the Accepted Cell Lines, including any improvements
thereto made by Athersys. Athersys shall have the sole responsibility, at its discretion, for
patent prosecution and choice of patent counsel in relation to Athersys Patents, and shall pay all
expenses associated therewith. BMS hereby assigns and agrees to assign to Athersys its entire
interest in any Improvements, which shall be deemed to be part of the Athersys Technology.
(b) BMS.
BMS shall be the sole owner of any inventions and information resulting from BMS’
use of the Accepted Cell Lines, including any Products, but excluding all Improvements. BMS shall
have the sole responsibility, at its discretion, for patent prosecution and choice of patent
counsel in relation to such BMS-owned inventions and the Products and shall pay all expenses
associated therewith.
6.2 Enforcement of Patent Rights
. Each Party shall have the sole right, but not the
obligation, to institute, prosecute or control any action or proceeding with respect to
infringement by a Third Party of one or more issued Patents owned by such Party.
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7.
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Confidentiality; Publicity.
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7.1 Confidential Information.
The Parties agree that, for the Term of this Agreement and for
five (5) years thereafter, the receiving Party shall keep completely confidential and shall not
publish or otherwise disclose and shall not use for any purpose, except for the purposes expressly
permitted by this Agreement, any Confidential Information furnished to it by the disclosing Party.
The foregoing obligation shall not apply to any information received by a Party to the extent that
it can be established by such receiving Party by competent evidence that such information:
(a)
was already known to the receiving Party, other than under an obligation of
confidentiality, at the time of disclosure;
(b)
was generally available to the public or otherwise part of the public domain at the time
of its disclosure to the receiving Party;
(c)
became generally available to the public or otherwise part of the public domain after its
disclosure and other than through any act or omission of the receiving Party in breach of this
Agreement;
(d)
was independently developed by the receiving Party as demonstrated by competent written
evidence prepared contemporaneously with such independent development; or
(e)
was subsequently lawfully disclosed to the receiving Party by a person other than a Party
hereto.
7.2 Authorized Disclosure
. Notwithstanding the foregoing, a Party may disclose the
Confidential Information of the other Party to the extent such disclosure is necessary to be
disclosed in the following instances:
(a)
Regulatory filings made by BMS;
(b)
Prosecuting or defending litigation or responding to valid subpoenas;
(c)
Complying with applicable governmental regulations;
(d)
Conducting clinical trials of BMS, its Affiliates and sublicensees;
(e)
Disclosure, in connection with the performance of this Agreement, to Affiliates,
employees, consultants, or agents, each of whom prior to disclosure must be bound by similar
obligations of confidentiality and non-use at least equivalent in scope to those set forth in this
Section 7;
(f)
Disclosure that is required by applicable law or governmental regulation; and
(g)
Disclosure of the existence and terms of this Agreement and of general summaries of the
progress made by the Parties under this Agreement (but excluding the identification of any target
nominated by BMS under Section 2.1 and of any Collaboration Cell Line or Accepted Cell Line
developed by Athersys hereunder) to existing or potential investment bankers, investors and/or
merger or acquisition parties, provided that the disclosing Party obtains from such recipient prior
to disclosure an agreement to be bound by obligations of confidentiality and non-use at least
similar in scope to those set forth in this Section 7.
7.3 Disclosure.
If a Party is required to make any disclosure of another Party’s Confidential
Information that is authorized under subsections (a), (b), (c), (d) or (f) of Section 7.2, it will
give reasonable advance notice to the latter Party of such disclosure and will afford the latter
Party a reasonable opportunity, and will cooperate reasonably with such Party, to secure
confidential treatment of such information prior to its disclosure (whether through protective
orders or otherwise) and to limit the extent of the disclosure as much as possible. Except as
otherwise required by law, and subject to Section 7.5, neither Party shall issue a press release or
make any other disclosure of the terms of this Agreement or any aspect of the research conducted
pursuant to this Agreement without the prior approval of such press release or disclosure by the
other Party hereto. Each Party shall submit any such press release or disclosure to the other
Party, and the receiving Party shall have ten (10) business days to review and approve any such
press release or disclosure, which approval shall not be unreasonably withheld. If the receiving
Party does not respond within such ten (10) day period, the press release or disclosure shall be
deemed approved. In addition, if a public disclosure is required by law, including without
limitation in a filing with the Securities and Exchange Commission, the disclosing Party shall
provide copies of the disclosure reasonably in advance of such filing or other disclosure for the
nondisclosing Party’s prior review and comment.
7.4 Confidential Terms.
Except as expressly provided herein, each Party agrees not to
disclose any terms of this Agreement or any aspect of the research conducted pursuant to this
Agreement to any Third Party without the consent of the other Party.
7.5 Initial Press Release.
The Parties shall issue a mutually approved, initial press release
promptly after the Effective Date. The Parties agree that this press release shall be in the form
of the press release attached to this Agreement as Exhibit C.
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8.
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Representations and Warranties.
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8.1 Athersys.
Athersys represents and warrants that: (i) it is a corporation duly organized
validly existing and in good standing under the laws of the State of Delaware; (ii) the execution,
delivery and performance of this Agreement have been duly authorized by all necessary corporate
action on the part of Athersys; (iii) the performance of Athersys’s obligations under this
Agreement will not conflict with its charter documents or result in a material breach of any
agreements, contracts or other arrangements to which it is a party; (iv) Athersys will not, during
the Term of this Agreement, enter into any agreements, contracts or other arrangements that would
be materially inconsistent with its obligations under this
Agreement; (v) Athersys has sufficient facilities, experienced personnel and other
capabilities reasonably suited to enable it to perform its obligations under this Agreement; (vi)
Athersys is the owner of, or has licensed rights to, all of the Athersys Patents in existence on
the Effective Date, and has the right to grant the licenses or sublicenses, as the case may be,
therefor granted under this Agreement; and (vii) as of the Effective Date, Athersys is not aware of
any asserted or unasserted claim or demand which is being, or which Athersys believes can be,
rightfully enforced by a Third Party against any of the Athersys Patents that would materially
limit, hinder, delay or otherwise adversely affect BMS’s enjoyment of its rights and satisfaction
of its obligations under this Agreement.
8.2 BMS.
BMS represents and warrants that: (i) it is a corporation duly organized validly
existing and in good standing under the laws of the State of Delaware; (ii) the execution, delivery
and performance of this Agreement have been duly authorized by all necessary corporate action on
the part of BMS; (iii) the performance of BMS’s obligations under this Agreement will not conflict
with its charter documents or result in a material breach of any agreements, contracts or other
arrangements to which it is a party; (iv) BMS has sufficient facilities, experienced personnel and
other capabilities reasonably suited to enable it to perform its obligations under this Agreement;
and (v) BMS will not, during the Term of this Agreement, enter into any agreements, contracts or
other arrangements that would be materially inconsistent with its obligations under this Agreement.
8.3 Disclaimer of Warranties.
THE ATHERSYS KNOW-HOW, ATHERSYS PATENTS AND COLLABORATION CELL
LINES ARE PROVIDED AND LICENSED TO BMS “AS IS”, AND ATHERSYS AND ITS RESPECTIVE AFFILIATES MAKE NO
REPRESENTATIONS AND EXTEND NO WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH
RESPECT THERETO OR TO THE PRODUCTS OR ATHERSYS TECHNOLOGY, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF THE PATENT RIGHTS
LICENSED HEREUNDER, OR
NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
8.4 Unknown Biological Properties.
BMS understands and agrees that the Collaboration Cell
Lines may have unpredictable and unknown biological and/or chemical properties, that they are to be
used with caution, and that they are not to be used for testing in or treatment of humans. BMS
shall use the Collaboration Cell Lines in compliance with all applicable laws and regulations,
including, but not limited to, any laws or regulations relating to the research, testing,
production, storage, transportation, export, packaging, labeling or other authorized use of the
Collaboration Cell Lines.
9.1 Mediation.
If a dispute arises out of or relates to this Agreement, or the breach thereof,
and if said dispute cannot be settled through negotiation, the Parties agree first to try in good
faith to settle the dispute by good faith discussions by the Vice President of External Science and
Technology of BMS and the CEO or senior executive
officer of Athersys (or each such person’s designee), and failing resolution thereby by
mediation under the Commercial Mediation Rules of the American Arbitration Association, before
resorting to arbitration, litigation, or some other dispute resolution procedure.
9.2 Arbitration.
Subject to Section 9.1, Athersys and BMS agree that any dispute or
controversy arising out of, in relation to, or in connection with this Agreement, or the validity,
enforceability, construction, performance or breach thereof, shall be settled by binding
arbitration in New York, New York, under the then-current Rules of Commercial Arbitration of the
American Arbitration Association by one (1) arbitrator appointed in accordance with such Rules.
The arbitrator shall determine what discovery will be permitted, based on the principle of limiting
the cost and time that the Parties must expend on discovery; provided, however, that the arbitrator
shall permit such discovery as he or she deems necessary to achieve an equitable resolution of the
dispute. The decision and/or award rendered by the arbitrator shall be written, final and
non-appealable, absent manifest error, and may be entered in any court of competent jurisdiction.
The Parties agree that, any provision of applicable law notwithstanding, they will not request, and
the arbitrator shall have no authority to award punitive or exemplary damages against any Party.
The costs of any arbitration, including administrative fees and fees of the arbitrator, shall be
shared equally by the Parties, unless the arbitrator determines otherwise.
10.1 By BMS.
Subject to Section 10.3, BMS shall indemnify, defend and hold harmless Athersys
and its directors, officers and employees (each an “Athersys Indemnitee”) from and against any and
all liabilities, damages, losses, costs or expenses (including attorneys’ and professional fees and
other expenses of litigation and/or arbitration) (each a “Liability”) resulting from a claim, suit
or proceeding made or brought by a Third Party against an Athersys Indemnitee arising from or
occurring as a result of (i) any breach of the representations and warranties set forth in Section
8.2, or (ii) the performance (or failure to perform) by BMS of its obligations hereunder.
10.2 By Athersys.
Subject to Section 10.3, Athersys shall indemnify, defend and hold harmless
BMS and its directors, officers and employees (each a “BMS Indemnitee”) from and against any and
all Liabilities resulting from a claim, suit or proceeding made or brought by a Third Party against
a BMS Indemnitee arising from or occurring as a result of (i) any breach of the representations and
warranties set forth in Section 8.1, or (ii) the performance (or failure to perform) by Athersys of
its obligations hereunder.
10.3 Limitation on Indemnity Obligations.
(a) Negligence, etc.
No Athersys Indemnitee or BMS Indemnitee (each, an “Indemnitee”) shall
be entitled to the indemnification under Section 10.1 or 10.2, as the case may be, to the
comparative extent the Liability for which indemnification is sought was caused by a grossly
negligent, reckless or intentional act or omission by the Party with which such
Indemnitee is affiliated or any of such Party’s Affiliates or sublicensees or any of their
respective directors, officers, employees or authorized agents.
(b) Target Proteins and Collaboration Cell Lines.
Athersys acknowledges and agrees that it
will conduct a reasonable intellectual property investigation of each target protein that is the
basis of a particular Collaboration Cell Line, and of matters relating to the creation of the
Collaboration Cell Line, that BMS selects and Athersys agrees to produce pursuant to Section 2.1,
which shall be in addition to any such investigation that BMS may have conducted. BMS also
acknowledges and agrees that it will conduct a reasonable intellectual property investigation of
each target protein that BMS proposes for selection by Athersys as the basis for producing a
Collaboration Cell Line pursuant to Section 2.1, which shall be in addition to any such
investigation that Athersys may conduct, and shall disclose to Athersys the results of such
investigation. BMS shall not be obligated to provide indemnification under Section 10.1 against
any Liabilities resulting from a claim, suit or proceeding to the extent it is alleged, proven or
agreed in such claim, suit or proceeding that any such target protein (or the creation of the
corresponding Collaboration Cell Line) infringes upon or otherwise violates the intellectual
property rights of any Third Party, except to the comparative extent such infringement or violation
results from a grossly negligent, reckless or intentional act or omission by BMS or any of BMS’
Affiliates or any of their respective directors, officers, employees or authorized agents.
10.4 Procedure.
In the event that an Indemnitee intends to claim indemnification under this
Article 10, it shall promptly notify the indemnifying Party in writing of such alleged Liability.
The indemnifying Party shall have the sole right to control the defense and settlement thereof.
The indemnifying Party shall have the right to settle or compromise any Liabilities for which it is
providing indemnification under this Article 10, provided that the consent of the Indemnitee (which
shall not be unreasonably withheld or delayed) shall be required in the event any such settlement
or compromise would adversely affect the interests of such Indemnitee. The Indemnitees shall
cooperate with the indemnifying Party and its legal representatives in the investigation of any
action, claim or liability covered by this Article 10. The Indemnitees shall not, except at their
own cost, voluntarily make any payment or incur any expense with respect to any claim or suit
without the prior written consent of the indemnifying Party, which the indemnifying Party shall not
be required to give.
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11.
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Term and Termination.
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11.1 Term of Agreement.
The term of this Agreement (the “Term”) shall commence on the
Effective Date and continue until expiration upon the end of all royalty and payment obligations of
BMS under Article 4, or until such earlier date as the Parties agree in writing to terminate the
Agreement or the Agreement terminates as provided below.
11.2 Termination for Cause.
Either Party may terminate this Agreement in the event the other
Party has materially breached or defaulted in the performance of any of its obligations hereunder,
and such default has continued without cure for sixty (60) days after written notice thereof was
provided to the breaching Party by the non-breaching Party. Any termination shall become effective
at the end of such sixty (60) day period unless the breaching Party has cured any such breach or
default prior to the expiration of
the sixty (60) day period. Notwithstanding the above, in the case of a failure to timely pay
any amounts due hereunder, the period for cure of any subsequent default following notice thereof
shall be thirty (30) days and, unless payment is made within such period the termination shall
become effective at the end of such period.
11.3 Effect of Termination.
(a) Accrued Rights and Obligations.
Termination of this Agreement for any reason shall not
release any Party hereto from any liability which, at the time of such termination, has already
accrued to the other Party or which is attributable to a period prior to such termination nor
preclude either Party from pursuing any rights and remedies it may have hereunder or at law or in
equity with respect to any breach of this Agreement. It is understood and agreed that monetary
damages may not be a sufficient remedy for any breach of this Agreement and that the non-breaching
Party may be entitled to injunctive relief as a remedy for any such breach.
(b) Return of Confidential Information.
Upon any termination of this Agreement, each of
Athersys and BMS shall promptly return to the other Party all Confidential Information of the
other; provided that counsel of each Party may retain one (1) copy of such Confidential Information
solely for archival purposes.
(c) Survival.
Sections 3.5 and 11.3, and Articles 4, 5, 6, 7, 9, 10 and 12 of this Agreement
shall survive termination of this Agreement for any reason.
12.1 Governing Law.
This Agreement and any dispute, including without limitation any
arbitration, arising from the performance or breach hereof shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving effect to its
conflict of laws rules and regulations.
12.2 Independent Contractors.
The relationship of the parties hereto is that of independent
contractors. The parties hereto are not deemed to be agents, partners or joint venturers of the
others for any purpose as a result of this Agreement or the transactions contemplated thereby.
12.3 Assignment.
Neither Party may assign its rights or obligations under this Agreement
absent the prior written consent of the other Party, not to be unreasonably withheld; provided,
however, that either Party may assign this Agreement without such consent to any of its Affiliates
or to any successor in interest by merger, acquisition or sale of all or substantially all of its
assets in a manner such that the assignee will be liable and responsible for the performance and
observance of all its duties and obligations hereunder. This Agreement shall be binding upon the
successors and permitted assigns of the Parties. Any attempted delegation or assignment not in
accordance with this Section 12.3 shall be void and of no force or effect. In the case of BMS, if
any such successor in interest had, before its merger with, or acquisition or purchase of, BMS, an
agreement with Athersys providing such entity with
a license to the RAGE Technology, then within ninety (90) day after the effective date of such
merger, acquisition or purchase Athersys may terminate this agreement, upon written notice to such
successor in interest.
12.4 Notices.
All notices, requests and other communications hereunder shall be in writing
and shall be personally delivered or sent by telecopy or other electronic facsimile transmission or
by registered or certified mail, return receipt requested, postage prepaid, in each case to the
respective address specified below, or such other address as may be specified in writing to the
other parties hereto:
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If to BMS:
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Bristol-Myers Squibb Company
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Route 206 and Province Line Road
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P. O. Box 4000
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Princeton, New Jersey 08543-4000
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Attn: Vice President and Senior Counsel,
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Pharmaceutical Research Institute and
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Worldwide Business Development
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Fax No.: (609) 252-4232
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If to Athersys:
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Athersys, Inc.
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3201 Carnegie Avenue
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Cleveland, Ohio 44115-2634
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Attn: President
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Fax No.: (216) 361-9495
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12.5 Force Majeure.
Neither Party shall lose any rights hereunder or be liable to the other
Party for damages or losses (except for payment obligations) on account of failure of performance
by the defaulting Party if the failure is occasioned by war or terrorism, strike, fire, Act of God,
earthquake, flood, lockout, embargo, governmental acts or orders or restrictions, failure of
suppliers, or any other reason where failure to perform is beyond the reasonable control and not
caused by the negligence, intentional conduct or misconduct of the nonperforming Party has exerted
all reasonable efforts to avoid or remedy such force majeure; provided, however, that in no event
shall a Party be required to settle any labor dispute or disturbance.
12.6 Advice of Counsel.
BMS and Athersys have each consulted counsel of their choice
regarding this Agreement, and each acknowledges and agrees that this Agreement shall not be deemed
to have been drafted by one Party or another and will be construed accordingly.
12.7 Compliance with Laws.
Each Party will comply with all applicable laws and regulations in
connection with its performance under this Agreement. Each Party shall furnish to the other Party
any information requested or required by that Party during the term of this Agreement or any
extensions hereof to enable that Party to comply with the requirements of any U.S. or foreign
federal, state and/or government agency.
12.8 Severability.
In the event that any provisions of this Agreement are determined to be
invalid or unenforceable by a court of competent jurisdiction, the remainder of the Agreement shall
remain in full force and effect without said provision. In such event, the parties shall in good
faith attempt to negotiate a substitute clause for any provision declared invalid or unenforceable,
which substitute clause shall most nearly approximate the intent of the Parties in agreeing to such
invalid provision, without itself being invalid.
12.9 Waiver.
It is agreed that no waiver by either Party hereto of any breach or default of
any of the covenants or agreements herein set forth shall be deemed a waiver as to any subsequent
and/or similar breach or default.
12.10 Complete Agreement.
This Agreement, together with its Exhibits, constitutes the entire
agreement, both written and oral, between the Parties with respect to the subject matter hereof,
and that all prior agreements, including the term sheet, respecting the subject matter hereof,
either written or oral, expressed or implied, are merged and canceled, and are null and void and of
no effect as of the Effective Date. No amendment or change hereof or addition hereto shall be
effective or binding on either of the parties hereto unless reduced to writing and duly executed on
behalf of both Parties. For clarity, the cells lines created under the Original Agreement, and any
amendments thereto, are not considered within the subject matter of this Agreement.
12.11 Use of Name.
Unless otherwise permitted by this Agreement or required by applicable
laws or regulations, neither Party shall use the name or trademarks of the other Party without the
prior written consent of such other Party.
12.12 Headings.
The captions to the several Sections and Articles hereof are not a part of
this Agreement, but are included merely for convenience of reference only and shall not affect its
meaning or interpretation.
12.13 Counterparts.
This Agreement may be executed in two counterparts, each of which shall
be deemed an original and which together shall constitute one instrument.
* * *
In Witness Whereof
, BMS and Athersys have executed this Agreement by their respective
duly authorized representatives.
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Bristol-Myers Squibb Company
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Athersys, Inc.
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By:
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By:
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Print Name:
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Print Name:
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Title:
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Title:
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Exhibit A
RAGE-VT CELL LINES
A.
Creation of Collaboration Cell Lines
Within ninety (90) days after the Effective Date, BMS shall provide Athersys with an initial list
of specific proteins for which BMS requests that Athersys will create RAGE libraries, for Athersys’
review under Section 2.1(a). If Athersys accepts such proposed proteins as provided therein,
Athersys shall seek to create RAGE libraries, and screen and isolate Collaboration Cell Lines
expressing such proteins after the Parties agree upon Acceptance Criteria for each particular
Collaboration Cell Line. Such list may be supplemented from time to time by mutual agreement of
the Parties or by designation of additional specific proteins by BMS and acceptance of such
proteins by Athersys, as provided in Section 2.1 and in accordance with the procedure provided
below.
From time to time, BMS may nominate specific proteins for consideration by Athersys under Section
2.1 for use in constructing a Collaboration Cell Line using its RAGE technology and other Athersys
Know-How. Any such Collaboration Cell Line shall conform to the general specifications set forth
in Section B below and to any other specific requirements agreed to by the Parties.
Athersys shall have the right, before accepting such request of a particular protein by BMS
hereunder, to review and approve the technical and intellectual property feasibility of
constructing the requested Collaboration Cell Line. If requested by Athersys, BMS shall promptly
provide to Athersys the relevant technical requirements of BMS for the requested Collaboration Cell
Line. Athersys shall make its determination of technical feasibility, intellectual property
analysis and/or conflict with preexisting exclusive research obligations to Third Parties or
preexisting internal research programs for which research has commenced prior to receiving notice
(a “Pre-existing Program”), within forty-five (45) days of the request by BMS. If Athersys
believes that the project is not constrained by any of these considerations or fails to provide any
such notice within such forty-five (45) day period, then the nominated protein (and corresponding
Collaboration Cell Line) shall be deemed to be added to this Exhibit A. If Athersys believes the
project is constrained by any of such considerations and provides such notice within such
forty-five (45) day period, such protein and cell line shall not be added to Exhibit A; provided
that Athersys shall provide to BMS all pertinent information Controlled by Athersys regarding the
basis for its rejection of such request. In that event, BMS shall be entitled to nominate another
protein (with the foregoing process being repeated), until a protein nominated by BMS hereunder is
accepted by Athersys. For purposes of calculating the maximum number of cell lines permitted under
this Agreement, any substitute request made by BMS shall be deemed to have been made as of the date
of the original request.
In addition, in the event Athersys commences a Pre-existing Program with respect to a target
(either internally or with a Third Party), and BMS subsequently proposes such target under Section
2.1, Athersys shall promptly inform BMS of such program and request that BMS propose a substitute
target. In such event, Athersys shall, upon BMS’ request, provide, on a confidential basis, a
reasonable demonstration of such commencement and prosecution of any
such Pre-existing Program for a given target prior to the date of BMS’ proposal of such target
under Section 2.1.
B.
Acceptance Criteria for Collaboration Cell Lines
The Parties shall discuss and agree upon a set of specific Acceptance Criteria for each
Collaboration Cell Line based upon the Generic Criteria set forth below. Such Acceptance Criteria
shall be deemed to constitute a part of this Exhibit A. In each case, BMS and Athersys shall agree
upon one primary assay (with respect to each Collaboration Cell Line, the “Primary Assay”) as the
determining criterion for optimization and proof of target over-expression for purposes of
determining whether a particular Collaboration Cell Line satisfies various of its Acceptance
Criteria. If BMS wishes to have receptor density as determined by radioligand binding (which may
require MTX amplification) as an acceptance criterion, BMS may specify up to three (3) such
Collaboration Cell Lines in a particular year, and, in the aggregate, not more than fifty percent
(50%) of the Collaboration Cell Lines during the term of this Agreement, for such acceptance
treatment. If BMS wishes Athersys perform multiple assay validation and/or make radioligand
binding determinations in addition to those specified in the preceding sentence, BMS shall bear the
additional cost thereof.
Generic Collaboration Cell Line Acceptance Criteria
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Testing to determine if
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Category
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Criteria
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Criteria are Met by:
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1. Vector integration upstream of
target gene in HEK 293 or HT 1080
cells or other cell lines specified
by the Parties
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RT-PCR
demonstrating RIG
vector (RAGE
specific vector)
spliced to target
sequence mRNA
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Athersys
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2. Target gene mRNA
over-expression (RAGE vs. parental)
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Quantitative PCR
(qPCR)
demonstrating
>10 fold mRNA
increase
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Athersys
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3. Target protein over-expression
(RAGE vs. parental) and
functionality (Primary Assay
format)
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Functional
assay: such as
FLIPR with dose
response,
agonist/antagonist,
cAMP determination
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Athersys
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or
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•
Protein
over-expression: a
ten-fold increase
of Target protein
in RAGE clone
versus parental, as
determined by
Western blot or
FACS analysis
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4. RAGE clone robustness
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Freeze/thaw
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Athersys
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Expression
stability (e.g.
qPCR) over four
weeks
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5. RAGE cell line performance in HTS
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Performance in
Primary Assay under
simulated HTS
conditions and
general Cell Line
characteristics.
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BMS
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Exhibit B
MILESTONE PAYMENTS – CANDIDATE COMPOUNDS
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Milestone
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Payment
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Filing of first IND for the Candidate Compound directed against a
designated target expressed by an Accepted Cell Line
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$
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[*]
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Initiation of first Phase II clinical study for the Candidate Compound
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$
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[*]
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Initiation of first Phase III clinical study for the Candidate Compound
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$
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[*]
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Approval of a Product containing the Candidate Compound by Food and
Drug Administration as drug
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$
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[*]
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As used in this Exhibit B, the phrase “Initiation of first Phase III clinical study” shall be
deemed to include, if a party conducts a Phase II/III study on a Candidate Compound, the point
during such Phase II/III clinical trial when the party conducting the trial has the regulatory
approval to proceed with such trial as a pivotal trial.
BMS shall promptly notify Athersys of the first occurrence of any milestone with respect to each
Candidate Compound. Milestone payments shall be made only once with respect to any given Candidate
Compound, regardless of the number of indications sought (or approvals obtained) with respect to
such Candidate Compound, whether alone or in combination with other compounds or products, and
regardless of any new dosage strengths, preparations or forms of administration for such Candidate
Compound.
If BMS develops as a back-up Candidate Compound that inhibits or otherwise modulates the activity
of a particular molecular target of a Candidate Compound on which BMS is already making milestone
payments, then BMS may conduct clinical development on such back-up or follow-on Candidate
Compounds and shall not be obligated to make any milestone payments with respect to any such
back-up or follow-on Candidate Compound, except as otherwise provided below. In the event that a
particular Candidate Compound is dropped from active clinical development work or marketing for
safety or efficacy reasons and is specifically replaced with a different Candidate Compound
targeting the same molecular target as such dropped Candidate Compound, such new Candidate Compound
shall be deemed a “Replacement Compound.” BMS shall not be obligated to make milestone payments
that were earlier made with respect to a dropped Candidate Compound and replaced by a Replacement
Compound, but, subject to the preceding paragraph, BMS shall pay all milestone payments for
milestone events achieved by such Replacement Compound that had not been achieved by such dropped
Candidate Compound.
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1
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Confidential treatment has been requested for the redacted portions of this
exhibit, and such confidential portions have been omitted and filed separately with the Securities
and Exchange Commission.
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Exhibit C
FORM PRESS RELEASE
[Athersys to supply initial draft]
2.
EXHIBIT
10.3
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.
EXTENDED COLLABORATION AND LICENSE AGREEMENT
This Extended Collaboration and License Agreement
(the “Agreement”) is made and
entered into as of January 1, 2006 (the “Effective Date”), by and between
Athersys, Inc.
,
a Delaware corporation having its principal offices at 3201 Carnegie Avenue, Cleveland, Ohio 44115
(“Athersys”), and
Bristol-Myers Squibb Company
, a Delaware corporation having offices at
Route 206 and Province Line Road, Princeton, New Jersey 08543 (“BMS”). Athersys and BMS may be
referred to herein individually as a “Party” and collectively as the “Parties.”
Recitals
A.
Athersys has developed and owns technology and intellectual property rights relating to
methods for activating gene or protein expression in cells, referred to by Athersys as the Random
Activation of Gene Expression or RAGE technology, which includes the RAGE-VT technology useful for
creating cell lines that express particular desired proteins.
B.
BMS desires to engage Athersys to create certain such cell lines, using the RAGE-VT
technology, each of which expresses a specific cell surface or cellular protein of interest to BMS,
and to obtain license rights to use such cell lines for internal research, development and
commercialization of pharmaceutical products.
C.
Athersys is willing to create and provide BMS with the desired cell lines pursuant to the
terms of this Agreement.
D.
The Parties entered into a Research Collaboration and License Agreement, dated December 8,
2000 (the “Original Agreement”) and subsequently entered into a Cell Line Collaboration and License
Agreement dated July 1, 2002 (the “Prior Agreement”), each related to the creation of cell lines by
Athersys for use by BMS.
E.
Concurrently with entering into this Agreement, Athersys and BMS are amending the Prior
Agreement to acknowledge that BMS has fulfilled its obligation to propose and accept a minimum
number of cell lines as set forth in the Prior Agreement.
F.
For avoidance of doubt, all cell lines nominated by BMS after July 1, 2002 and prior to the
Effective Date of this Agreement shall be governed by the Prior Agreement and all cell lines
nominated by BMS prior to July 1, 2002 shall be governed by the Original Agreement and not this
Agreement. All cell lines nominated by BMS after the Effective Date of this Agreement shall be
governed by this Agreement.
Now, Therefore
, in consideration of the foregoing and the covenants and promises
contained in this Agreement, the Parties agree as follows:
2
As used herein, the following capitalized terms shall have the following meanings (with terms
defined in the singular having the same meanings when used in the plural):
1.1 “Accepted Cell Line”
shall have the meaning assigned to such term in Section 2.3(a).
1.2 “Affiliate”
shall mean, with respect to a Party, any corporation or other entity that,
directly or indirectly, controls, is controlled by or is under the common control with such Party.
For the purpose of this definition, “control” shall mean (a) the direct or indirect ownership of
fifty percent (50%) or more of the outstanding shares or other voting rights of the subject entity
to elect directors, or (b) if such amount of ownership of a foreign entity is not permitted by law,
ownership of the maximum amount of such entity as permitted by law, or (c) the actual ability to
control and direct the management of the subject entity.
1.3 “Athersys Know-How”
shall mean the Information that is Controlled by Athersys during the
term of this Agreement and relates directly to Collaboration Cell Lines or their method of
manufacture or use in the Field or for Counterscreening, as applicable, but excluding Athersys
Patents.
1.4 “Athersys Patents”
shall mean all Patents that are Controlled by Athersys during the term
of the Agreement and contain a Valid Claim covering a Collaboration Cell Line or its method of
manufacture or use in the Field or for Counterscreening, as applicable.
1.5 “Athersys Technology”
shall mean the Athersys Know-How and Athersys Patents collectively.
1.6 “Candidate Compound”
shall mean:
(a)
any compound that has activity, with respect to the target protein expressed by the
applicable Accepted Cell Line, which activity is initially discovered or detected by using an
Accepted Cell Line or materials or assays derived from an Accepted Cell Line, where such activity
is potentially useful for therapeutic or prophylactic use, or
(b)
any compound that is an analog, homolog, isomer or other chemical derivative of a compound
that meets the criteria in subsection (a) above (the “Parent Compound”), provided that such
compound (i) was made by or on behalf of BMS or its Affiliate or sublicensee based on information
relating to the Parent Compound, and (ii) has activity that is potentially useful for therapeutic
or prophylactic use and is similar or related to the activity of such Parent Compound (with the
understanding that such activity may be superior to the activity of the Parent Compound, in any
appropriate criteria).
1.7 “Collaboration Cell Line”
shall have the meaning assigned to such term in Section 2.1(b).
1.8 “Confidential Information”
shall mean (a) any proprietary or confidential information or
material of a Party in tangible form disclosed hereunder that is (i) marked as
3
“Confidential” at
the time it is delivered to the receiving Party, or (ii) designated as confidential or proprietary
in a written memorandum provided to the receiving Party by the disclosing Party within thirty (30)
days of such disclosure, or (b) any proprietary or confidential information of a Party disclosed
orally hereunder that is identified as confidential or proprietary when disclosed and designated as
confidential or proprietary in a written memorandum provided to the receiving Party by the
disclosing Party within thirty (30) days of such oral disclosure by the disclosing Party. Further,
it is agreed that if Athersys discloses to BMS that it is working on a particular protein or gene
target, such information shall be treated by BMS as the Confidential Information of Athersys.
Still further, it is agreed that Athersys shall treat the fact that BMS has nominated a specific
target under Section 2.1 and the fact that Athersys has provided BMS with a corresponding
Collaboration Cell Line under Section 2.2 as Confidential Information of BMS.
1.9 “Controlled”
shall mean, with respect to any material, Information or intellectual
property right, that a Party owns or has a license to such material, Information or intellectual
property right and has the ability to grant to the other Party the licenses or sublicenses thereto
as provided for herein without violating the terms of any agreement with any Third Party.
1.10 “Counterscreening”
shall mean testing a BMS compound, which has known activity against
one target, for activity against another target that is expressed in an Accepted Cell Line, for the
purpose of determining the relative selectivity and potency of the BMS compound for the first
target.
1.11 “Counterscreening Cell Line”
shall mean an Accepted Cell Line that was selected by BMS to
be used in Counterscreening as provided in Section 2.5.
1.12 “Counterscreening License”
shall have the meaning assigned to it in Section 3.3.
1.13 “Field”
shall mean use of the Accepted Cell Lines by BMS solely for BMS’s internal
discovery, research, development and/or commercialization of Products. For the avoidance of doubt,
subject to Section 3.5(b), the Field shall include BMS’s use of the Accepted Cell Lines in
connection with any bona fide collaboration between BMS and an academic and/or corporate
collaborator, provided that any compounds initially discovered or detected pursuant to such
collaboration by using an Accepted Cell Line or materials or assays derived from an Accepted Cell
Line shall be deemed to be Candidate Compounds. The Field expressly excludes the use of Accepted
Cell Lines by BMS for Counterscreening.
1.14 “HTS”
shall mean high throughput screening using BMS’ test deck of compounds in primary
screening of the Accepted Cell Line. HTS shall be deemed “completed” when BMS has screened the
test deck, confirmed positive responses, and completed standard data analysis.
1.15 “Improvement”
shall mean any improvement, modification or enhancement to the Athersys
Know-How or the inventions claimed in the Athersys Patents (and/or the practice thereof), and any
Information and intellectual property rights relating thereto, that the possessing Party has the
right to disclose to the other Party without violating contractual obligations to a Third Party.
For the avoidance of doubt, the following shall be owned by BMS and shall not
4
comprise
Improvements: (i) Information comprising the results of any assays or other screening or testing
generated by BMS through use of the Accepted Cells Lines under the terms of this Agreement, and any
Information developed based on evaluating or using such results (which shall exclude, for clarity,
any such Information that relates to the manufacture of such Accepted Cell Lines via the RAGE-VT
method or use of same); (ii) any methodology, process or tool, whether previously existing or
created during the Term (without use of an Accepted Cell Line), that is proprietary to BMS and that
BMS uses to generate the Information referred to in clause (i); and (iii) any invention based on,
or improvement, modification, or enhancement of, the proprietary know-how of BMS that is created in
connection with the subject matter of this Agreement and the use or practice of which does not
involve the use of any Athersys Technology.
1.16 “Information”
shall mean information, results and/or data of any type whatsoever, in any
tangible or intangible form, including without limitation databases, inventions, practices,
methods, techniques, specifications, formulations, formulae, knowledge, know-how, skill,
experience, test data including pharmacological, biological, chemical, biochemical, toxicological
and clinical test data, analytical and quality control data, stability data, studies and
procedures, and patent and other legal information or descriptions.
1.17 “License”
shall have the meaning assigned to it in Section 3.2.
1.18 “Net Sales”
shall mean the amount invoiced or otherwise billed by BMS or its Affiliate or
licensee for sales or other commercial disposition of a Product to a Third Party purchaser, less
the following to the extent included in such billing or otherwise actually allowed or incurred with
respect to such sales: (i) discounts, including cash, trade and quantity discounts, price reduction
programs, retroactive price adjustments with respect to sales of a product, charge-back payments
and rebates granted to managed health care organizations or to federal, state and local governments
(or their respective agencies, purchasers and reimbursers) or to trade customers, including but not
limited to, wholesalers and chain and pharmacy buying groups; (ii) credits or allowances actually
granted upon rejections or returns of Products, including for recalls or damaged goods; (iii)
freight, postage, shipping and insurance charges actually allowed or paid for delivery of Products,
to the extent billed; (iv) customs duties, tariffs, surcharges and other governmental charges
incurred in connection with the exportation or importation of a Product; (v) bad debts relating to
sales of Products that are actually written off by BMS in accordance with generally accepted
accounting principles, consistently applied, during the applicable royalty calculation period, and
(vi) taxes, duties or other governmental charges levied on, absorbed or otherwise imposed on sale
of Products, including without limitation value-added taxes, or other governmental charges
otherwise measured by the billing amount, when included in billing, as adjusted for rebates and
refunds, but specifically excluding taxes based on net income of the seller; provided that all of
the foregoing deductions are calculated in accordance with generally accepted accounting
principles consistently applied throughout the party’s organization.
Notwithstanding the foregoing, if any Product is sold under a bundled or capitated arrangement with
other BMS products, then, solely for the purpose of calculating Net Sales for royalty purposes
hereunder, any discount on such Product sold under such an arrangement shall be no greater, on a
percentage basis based on the gross selling price prior to discount, than the largest percentage
discount applied on the other pharmaceutical products sold within such bundled
5
arrangement for the
applicable accounting period. In case of any dispute as to the applicable discount numbers under
the preceding sentence, the determination of same shall be calculated and certified by BMS’
independent public accountants, whose decision shall be binding.
A sale of a Product is deemed to occur upon the earliest of invoicing or transfer of title in the
Product to the Third Party purchaser. In the event that BMS, after reasonable efforts, cannot
calculate accurately the Net Sales of a sublicensee in a particular country, the Parties will meet
and negotiate in good faith an appropriate means for calculating “Net Sales” in such a situation.
For sake of clarity and avoidance of doubt, sales by BMS, its Affiliates or sublicensees of a
Product to a Third Party distributor of such Product in a given country shall be considered sales
to a Third Party customer, but sales and/or transfers of a Product between or among BMS, its
Affiliates or sublicensees shall not be considered sales to a Third Party customer, so long as such
recipient subsequently resells the Product. Any Products used (but not sold for consideration) for
promotional or advertising purposes or used for clinical or other research purposes shall not be
considered in determining Net Sales hereunder.
In the event a Product is sold as an end-user product consisting of a combination of active
functional elements or as a combined product and/or service, Net Sales, for purposes of determining
royalty payments on such Product, shall be calculated by multiplying the Net Sales of the end-user
product and/or service by the fraction A over A+B, in which A is the gross selling price of the
Product portion of the end-user product and/or service when such Product is sold separately during
the applicable accounting period in which the sales of the end-user product were made, and B is the
gross selling price of the other active elements and/or service, as the case may be, of the
end-user product and/or service sold separately during the accounting period in question. All
gross selling prices of the elements of such end-user product and/or service shall be calculated as
the average gross selling price of the said elements during the applicable accounting period for
which the Net Sales are being calculated. In the event that, in any country or countries, no
separate sale of either such above-designated Product or such above designated elements of the
end-user product and/or service are made during the accounting period in which the sale was made or
if gross retail selling price for an active functional element, component or service, as the case
may be, cannot be determined for an accounting period, Net Sales allocable to the Product in each
such country shall be determined by mutual agreement reached in good faith by the Parties prior to
the end of the accounting period in question based on an equitable method of determining same that
takes into account, on a country by country basis, variations in potency, the relative contribution
of each active agent, component or service, as the case may be, in the combination, and relative
value to the end user of each active agent, component or service, as the case may be.
Notwithstanding the foregoing, it is agreed that drug delivery vehicles, adjuvants, and excipients
shall not be deemed to be “active ingredients” or “active functional elements,” the presence of
which in a Product would be deemed to create a combination product subject to the terms of the
preceding paragraph.
1.19 “Patents”
shall mean all issued United States and foreign patents (including all
reissues, extensions, renewals, substitutions, re-examinations, supplementary protection
6
certificates and the like, and patents of addition) and pending United States and foreign patent
applications (including, without limitation, all provisional and nonprovisional applications and
all continuations, continuations-in-part and divisions thereof).
1.20 “Product”
shall mean any product containing a Candidate Compound, including any
formulation, dosage form, packaged form or delivery means thereof.
1.21 “RAGE Technology”
shall mean any and all intellectual property, whether or not
patentable, that is owned or licensed by Athersys and relates to Athersys’ techniques for
activating gene expression, which are referred to by Athersys collectively as Random Activation of
Gene Expression or RAGE technology.
1.22 “Term”
shall have the meaning assigned to it in Section 11.1.
1.23 “Third Party”
means any entity other than Athersys, BMS or an Affiliate of either of
them.
1.24 “Valid Claim”
shall mean either (i) a claim of issued and unexpired letters patent which
has not been held permanently revoked, unenforceable or invalid by a decision of a court or other
governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed
for appeal and that is not admitted to be invalid or unenforceable through reissue, disclaimer or
otherwise, or (ii) a claim of a pending patent application that has not been pending for more than
seven (7) years and that has not been abandoned or finally rejected without the possibility of
appeal or refiling.
2.1 Review of Proposed Cell Lines by Athersys.
(a)
Subject to the limits set forth in Section 2.2, Athersys shall create new Accepted Cell
Lines based on RAGE-VT cell lines that BMS proposes, as set forth in
Exhibit A
, and
Athersys has accepted as provided below. BMS shall use reasonable, good faith efforts to assure
that the aggregate level of technical difficulties and legal risks associated with the cell lines
that BMS nominates is balanced and provides Athersys a reasonable opportunity to perform hereunder.
Athersys shall have the right to review and approve, as provided in
Exhibit A
, the target
protein to be expressed in each RAGE-VT cell line that BMS proposes be made under this Agreement.
Athersys shall complete such review within forty-five (45) days after the date Athersys receives
information from BMS regarding a proposed target to be expressed in a
RAGE-VT cell line, or upon any other schedule to which the Parties may mutually agree in
writing. Athersys shall use reasonable, good faith efforts to assure that the aggregate level of
technical difficulties and legal risks associated with the cell lines that Athersys accepts is
balanced and provides a reasonable opportunity for the generation of Accepted Cell Lines hereunder.
(b)
While Athersys is completing such review, the Parties shall promptly negotiate specific
Acceptance Criteria for such cell line based upon the Acceptance Criteria as generically set forth
in
Exhibit A
. Upon agreement by the Parties on the specific Acceptance Criteria for a
particular proposed RAGE-VT cell line, such Acceptance Criteria shall be included
in
Exhibit
A
, and, subject to review and subsequent approval of the target protein by Athersys under this
Section 2.1, Athersys shall promptly thereafter commence work under Section 2.2 to create a RAGE-VT
cell line based thereon, and any such cell line shall be a “Collaboration Cell Line.”
(c)
If Athersys rejects any of the proposed RAGE-VT cell lines in accordance with the
parameters set forth in
Exhibit A
, Athersys shall promptly notify BMS, and BMS shall amend
Exhibit A
in order to designate a replacement RAGE-VT cell line (for each one of the
RAGE-VT cell lines originally proposed and rejected by Athersys) within sixty (60) days after
receiving notice of the rejection; provided, however, that Athersys shall again have the right to
review and approve any such proposed replacement cell line, as above.
(d)
BMS shall be obligated to propose at least three (3), but not more than seven (7), RAGE-VT
cell lines per year beginning on the Effective Date and ending on the third anniversary of the
Effective Date. If Athersys rejects one or more cell lines subject to this Section 2.1, then BMS
shall replace each rejected cell line with a new proposed cell line, until Athersys has at least 3
cell lines in the current year. BMS shall have sixty (60) days to replace each rejected cell line,
regardless of the deadline for meeting any applicable minimum under this Section 2.1.For avoidance
of doubt, any proposed cell lines in excess of the minimum in a given year may not be applied to
future annual obligations.
2.2 Supply of Collaboration Cell Lines; Status Reports.
Athersys shall use reasonable efforts
to deliver to BMS each Collaboration Cell Line that Athersys approves under Section 2.1 within six
(6) months after such approval. Athersys shall provide BMS with summary reports, which shall be
written, of the status and progress of Athersys’s efforts to provide Collaboration Cell Lines every
eight (8) weeks. Such reports shall be sent to the attention of the BMS Project Coordinator.
Athersys shall not be obligated to supply to BMS more than a total of eight (8) Collaboration Cell
Lines per year over the Term.
2.3 Review of Collaboration Cell Lines by BMS.
(a)
BMS shall have the right, for a period of forty-five (45) days after receiving a
particular Collaboration Cell Line, to review such Collaboration Cell Line for the purpose of
evaluating whether or not the production of protein meets the specific Acceptance Criteria for the
particular Collaboration Cell Line as agreed by the Parties (pursuant to Section
2.1) and set forth in
Exhibit A
. Unless BMS provides written notice to Athersys that
such Collaboration Cell Line does not meet such specific Acceptance Criteria within such period,
such Collaboration Cell Line shall be accepted by BMS and shall be an “Accepted Cell Line” for all
purposes hereunder. Even if any Collaboration Cell Line fails to produce the amount of protein
meeting the specific Acceptance Criteria set forth in
Exhibit A
, BMS shall nonetheless have
the right, but not the obligation, to accept such Collaboration Cell Line as an Accepted Cell Line,
by written notice to Athersys within such forty-five (45) day period. If BMS does not accept a
Collaboration Cell Line, BMS and Athersys shall discuss the reason(s) such Collaboration Cell Line
was not accepted, and if BMS and Athersys agree that modifying the approach to creating a
Collaboration Cell Line is feasible and desirable, Athersys shall make such modification and
present such modified Collaboration Cell Line to BMS for evaluation and acceptance (if applicable)
as provided herein.
8
(b)
Athersys shall provide the BMS Project Coordinator with at least two (2) weeks’ advance
notice of Athersys’ intent to deliver a Collaboration Cell Line to BMS for review under Section
2.3(a), so that BMS may attempt to allocate internal resources appropriately. In the event
Athersys fails to give such notice with respect to any given Collaboration Cell Line, the BMS
review period therefor shall be extended to sixty (60) days.
2.4 Infringement by Accepted Cell Lines.
If at any time during the term of the License or
Counterscreening License applicable to a particular Accepted Cell Line, such Accepted Cell Line
becomes, or in Athersys’ opinion is likely to become, the subject of a Third Party patent
infringement claim based on BMS’ practice of such License or Counterscreening License, then
Athersys shall use commercially reasonable efforts, at its sole expense, either (i) to procure for
BMS the right to continue using such Accepted Cell Line, or (ii) to replace or modify such Accepted
Cell Line so that it becomes noninfringing while still having substantially the same functionality
and efficacy as prior to such replacement or modification. In the event Athersys is not successful
in its efforts under clause (i) and/or (ii) of the preceding sentence within three (3) months after
any such claim arises, Athersys shall, at BMS’s request, meet to discuss in good faith other
possible solutions to the claim.
2.5 Selection of Counterscreening Cell Lines.
As to a particular cell line that BMS requests
to be made under Section 2.1, BMS may specify in writing, at the time the request for such cell
line is made, that such cell line will be a Counterscreening Cell Line when accepted under Section
2.3, and such cell line then would be used solely for Counterscreening pursuant to the
Counterscreening License. BMS may so specify no more than fifty percent (50%) of the Collaboration
Cell Lines requested in a particular year be used for Counterscreening. For purposes of clarity,
at any time subsequent to a cell line’s designation as a Counterscreening Cell Line, BMS may elect
to initiate an HTS program with respect to such Cell Line, subject to the terms and conditions of
this Agreement with respect to an Accepted Cell Line.
2.6 Project Coordinators.
Each Party shall designate an individual (a “Project Coordinator”)
to coordinate, on such Party’s behalf, the day-to-day interaction of and communication between the
Parties under this Agreement. Each Project Coordinator shall possess the education, training and
experience necessary to make him
or her reasonably technically qualified to serve as a Project Coordinator. Each Party shall
be free to replace its Project Coordinator with new a appointee who has authority to act on behalf
of such Party, upon notice to the other Party.
2.7 BMS Diligence.
BMS agrees that, for each Accepted Cell Line (but excluding all
Counterscreening Cell Lines), BMS shall initiate and use reasonably diligent efforts to complete an
HTS program for such Accepted Cell Line as soon as practicable after the date such cell line is
designated or deemed an Accepted Cell Line. Notwithstanding the preceding sentence, an Accepted
Cell Line shall be deemed to have completed HTS twelve (12) months after acceptance unless the Cell
Line fails to perform as prescribed in
Exhibit A
. BMS shall provide Athersys with
reasonable reports regarding its progress in conducting such HTS screening.
9
2.8 BMS Termination of Cell Lines.
(a) Prior to Cell Line Acceptance.
With respect to Collaboration Cell Lines for which
acceptance has not yet occurred, upon thirty (30) days notice to Athersys, BMS may terminate
Athersys’ development of any Collaboration Cell Line, provided that BMS has paid all milestones
achieved prior to termination pursuant to Section 4.1(a) or 4.1(c), as the case may be, for each
such Collaboration Cell Line.
(b) Following HTS Completion.
With respect to any Accepted Cell Line (other than
Counterscreening Cell Lines) for which HTS completion has occurred and BMS has paid the
corresponding milestone payment under Section 4.1(a), upon thirty (30) days notice to Athersys, BMS
may, for reasonable business, scientific and/or technical reasons (which shall be disclosed to
Athersys, on a confidential basis), terminate its License with respect to such Accepted Cell Line,
which termination shall be effective after payment of the next license fee due under Section
4.1(b). On the due date of such payment the license to such Accepted Cell Line granted under
Section 3.2 shall automatically terminate, and after payment of such license fee BMS shall have no
further payment obligations to Athersys with respect to such Accepted Cell Line subject to the
following covenant. With respect to any such Accepted Cell Line for which BMS has terminated its
license rights pursuant to this Section 2.8(b), BMS covenants that BMS and its Affiliates and
licensees shall not use, develop or commercialize any materials, results, data or information
(including, without limitation, any compound or composition, or any derivative, homolog or isomer
thereof) that was originally created or originally identified through BMS’ prior use of such
Accepted Cell Line; provided, however, that the foregoing covenant shall not preclude BMS and its
Affiliates from continuing to conduct discovery, research, development and commercialization
activities with respect to the target protein expressed by such Accepted Cell Line so long as BMS
and its Affiliates abide by such covenant in so doing.
2.9 BMS Termination of Collaboration Program.
BMS shall have the right to terminate the
collaboration program contemplated by this Section 2 at the end of each year of the collaboration
program, by giving Athersys written notice of such termination at least sixty (60) days prior to
the anniversary of the Effective Date, provided that BMS has accepted an aggregate of at least
fifteen (15) cell lines since July 1, 2002 (i.e., the effective date of the Prior Agreement). BMS
acknowledges that Athersys will incur certain wind-down and FTE re-
allocation costs and expenses in the event of any such early termination and, therefore,
agrees to pay Athersys the sum of $125,000 to help offset such costs. Such payment shall be made
within thirty (30) days after delivery of BMS’ termination notice pursuant to this Section 2.9.
3.1 Evaluation License.
Subject to the terms of this Agreement, as to each Collaboration Cell
Line provided to BMS by Athersys hereunder, Athersys grants to BMS a royalty-free, non-exclusive
,
worldwide license, without the right to sublicense, under the Athersys Technology solely to conduct
internal research evaluation of such Collaboration Cell
10
Line as provided in Section 2.3 of this
Agreement during the forty-five (45) day period after BMS first receives such Collaboration Cell
Line.
3.2 Research and Development License.
Subject to the terms of this Agreement, and effective
upon BMS’s acceptance of a particular Accepted Cell Line (other than a Counterscreening Cell Line),
Athersys grants to BMS a royalty-bearing, non-exclusive, worldwide license, without the right to
sublicense, under the Athersys Technology solely to use such Accepted Cell Line in the Field (the
“License”).
3.3 Counterscreening License.
Subject to the terms of this Agreement, and effective only upon
BMS’s acceptance of a particular Accepted Cell Line that BMS elected under Section 2.5 to be a
Counterscreening Cell Line, Athersys hereby grants to BMS a non-exclusive, worldwide license (the
“Counterscreening License”), without the right to sublicense, under the Athersys Technology solely
to use each such Counterscreening Cell Line for Counterscreening. For clarity, a particular
Accepted Cell Line may not be used by BMS (or its Affiliate) for use both in the Field and for
Counterscreening except as specified in 4.1 (e).
3.4 Duration of Athersys Licenses.
(a) Field License Duration.
The License granted in Section 3.2, as to a particular Accepted
Cell Line, shall be perpetual, subject to payment of all applicable fees, unless terminated by BMS
as provided in Section 2.8(b).
(b) Counterscreening License Duration.
Subject to payment of all applicable fees, the
Counterscreening License granted in Section 3.3 shall be perpetual, as to a particular
Counterscreening Cell Line.
3.5 Negative Covenants.
(a) No Other Use by BMS.
BMS covenants and agrees that it shall not use the Collaboration
Cell Lines for any purpose other than as set forth in Section 3.1 and shall not use the Accepted
Cell Lines or any materials derived therefrom for any purpose other than as set forth in Sections
3.2 and 3.3, as applicable. BMS further covenants and agrees that it shall not use or practice the
Athersys Technology for any purpose except as expressly permitted in the licenses granted to BMS
under Sections 3.1, 3.2 and 3.3, as applicable.
(b) No Transfer to Third Parties.
BMS covenants and agrees that BMS shall not transfer
Collaboration Cell Lines or Accepted Cell Lines or any Information pertaining thereto or any
materials derived therefrom, to any Third Party for any purpose, except that BMS may transfer such
Information and materials to collaborators to the extent necessary for BMS to exercise its right to
use the Accepted Cell Lines in connection with bona fide collaborations with academic and/or
commercial partners in the Field, but may not transfer the Accepted Cell Lines to such entities
except with Athersys’ prior written consent. For clarity, BMS covenants and agrees that BMS shall
not transfer Collaboration Cell Lines or Accepted Cell Lines, or any Information pertaining thereto
or any materials derived therefrom, to any Third Party for Counterscreening.
11
3.6 Athersys Reserved Rights.
BMS understands and agrees that Athersys owns and reserves to
itself all rights, title and interest in the Athersys Technology, and to the Collaboration Cell
Lines and the Accepted Cell Lines, subject only to the licenses granted in Sections 3.1, 3.2 and
3.3, respectively.
3.7 Records And Reports.
(a) Records.
BMS shall maintain complete and accurate records that fully and properly reflect
all work done and all results achieved, including raw data, in the evaluation of Collaboration Cell
Lines, the use of Accepted Cell Lines and the discovery, research and development of Candidate
Compounds (“Records”). The Records shall be kept with sufficient detail and in good scientific
manner appropriate for patent and regulatory purposes and shall be kept separate and distinct from
other work conducted by BMS, all in a manner consistent with BMS’ other internal research and
development record keeping.
(b) Copies and Inspection of Records.
Athersys shall have the right, during normal business
hours and upon reasonable notice, to inspect the Records for purposes consistent with this
Agreement. Athersys shall maintain all Information learned from such inspection of the Records in
confidence in accordance with Article 7. All inspections, copying and visits hereunder shall be
conducted in a manner and frequency so as not to disrupt BMS’s business and in a manner so as not
to cause any disclosure of any other BMS Confidential Information.
(c) Semi-Annual Reports.
Within thirty (30) days following the end of each six (6) month
period during the term of the License with respect to each Accepted Cell Line, BMS shall provide to
Athersys a written progress report that shall describe the results and developments of the use of
such Accepted Cell Line, and the discovery, research and development of Candidate Compounds
therewith. With such reports, BMS shall disclose to Athersys in summary form (
i.e.,
in a manner
that does not require BMS to disclose sensitive or competitively-enabling data or information) the
development, making, conception or reduction to practice of all Candidate Compounds that are
discovered, made, investigated, conceived or reduced to practice by use of such Accepted Cell Line
or assays based thereon. In addition, BMS shall fully disclose to Athersys in each such report any
Improvements that BMS may have developed during the period covered by such report.
4.1 License Fees.
(a) Screening License Fees.
For each Collaboration Cell Line requested by BMS that is to be
used in the Field (
i.e.,
excluding the Counterscreening Cell Lines), BMS shall pay Athersys
non-refundable license fees upon achievement of the milestone events as provided in the following
schedule:
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Agreed upon Acceptance Criteria
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$[*]
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•
Athersys accepts BMS’ request for the development of a
Collaboration Cell Line, and the Parties mutually agree upon
Acceptance Criteria therefor
|
|
|
|
Clonal Cell Line Isolated
|
|
$[*]
|
•
Verified through RT- PCR proof of appropriate vector
integration
|
|
|
|
|
|
|
|
Cell Line Acceptance (designation of Accepted Cell Line)
|
|
$[*]
|
•
Achievement, pursuant to Section 2.3(a), of all
specific Acceptance Criteria mutually previously agreed upon
by the Parties for the proposed Accepted Cell Line
|
|
|
|
|
|
|
|
HTS Completion for Accepted Cell Line
|
|
$[*]
|
|
|
|
|
|
1
|
|
Confidential treatment has been requested for the redacted portions of this
exhibit, and such confidential portions have been omitted and filed separately with the Securities
and Exchange Commission.
|
BMS and Athersys shall jointly determine the occurrence of any of the foregoing milestone
events with respect to a particular Collaboration Cell Line, and the applicable payments for each
event shall be due and payable within thirty (30) days of the Parties’ having made such a
determination.
(b) Additional Annual License Fees.
For each Accepted Cell Line that is to be used in the
Field (
i.e.,
excluding the Counterscreening Cell Lines) with respect to which the License has not
terminated due to BMS previously exercising its right to terminate its License under Section
2.8(b), BMS shall also pay Athersys non-refundable license fees upon achievement of the milestone
events as provided in the following schedule:
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|
|
|
|
Event
|
|
Payment
|
|
Six (6) Month Anniversary of Completion of HTS for Accepted Cell
Line
|
|
$[*]
|
•
Payable at the end of the six (6) month period
beginning on the date BMS completes HTS for such Accepted
Cell Line
|
|
|
|
|
|
|
|
Twelve (12) Month Anniversary of Completion of HTS for Accepted
Cell Line
|
|
$[*]
|
•
Payable at the end of the twelve (12) month period
beginning on the date BMS completes HTS for such Accepted
Cell Line
|
|
|
|
|
|
|
|
Eighteen (18) Month Anniversary of Completion of HTS for Accepted
Cell Line
|
|
$[*]
|
•
Payable at the end of the eighteen (18) month period
beginning on the date BMS completes HTS for such Accepted
Cell Line
|
|
|
|
|
|
|
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Twenty-Four (24) Month Anniversary of Completion of HTS for
Accepted Cell Line
|
|
$[*]
|
•
Payable at the end of the twenty-four (24) month
period beginning on the date BMS completes HTS for such
Accepted Cell Line
|
|
|
13
|
|
|
|
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1
|
|
Confidential treatment has been requested for the redacted portions of this
exhibit, and such confidential portions have been omitted and filed separately with the Securities
and Exchange Commission.
|
For clarity, if BMS exercises its right to terminate the License as provided in Section 2.8(b)
as to a particular Accepted Cell Line, BMS shall make the next payment due as provided above after
serving notice of such termination.
(c) Counterscreening License Fees.
For each Counterscreening Cell Line requested to be made by
BMS, BMS shall pay Athersys non-refundable license fees upon achievement of the milestone events as
provided in the following schedule:
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|
|
|
|
Event
|
|
Payment
|
|
Agreed upon Acceptance Criteria
|
|
$[*]
|
•
Athersys accepts BMS’ request for the development of
a Collaboration Cell Line, and the Parties mutually agree
upon Acceptance Criteria therefor
|
|
|
|
|
|
|
|
Clonal Cell Line Isolated
|
|
$[*]
|
•
Verified through RT- PCR proof of appropriate vector
integration
|
|
|
|
|
|
|
|
Cell Line Acceptance (designation of Counterscreening Cell Line)
|
|
$[*]
|
•
Achievement, pursuant to Section 2.3(a), of all
specific Acceptance Criteria previously mutually agreed upon
by the Parties for the proposed Counterscreening Cell Line
|
|
|
|
|
|
|
|
1
|
|
Confidential treatment has been requested for the redacted portions of this
exhibit, and such confidential portions have been omitted and filed separately with the Securities
and Exchange Commission.
|
BMS and Athersys shall jointly determine the occurrence of any of the foregoing milestone
events with respect to a particular Counterscreening Cell Line, and the applicable payments for
each event shall be due and payable within thirty (30) days of the Parties’ having made such a
determination.
(d) Additional Counterscreening License Fees.
For each Accepted Cell Line specified as a
Counterscreening Cell Line pursuant to Section 2.5 that is accepted by BMS pursuant to Section 2.3,
BMS shall pay Athersys a non-refundable license fee of either: (i) an aggregate of [*] dollars ($[*]) license fee, which shall be payable in six (6) installments of [*] dollars ($[*]) each, to be paid at the end of each six (6) month period after the
date of acceptance by BMS of the applicable Accepted Cell Line; or
(ii) [*] dollars ($[*]) for the use, in perpetuity, of the Counterscreening License, such fee to be
payable on the six (6) month anniversary of the date of acceptance by BMS of the applicable
Accepted Cell Line.
14
(e) Counterscreening License Fee for Accepted Cell Line.
For any particular Accepted Cell
Line used in the Field for which BMS has completed payment of all milestone payments under Sections
4.1(a) and (b) (
i.e.
, a total of [*] dollars ($[*]) for such Accepted Cell
Line), BMS may elect in writing to Athersys to obtain the perpetual right to use such Accepted Cell
Line in Counterscreening (under the terms of a Counterscreening License under Section 3.3) by a
one-time payment of [*] dollars ($[*]) to be made within thirty (30)
days of such notice.
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|
|
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1
|
|
Confidential treatment has been requested for the redacted portions of this
exhibit, and such confidential portions have been omitted and filed separately with the Securities
and Exchange Commission.
|
4.2 Milestone Payments.
For each Accepted Cell Line used in the Field, BMS shall pay
Athersys the milestone payments set forth in
Exhibit B
within thirty (30) days after each
milestone event has been achieved for each Candidate Compound identified for clinical development
by BMS or its Affiliate or sublicensee for the particular Accepted Cell Line.
4.3 Royalty Payments.
BMS shall pay Athersys a royalty equal to [*] percent ([*]%) of Net
Sales of all Products worldwide; provided that BMS may elect, on a Product-by-Product basis and in
its sole discretion, and by giving written notice to Athersys at any time prior to the date which
is ninety (90) days subsequent to the approval of a given Product by Food and Drug Administration,
that BMS will, in lieu of such one and one-half (1.5%) royalty, (i) pay to Athersys a royalty of
[*] ([*]%) of Net Sales of such Product worldwide and (ii) pay to Athersys a one-time sales
milestone of [*] dollars ($[*]) upon the achievement of five hundred million dollars of aggregate
Net Sales for such Product. Each payment of royalties under this Agreement shall be accompanied by
a statement of the amount of the total amounts received and calculated as Net Sales during such
period, and all other information necessary to determine the appropriate amount of such payments.
4.4 Royalty Term.
For each Product, on a country-by-country basis, BMS shall pay to Athersys
royalties under Section 4.3 commencing on the first commercial sale in the applicable country and
continuing until the later of (a) the last to
expire Patent in such country owned or controlled by BMS or its affiliate or licensee
containing a Valid Claim covering such Product or the Candidate Compound therein, or covering the
manufacture, use or formulation of such Product or compound, or (b) ten (10) years from the date of
such first commercial sale in such country.
4.5 Blocked Currency.
In each country where the local currency is blocked and cannot be
removed from the country, at the election of Athersys, royalties accrued in that country shall be
paid to Athersys in such country in local currency by deposit in a local bank designated by
Athersys.
4.6 Non-Monetary Consideration.
In the event BMS (or its Affiliates or sublicensees) receives
any non-monetary consideration in connection with the sale or other commercial disposition of
Products, Athersys’s royalty shall be based on the fair monetary value of such other consideration.
In such case, BMS shall disclose to Athersys, on a confidential basis, the terms of such
arrangement, and the Parties shall agree in good faith on such monetary
15
value, which shall then be
included in Net Sales for the period in which it was received by BMS (or its Affiliates or
sublicensees).
5.1 Records and Audit.
During the term of this Agreement and for a period of three (3) years
thereafter, BMS shall keep complete and accurate records pertaining to the sale or other
disposition of all Products, in sufficient detail to permit Athersys to confirm the accuracy of all
payments due hereunder. Athersys shall have the right to cause an independent, certified public
accountant to audit such records to confirm BMS’s Net Sales and royalty payments and payments under
Section 4.2; provided, however, that such auditor shall not disclose BMS’s Confidential Information
to Athersys, except to the extent such disclosure is necessary to verify the portion of the amount
of royalties and payments due under this Agreement. Such audits may be exercised once a year,
within three (3) years after the period to which such records relate, upon notice to BMS and during
normal business hours. Athersys shall bear the full cost of such audit unless such audit discloses
a variance of more than five percent (5%) from the amount of royalties and payments under Section
4.2 previously paid for such year. In such case, BMS shall bear the full cost of such audit. The
terms of this Section 5.1 shall survive any termination or expiration of this Agreement for a
period of three (3) years.
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6.
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Intellectual Property.
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6.1 Ownership
.
(a) Athersys.
Athersys shall remain the sole owner of the Athersys Technology, the RAGE
Technology, the Collaboration Cell Lines and the Accepted Cell Lines, including any improvements
thereto made by Athersys. Athersys shall have the sole responsibility, at its discretion, for
patent prosecution and choice of patent counsel in relation to Athersys Patents, and shall pay all
expenses associated therewith. BMS hereby assigns and agrees to assign to Athersys its entire
interest in any Improvements, which shall be deemed to be part of the Athersys Technology.
(b) BMS.
BMS shall be the sole owner of any inventions and information resulting from BMS’
use of the Accepted Cell Lines, including any Products, but excluding all Improvements. BMS shall
have the sole responsibility, at its discretion, for patent prosecution and choice of patent
counsel in relation to such BMS-owned inventions and the Products and shall pay all expenses
associated therewith.
6.2 Enforcement of Patent Rights
. Each Party shall have the sole right, but not the
obligation, to institute, prosecute or control any action or proceeding with respect to
infringement by a Third Party of one or more issued Patents owned by such Party.
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7.
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Confidentiality; Publicity.
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7.1 Confidential Information.
The Parties agree that, for the Term of this Agreement and for
five (5) years thereafter, the receiving Party shall keep completely
16
confidential and shall not
publish or otherwise disclose and shall not use for any purpose, except for the purposes expressly
permitted by this Agreement, any Confidential Information furnished to it by the disclosing Party.
The foregoing obligation shall not apply to any information received by a Party to the extent that
it can be established by such receiving Party by competent evidence that such information:
(a)
was already known to the receiving Party, other than under an obligation of
confidentiality, at the time of disclosure;
(b)
was generally available to the public or otherwise part of the public domain at the time
of its disclosure to the receiving Party;
(c)
became generally available to the public or otherwise part of the public domain after its
disclosure and other than through any act or omission of the receiving Party in breach of this
Agreement;
(d)
was independently developed by the receiving Party as demonstrated by competent written
evidence prepared contemporaneously with such independent development; or
(e)
was subsequently lawfully disclosed to the receiving Party by a person other than a Party
hereto.
7.2 Authorized Disclosure
. Notwithstanding the foregoing, a Party may disclose the
Confidential Information of the other Party to the extent such disclosure is necessary to be
disclosed in the following instances:
(a)
Regulatory filings made by BMS;
(b)
Prosecuting or defending litigation or responding to valid subpoenas;
(c)
Complying with applicable governmental regulations;
(d)
Conducting clinical trials of BMS, its Affiliates and sublicensees;
(e)
Disclosure, in connection with the performance of this Agreement, to Affiliates,
employees, consultants, or agents, each of whom prior to disclosure must be bound by similar
obligations of confidentiality and non-use at least equivalent in scope to those set forth in this
Section 7;
(f)
Disclosure that is required by applicable law or governmental regulation; and
(g)
Disclosure of the existence and terms of this Agreement and of general summaries of the
progress made by the Parties under this Agreement (but excluding the identification of any target
nominated by BMS under Section 2.1 and of any Collaboration Cell Line or Accepted Cell Line
developed by Athersys hereunder) to existing or potential investment bankers, investors and/or
merger or acquisition parties, provided that the disclosing Party obtains
from such recipient prior
to disclosure an agreement to be bound by obligations of confidentiality and non-use at least
similar in scope to those set forth in this Section 7.
7.3 Disclosure.
If a Party is required to make any disclosure of another Party’s Confidential
Information that is authorized under subsections (a), (b), (c), (d) or (f) of Section 7.2, it will
give reasonable advance notice to the latter Party of such disclosure and will afford the latter
Party a reasonable opportunity, and will cooperate reasonably with such Party, to secure
confidential treatment of such information prior to its disclosure (whether through protective
orders or otherwise) and to limit the extent of the disclosure as much as possible. Except as
otherwise required by law, and subject to Section 7.5, neither Party shall issue a press release or
make any other disclosure of the terms of this Agreement or any aspect of the research conducted
pursuant to this Agreement without the prior approval of such press release or disclosure by the
other Party hereto. Each Party shall submit any such press release or disclosure to the other
Party, and the receiving Party shall have ten (10) business days to review and approve any such
press release or disclosure, which approval shall not be unreasonably withheld. If the receiving
Party does not respond within such ten (10) day period, the press release or disclosure shall be
deemed approved. In addition, if a public disclosure is required by law, including without
limitation in a filing with the Securities and Exchange Commission, the disclosing Party shall
provide copies of the disclosure reasonably in advance of such filing or other disclosure for the
nondisclosing Party’s prior review and comment.
7.4 Confidential Terms.
Except as expressly provided herein, each Party agrees not to
disclose any terms of this Agreement or any aspect of the research conducted pursuant to this
Agreement to any Third Party without the consent of the other Party.
7.5 Initial Press Release.
The Parties shall issue a mutually approved, initial press release
promptly after the Effective Date. The Parties agree that this press release shall be in the form
of the press release attached to this Agreement as
Exhibit C
.
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8.
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Representations and Warranties.
|
8.1 Athersys.
Athersys represents and warrants that: (i) it is a corporation duly organized
validly existing and in good standing under the laws of the State of Delaware; (ii) the execution,
delivery and performance of this Agreement have been duly authorized by all necessary corporate
action on the part of Athersys; (iii) the performance of Athersys’s obligations under this
Agreement will not conflict with its charter documents or result in a material breach of any
agreements, contracts or other arrangements to which it is a party; (iv) Athersys will not, during
the Term of this Agreement, enter into any agreements, contracts or other arrangements that would
be materially inconsistent with its obligations under this Agreement; (v) Athersys has sufficient
facilities, experienced personnel and other capabilities reasonably suited to enable it to perform
its obligations under this Agreement; (vi) Athersys is the owner of, or has licensed rights to, all
of the Athersys Patents in existence on the Effective Date, and has the right to grant the licenses
or sublicenses, as the case may be, therefor granted under this Agreement; and (vii) as of the
Effective Date, Athersys is not aware of any asserted or unasserted claim or demand which is being,
or which Athersys believes can be, rightfully enforced by a Third Party against any of the Athersys
Patents that would materially limit, hinder, delay or otherwise adversely affect BMS’s enjoyment of
its rights and satisfaction of its obligations under this Agreement.
18
8.2 BMS.
BMS represents and warrants that: (i) it is a corporation duly organized validly
existing and in good standing under the laws of the State of Delaware; (ii) the execution, delivery
and performance of this Agreement have been duly authorized by all necessary corporate action on
the part of BMS; (iii) the performance of BMS’s obligations under this Agreement will not conflict
with its charter documents or result in a material breach of any agreements, contracts or other
arrangements to which it is a party; (iv) BMS has sufficient facilities, experienced personnel and
other capabilities reasonably suited to enable it to perform its obligations under this Agreement;
and (v) BMS will not, during the Term of this Agreement, enter into any agreements, contracts or
other arrangements that would be materially inconsistent with its obligations under this Agreement.
8.3 Disclaimer of Warranties.
THE ATHERSYS KNOW-HOW, ATHERSYS PATENTS AND COLLABORATION CELL
LINES ARE PROVIDED AND LICENSED TO BMS “AS IS”, AND ATHERSYS AND ITS RESPECTIVE AFFILIATES MAKE NO
REPRESENTATIONS AND EXTEND NO WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH
RESPECT THERETO OR TO THE PRODUCTS OR ATHERSYS TECHNOLOGY, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF THE PATENT RIGHTS
LICENSED HEREUNDER, OR NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
8.4 Unknown Biological Properties.
BMS understands and agrees that the Collaboration Cell
Lines may have unpredictable and unknown biological and/or chemical properties, that they are to be
used with caution, and that they are not to be used for testing in or treatment of humans. BMS
shall use the Collaboration
Cell Lines in compliance with all applicable laws and regulations, including, but not limited
to, any laws or regulations relating to the research, testing, production, storage, transportation,
export, packaging, labeling or other authorized use of the Collaboration Cell Lines.
9.1 Mediation.
If a dispute arises out of or relates to this Agreement, or the breach thereof,
and if said dispute cannot be settled through negotiation, the Parties agree first to try in good
faith to settle the dispute by good faith discussions by the Vice President of External Science and
Technology of BMS and the CEO or senior executive officer of Athersys (or each such person’s
designee), and failing resolution thereby by mediation under the Commercial Mediation Rules of the
American Arbitration Association, before resorting to arbitration, litigation, or some other
dispute resolution procedure.
9.2 Arbitration.
Subject to Section 9.1, Athersys and BMS agree that any dispute or
controversy arising out of, in relation to, or in connection with this Agreement, or the validity,
enforceability, construction, performance or breach thereof, shall be settled by binding
arbitration in New York, New York, under the then-current Rules of Commercial Arbitration of the
American Arbitration Association by one (1) arbitrator appointed in accordance with such Rules.
The arbitrator shall determine what discovery will be permitted, based on the principle of
19
limiting
the cost and time that the Parties must expend on discovery; provided, however, that the arbitrator
shall permit such discovery as he or she deems necessary to achieve an equitable resolution of the
dispute. The decision and/or award rendered by the arbitrator shall be written, final and
non-appealable, absent manifest error, and may be entered in any court of competent jurisdiction.
The Parties agree that, any provision of applicable law notwithstanding, they will not request, and
the arbitrator shall have no authority to award punitive or exemplary damages against any Party.
The costs of any arbitration, including administrative fees and fees of the arbitrator, shall be
shared equally by the Parties, unless the arbitrator determines otherwise.
10.1 By BMS.
Subject to Section 10.3, BMS shall indemnify, defend and hold harmless Athersys
and its directors, officers and employees (each an “Athersys Indemnitee”) from and against any and
all liabilities, damages, losses, costs or expenses (including attorneys’ and professional fees and
other expenses of litigation and/or arbitration) (each a “Liability”) resulting from a claim, suit
or proceeding made or brought by a Third Party against an Athersys Indemnitee arising from or
occurring as a result of (i) any breach of the representations and warranties set forth in Section
8.2, or (ii) the performance (or failure to perform) by BMS of its obligations hereunder.
10.2 By Athersys.
Subject to Section 10.3, Athersys shall indemnify, defend and hold harmless
BMS and its directors, officers and employees (each a “BMS Indemnitee”) from and against any and
all Liabilities resulting from a claim, suit or proceeding made or brought by a Third Party against
a BMS Indemnitee arising from or occurring as a result of (i) any breach of the representations and
warranties set forth in
Section 8.1, or (ii) the performance (or failure to perform) by Athersys of its obligations
hereunder.
10.3 Limitation on Indemnity Obligations.
(a) Negligence, etc.
No Athersys Indemnitee or BMS Indemnitee (each, an “Indemnitee”) shall
be entitled to the indemnification under Section 10.1 or 10.2, as the case may be, to the
comparative extent the Liability for which indemnification is sought was caused by a grossly
negligent, reckless or intentional act or omission by the Party with which such Indemnitee is
affiliated or any of such Party’s Affiliates or sublicensees or any of their respective directors,
officers, employees or authorized agents.
(b) Target Proteins and Collaboration Cell Lines.
Athersys acknowledges and agrees that it
will conduct a reasonable intellectual property investigation of each target protein that is the
basis of a particular Collaboration Cell Line, and of matters relating to the creation of the
Collaboration Cell Line, that BMS selects and Athersys agrees to produce pursuant to Section 2.1,
which shall be in addition to any such investigation that BMS may have conducted. BMS also
acknowledges and agrees that it will conduct a reasonable intellectual property investigation of
each target protein that BMS proposes for selection by Athersys as the basis for producing a
Collaboration Cell Line pursuant to Section 2.1, which shall be in addition to any such
investigation that Athersys may conduct, and shall disclose to Athersys the results of such
investigation. BMS shall not be obligated to provide indemnification under Section 10.1 against
any Liabilities resulting from a claim, suit or proceeding to the extent it is alleged, proven
or
agreed in such claim, suit or proceeding that any such target protein (or the creation of the
corresponding Collaboration Cell Line) infringes upon or otherwise violates the intellectual
property rights of any Third Party, except to the comparative extent such infringement or violation
results from a grossly negligent, reckless or intentional act or omission by BMS or any of BMS’
Affiliates or any of their respective directors, officers, employees or authorized agents.
10.4 Procedure.
In the event that an Indemnitee intends to claim indemnification under this
Article 10, it shall promptly notify the indemnifying Party in writing of such alleged Liability.
The indemnifying Party shall have the sole right to control the defense and settlement thereof.
The indemnifying Party shall have the right to settle or compromise any Liabilities for which it is
providing indemnification under this Article 10, provided that the consent of the Indemnitee (which
shall not be unreasonably withheld or delayed) shall be required in the event any such settlement
or compromise would adversely affect the interests of such Indemnitee. The Indemnitees shall
cooperate with the indemnifying Party and its legal representatives in the investigation of any
action, claim or liability covered by this Article 10. The Indemnitees shall not, except at their
own cost, voluntarily make any payment or incur any expense with respect to any claim or suit
without the prior written consent of the indemnifying Party, which the indemnifying Party shall not
be required to give.
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11.
|
|
Term and Termination.
|
11.1 Term of Agreement.
The term of this Agreement (the “Term”) shall commence on the
Effective Date and continue until expiration
upon the end of all royalty and payment obligations of BMS under Article 4, or until such
earlier date as the Parties agree in writing to terminate the Agreement or the Agreement terminates
as provided below.
11.2 Termination for Cause.
Either Party may terminate this Agreement in the event the other
Party has materially breached or defaulted in the performance of any of its obligations hereunder,
and such default has continued without cure for sixty (60) days after written notice thereof was
provided to the breaching Party by the non-breaching Party. Any termination shall become effective
at the end of such sixty (60) day period unless the breaching Party has cured any such breach or
default prior to the expiration of the sixty (60) day period. Notwithstanding the above, in the
case of a failure to timely pay any amounts due hereunder, the period for cure of any subsequent
default following notice thereof shall be thirty (30) days and, unless payment is made within such
period the termination shall become effective at the end of such period.
11.3 Effect of Termination.
(a) Accrued Rights and Obligations.
Termination of this Agreement for any reason shall not
release any Party hereto from any liability which, at the time of such termination, has already
accrued to the other Party or which is attributable to a period prior to such termination nor
preclude either Party from pursuing any rights and remedies it may have hereunder or at law or in
equity with respect to any breach of this Agreement. It is understood and agreed that monetary
damages may not be a sufficient remedy for any breach of this Agreement and that the non-breaching
Party may be entitled to injunctive relief as a remedy for any such breach.
21
(b) Return of Confidential Information.
Upon any termination of this Agreement, each of
Athersys and BMS shall promptly return to the other Party all Confidential Information of the
other; provided that counsel of each Party may retain one (1) copy of such Confidential Information
solely for archival purposes.
(c) Survival.
Sections 3.5 and 11.3, and Articles 4, 5, 6, 7, 9, 10 and 12 of this Agreement
shall survive termination of this Agreement for any reason.
12.1 Governing Law.
This Agreement and any dispute, including without limitation any
arbitration, arising from the performance or breach hereof shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving effect to its
conflict of laws rules and regulations.
12.2 Independent Contractors.
The relationship of the parties hereto is that of independent
contractors. The parties hereto are not deemed to be agents, partners or joint venturers of the
others for any purpose as a result of this Agreement or the transactions contemplated thereby.
12.3 Assignment.
Neither Party may assign its rights or obligations under this Agreement
absent the prior written consent of the other Party, not to be unreasonably withheld; provided,
however, that either Party may assign this Agreement without such consent to any of its Affiliates
or to any successor in interest by merger, acquisition or sale of all or substantially all of its
assets in a manner such that the assignee will be liable and responsible for the performance and
observance of all its duties and obligations hereunder. This Agreement shall be binding upon the
successors and permitted assigns of the Parties. Any attempted delegation or assignment not in
accordance with this Section 12.3 shall be void and of no force or effect. In the case of BMS, if
any such successor in interest had, before its merger with, or acquisition or purchase of, BMS, an
agreement with Athersys providing such entity with a license to the RAGE Technology, then within
ninety (90) day after the effective date of such merger, acquisition or purchase Athersys may
terminate this agreement, upon written notice to such successor in interest.
12.4 Notices.
All notices, requests and other communications hereunder shall be in writing
and shall be personally delivered or sent by telecopy or other electronic facsimile transmission or
by registered or certified mail, return receipt requested, postage prepaid, in each case to the
respective address specified below, or such other address as may be specified in writing to the
other parties hereto:
22
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If to BMS:
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Bristol-Myers Squibb Company
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Route 206 and Province Line Road
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P. O. Box 4000
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Princeton, New Jersey 08543-4000
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Attn: Vice President and Senior Counsel,
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Pharmaceutical Research Institute and
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Worldwide Business Development
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Fax No.: (609) 252-4232
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If to Athersys:
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Athersys, Inc.
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3201 Carnegie Avenue
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Cleveland, Ohio 44115-2634
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Attn: President
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Fax No.: (216) 361-9495
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12.5 Force Majeure.
Neither Party shall lose any rights hereunder or be liable to the other
Party for damages or losses (except for payment obligations) on account of failure of performance
by the defaulting Party if the failure is occasioned by war or terrorism, strike, fire, Act of God,
earthquake, flood, lockout, embargo, governmental acts or orders or restrictions, failure of
suppliers, or any other reason where failure to perform is beyond the reasonable control and not
caused by the negligence, intentional conduct or misconduct of the nonperforming Party has exerted
all reasonable efforts to avoid or remedy such force majeure; provided, however, that in no event
shall a Party be required to settle any labor dispute or disturbance.
12.6 Advice of Counsel.
BMS and Athersys have each consulted counsel of their choice
regarding this Agreement, and each
acknowledges and agrees that this Agreement shall not be deemed to have been drafted by one
Party or another and will be construed accordingly.
12.7 Compliance with Laws.
Each Party will comply with all applicable laws and regulations in
connection with its performance under this Agreement. Each Party shall furnish to the other Party
any information requested or required by that Party during the term of this Agreement or any
extensions hereof to enable that Party to comply with the requirements of any U.S. or foreign
federal, state and/or government agency.
12.8 Severability.
In the event that any provisions of this Agreement are determined to be
invalid or unenforceable by a court of competent jurisdiction, the remainder of the Agreement shall
remain in full force and effect without said provision. In such event, the parties shall in good
faith attempt to negotiate a substitute clause for any provision declared invalid or unenforceable,
which substitute clause shall most nearly approximate the intent of the Parties in agreeing to such
invalid provision, without itself being invalid.
12.9 Waiver.
It is agreed that no waiver by either Party hereto of any breach or default of
any of the covenants or agreements herein set forth shall be deemed a waiver as to any subsequent
and/or similar breach or default.
12.10 Complete Agreement.
This Agreement, together with its Exhibits, constitutes the entire
agreement, both written and oral, between the Parties with respect to the subject matter
23
hereof,
and that all prior agreements, including the term sheet, respecting the subject matter hereof,
either written or oral, expressed or implied, are merged and canceled, and are null and void and of
no effect as of the Effective Date. No amendment or change hereof or addition hereto shall be
effective or binding on either of the parties hereto unless reduced to writing and duly executed on
behalf of both Parties. For clarity, the cells lines created under the Original Agreement and the
Prior Agreement, and any amendments thereto, are not considered within the subject matter of this
Agreement.
12.11 Use of Name.
Unless otherwise permitted by this Agreement or required by applicable
laws or regulations, neither Party shall use the name or trademarks of the other Party without the
prior written consent of such other Party.
12.12 Headings.
The captions to the several Sections and Articles hereof are not a part of
this Agreement, but are included merely for convenience of reference only and shall not affect its
meaning or interpretation.
12.13 Counterparts.
This Agreement may be executed in two counterparts, each of which shall
be deemed an original and which together shall constitute one instrument.
* * *
24
In Witness Whereof
, BMS and Athersys have executed this Agreement by their respective
duly authorized representatives.
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Bristol-Myers Squibb Company
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Athersys, Inc.
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By:
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By:
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Print Name:
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Print Name:
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Title:
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Title:
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25
Exhibit A
RAGE-VT CELL LINES
A.
Creation of Collaboration Cell Lines
Within ninety (90) days after the Effective Date, BMS shall provide Athersys with an initial list
of specific proteins for which BMS requests that Athersys will create RAGE libraries, for Athersys’
review under Section 2.1(a). If Athersys accepts such proposed proteins as provided therein,
Athersys shall seek to create RAGE libraries, and screen and isolate Collaboration Cell Lines
expressing such proteins after the Parties agree upon Acceptance Criteria for each particular
Collaboration Cell Line. Such list may be supplemented from time to time by mutual agreement of
the Parties or by designation of additional specific proteins by BMS and acceptance of such
proteins by Athersys, as provided in Section 2.1 and in accordance with the procedure provided
below.
From time to time, BMS may nominate specific proteins for consideration by Athersys under Section
2.1 for use in constructing a Collaboration Cell Line using its RAGE technology and other Athersys
Know-How. Any such Collaboration Cell Line shall conform to the general specifications set forth
in Section B below and to any other specific requirements agreed to by the Parties.
Athersys shall have the right, before accepting such request of a particular protein by BMS
hereunder, to review and approve the technical and intellectual property feasibility of
constructing the requested Collaboration Cell Line. If requested by Athersys, BMS shall promptly
provide to Athersys the relevant technical requirements of BMS for the requested Collaboration Cell
Line. Athersys shall make its determination of technical feasibility, intellectual property
analysis and/or conflict with preexisting exclusive research obligations to Third Parties or
preexisting internal research programs for which research has commenced prior to receiving notice
(a “Pre-existing Program”), within forty-five (45) days of the request by BMS. If Athersys
believes that the project is not constrained by any of these considerations or fails to provide any
such notice within such forty-five (45) day period, then the nominated protein (and corresponding
Collaboration Cell Line) shall be deemed to be added to this
Exhibit A
. If Athersys
believes the project is constrained by any of such considerations and provides such notice within
such forty-five (45) day period, such protein and cell line shall not be added to
Exhibit
A
; provided that Athersys shall provide to BMS all pertinent information Controlled by Athersys
regarding the basis for its rejection of such request. In that event, BMS shall be entitled to
nominate another protein (with the foregoing process being repeated), until a protein nominated by
BMS hereunder is accepted by Athersys. For purposes of calculating the maximum number of cell
lines permitted under this Agreement, any substitute request made by BMS shall be deemed to have
been made as of the date of the original request.
In addition, in the event Athersys commences a Pre-existing Program with respect to a target
(either internally or with a Third Party), and BMS subsequently proposes such target under Section
2.1, Athersys shall promptly inform BMS of such program and request that BMS propose a substitute
target. In such event, Athersys shall, upon BMS’ request, provide, on a confidential basis, a
reasonable demonstration of such commencement and prosecution of any
26
such Pre-existing Program for a given target prior to the date of BMS’ proposal of such target
under Section 2.1.
B.
Acceptance Criteria for Collaboration Cell Lines
The Parties shall discuss and agree upon a set of specific Acceptance Criteria for each
Collaboration Cell Line based upon the Generic Criteria set forth below. Such Acceptance Criteria
shall be deemed to constitute a part of this
Exhibit A
. In each case, BMS and Athersys
shall agree upon one primary assay (with respect to each Collaboration Cell Line, the “Primary
Assay”) as the determining criterion for optimization and proof of target over-expression for
purposes of determining whether a particular Collaboration Cell Line satisfies various of its
Acceptance Criteria. If BMS wishes to have receptor density as determined by radioligand binding
(which may require MTX amplification) as an acceptance criterion, BMS may specify not more than
fifty percent (50%) of the Collaboration Cell Lines in a particular year, for such acceptance
treatment. If BMS wishes Athersys perform multiple assay validation and/or make radioligand
binding determinations in addition to those specified in the preceding sentence, BMS shall bear the
additional cost thereof.
Generic Collaboration Cell Line Acceptance Criteria
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Testing to determine if
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Category
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Criteria
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Criteria are Met by:
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1. Vector integration upstream of
target gene in HEK 293 or HT 1080
cells or other cell lines specified
by the Parties
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RT-PCR
demonstrating RIG
vector (RAGE
specific vector)
spliced to target
sequence mRNA
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Athersys
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2. Target gene mRNA
over-expression (RAGE vs. parental)
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Quantitative PCR
(qPCR)
demonstrating
>10 fold mRNA
increase
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Athersys
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3. Target protein over-expression
(RAGE vs. parental) and
functionality (Primary Assay
format)
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Functional
assay: such as
FLIPR with dose
response,
agonist/antagonist,
cAMP determination
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or
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•
Protein
over-expression: a
ten-fold increase
of Target protein
in RAGE clone
versus parental, as
determined by
Western blot or
FACS analysis
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Athersys
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4. RAGE clone robustness
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Freeze/thaw
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•
Expression
stability (e.g.
qPCR) over four
weeks
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Athersys
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5. RAGE cell line performance in HTS
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Performance in
Primary Assay under
simulated HTS
conditions and
general Cell Line
characteristics.
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BMS
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Exhibit B
MILESTONE PAYMENTS – CANDIDATE COMPOUNDS
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Milestone
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Payment
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Filing of first IND for the Candidate Compound directed against a
designated target expressed by an Accepted Cell Line
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$[*]
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Initiation of first Phase II clinical study for the Candidate Compound
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$[*]
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Initiation of first Phase III clinical study for the Candidate Compound
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$[*]
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Approval of a Product containing the Candidate Compound by Food and
Drug Administration as drug
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$[*]
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As used in this
Exhibit B
, the phrase “Initiation of first Phase III clinical study” shall
be deemed to include, if a party conducts a Phase II/III study on a Candidate Compound, the point
during such Phase II/III clinical trial when the party conducting the trial has the regulatory
approval to proceed with such trial as a pivotal trial.
BMS shall promptly notify Athersys of the first occurrence of any milestone with respect to each
Candidate Compound. Milestone payments shall be made only once with respect to any given Candidate
Compound, regardless of the number of indications sought (or approvals obtained) with respect to
such Candidate Compound, whether alone or in combination with other compounds or products, and
regardless of any new dosage strengths, preparations or forms of administration for such Candidate
Compound.
If BMS develops as a back-up Candidate Compound that inhibits or otherwise modulates the activity
of a particular molecular target of a Candidate Compound on which BMS is already making milestone
payments, then BMS may conduct clinical development on such back-up or follow-on Candidate
Compounds and shall not be obligated to make any milestone payments with respect to any such
back-up or follow-on Candidate Compound, except as otherwise provided below. In the event that a
particular Candidate Compound is dropped from active clinical development work or marketing for
safety or efficacy reasons and is specifically replaced with a different Candidate Compound
targeting the same molecular target as such dropped Candidate Compound, such new Candidate Compound
shall be deemed a “Replacement Compound.” BMS shall not be obligated to make milestone payments
that were earlier made with respect to a dropped Candidate Compound and replaced by a Replacement
Compound, but, subject to the preceding paragraph, BMS shall pay all milestone payments for
milestone events achieved by such Replacement Compound that had not been achieved by such dropped
Candidate Compound.
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1
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Confidential treatment has been requested for the redacted portions of this
exhibit, and such confidential portions have been omitted and filed separately with the Securities
and Exchange Commission.
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2
Exhibit C
FORM PRESS RELEASE
[Athersys to supply initial draft]
EXHIBIT
10.12
LOAN AND SECURITY AGREEMENT
Dated as of November 2, 2004
among
ATHERSYS, INC.,
a Delaware corporation
and
ADVANCED BIOTHERAPEUTICS, INC.,
a Delaware corporation
each sometimes individually as a “Borrower”, and sometimes collectively as “Borrowers”,
and
VENTURE LENDING & LEASING IV, INC. (“VLL”),
a Maryland corporation,
as “Agent” and “Lender”,
and
COSTELLA KIRSCH IV, L.P.
as “Lender”,
each individually a “Lender” and collectively, “Lenders”
LOAN AND SECURITY AGREEMENT
The Borrowers, Agent and Lenders identified on the cover page of this document have entered or
anticipate entering into one or more transactions pursuant to which each Lender severally, but not
jointly, agrees to make available to Borrowers a loan facility governed by the terms and conditions
set forth in this document and one or more Supplements executed by Borrowers, Agent and Lenders
which incorporate this document by reference. Each Supplement constitutes a supplement to and
forms part of this document, and will be read and construed as one with this document, so that this
document and the Supplement constitute a single agreement among the parties (collectively referred
to as this “Agreement”).
Accordingly, the parties agree as follows:
ARTICLE 1 — INTERPRETATION
1.1 Definitions.
The terms defined in Article 11 and in the Supplement will have the meanings
therein specified for purposes of this Agreement.
1.2 Inconsistency.
In the event of any inconsistency between the provisions of any Supplement
and this document, the provisions of the Supplement will be controlling for the purpose of all
relevant transactions.
1.3
Each reference herein to “Borrower” shall mean and refer to each Borrower individually,
and to all Borrowers collectively, except as the context or meaning may otherwise require; and all
Obligations of the Borrowers shall be joint and several.
ARTICLE 2 — THE COMMITMENT AND LOANS
2.1 The Commitment
. Subject to the terms and conditions of this Agreement, each of the
Lenders agrees severally, but not jointly, to make term loans to Borrowers from time to time from
the Closing Date and to, but not including, the Termination Date in an aggregate principal amount
not exceeding such Lender’s Commitment Percentage of the Commitment. Each Lender’s Commitment under
this Agreement is not a revolving credit commitment, and Borrower does not have the right to repay
and reborrow hereunder. Each Loan requested by Borrower to be made on a single Business Day shall
be for a minimum principal amount set forth in the Supplement, except to the extent the remaining
Commitment is a lesser amount.
2.2 Notes Evidencing Loans; Repayment
. Each Loan shall be evidenced by a separate Note
executed jointly and severally by Borrowers payable to the order of each Lender, in the total
principal amount of the Loan. Principal and interest of each Loan shall be payable at the times
set forth in the Note and, at the election of any Lender, regularly scheduled payments thereof and
each Terminal Payment shall be effected by automatic debit of the appropriate funds from Borrower’s
Primary Operating Account as specified in the Supplement hereto or by wire transfer to such
Lender’s account according to the instructions shown on such Supplement opposite such Lender’s
name. Any payment received by the Agent or any Lender hereunder for the account of any other
Lender shall be paid promptly to such Lender, in like funds, for the Loan in respect of which such
payment is made.
2.3 Procedures for Borrowing
.
(a) Whenever the Borrowers desire to borrow under this Agreement, the Borrowers shall give the
Agent written notice of such proposal, stating the total amount requested, in substantially the
form of the Borrowing Request attached to the Supplement as
Exhibit “B”
. The total amount
of the borrowing shall be allocated among the Lenders in accordance with the provisions of the
Supplement, to be advanced as separate Loans in the aggregate amount requested. Each Borrowing
Request shall be irrevocable and shall be effective only if received by the Agent not later than
10:00 a.m.
Pacific time on the date that is at least five (5) Business Days prior to a proposed
Borrowing Date. If any such Borrowing Request is by facsimile transmission, it shall be confirmed
in a writing sent by the Borrowers to the Agent on the next Business Day.
(b) Promptly upon receipt of a Borrowing Request, but not later than one (1) Business Day
after receipt of the Borrowing Request and the related documentation, the Agent shall calculate
each Lender’s Funding Amount, and notify each Lender telephonically of the Borrowing Request and
such Lender’s Funding Amount, and shall transmit copies of the Borrowing Request and the Funding
Amounts by facsimile to each Lender.
2.4 Required Borrowing Documentation.
The Borrower, on or prior to the Borrowing Date stated
in a Borrowing Request, which shall be a date that is not less than five (5) Business Days after
receipt by Agent of the Borrowing Request, and as of the date of the making of any related Loan,
shall have satisfied all applicable conditions precedent to such borrowing contained in this
Agreement, including delivery to each Lender of executed original Notes evidencing such Loan.
Without limiting the generality of the foregoing, not later than 1:00 p.m. Pacific time on the
Business Day that is two (2) Business Days prior to the Borrowing Date, Borrowers shall have
executed and delivered to Agent an original Note for each Lender for its Loan to be advanced, and
shall have authorized Agent to file any UCC-1 financing statements, amendments, releases or
termination statements that may be required by Agent. Such promissory notes and UCC statements, if
any, shall have been prepared by Agent and delivered to Borrowers promptly following receipt of the
related Borrowing Request, but in no event less than twenty-four hours prior to the deadline
referenced in the immediately preceding sentence unless otherwise agreed to by the parties. Agent
shall cause each Lender’s original executed promissory note and copies of any such UCC statements
relating to the Loan to be delivered to such Lender prior to the Borrowing Date to facilitate the
funding of its Loan.
2.5 Disbursement of Loan Proceeds.
Subject to the satisfaction of all of the conditions
precedent to borrowing specified herein and in the Supplement and so long as no Event of Default or
Default has occurred and is continuing, not later than
1:00 p.m.
, Pacific time, on the Borrowing
Date specified in the Borrowing Request, for each borrowing, each Lender shall transfer its
respective Funding Amount, allocated in accordance with the provisions of the Supplement, to the
Parent’s Primary Operating Account set forth in the Supplement, as the same may be amended from
time to time in accordance with the terms of Section 5.10 of this Agreement, by wire transfer
according to the instructions shown therein, or by other method but in any event in immediately
available funds.
2.6 Time and Method of Payments.
(a) Not later than one Business Day after receipt of the Borrowing Request, the Agent shall
prepare and distribute to each of the Lenders and the Borrower an amortization schedule showing the
principal amount of each Lender’s Loan that is to be advanced to the Parent’s Primary Operating
Account on the Borrowing Date and the regularly scheduled, monthly installment amount to be paid by
the Borrower in respect of each Lender’s Loan made on such Borrowing Date. Each Lender shall be
responsible for verifying such amounts; however, the Agent’s calculation shall be presumed correct
absent manifest error unless rebutted by such Lender or the Borrower. Agent shall not be liable
for any error in calculating a Lender’s Loan installment amount. If at any time or from time to
time a Lender desires to collect late charges and/or interest at the Default Rate, it shall
promptly notify Parent and Agent, and appropriate adjustment shall be made to the loan schedule to
reflect any changes in the monthly installment payable by Borrower in respect of such Lender’s
Loan(s).
(b) All payments of principal, interest, fees and other amounts (including indemnities)
payable by the Borrower hereunder shall be made, in immediately available funds not later than 1:00
p.m., Pacific time, on the date on which such payment shall become due (the “Payment Date”), by
disbursement to each Lender of its respective share of such payment on each Payment Date to the
address of such Lender for payments shown on the Supplement and, if indicated on such Schedule, by
wiretransfer to such Lender’s account according to the instructions shown on such
Schedule opposite such Lender’s name;
provided
, however, that Parent hereby (i) authorizes
each Lender to initiate debit entries to Parent’s “Primary Operating Account” as specified in the
Supplement, through Automated Clearinghouse (“ACH”) or other transfers, in order to satisfy
regularly scheduled payments of principal, interest or fees; (ii) agrees to provide each
Lender at least ten (10) days’ written notice in advance of any change in Parent’s Primary
Operating Account; and (iii) grants each Lender any additional authorizations necessary to begin
ACH debits from a new account which becomes the Primary Operating Account. Any payment received by
the Agent or any Lender hereunder for the account of any other Lender shall be paid promptly by
Agent or Lender, as applicable, to such Lender, in like funds, for the Loan in respect of which
such payment is made.
2.7 Several Obligations.
The failure of any Lender to make any Loan to be made by it on the
date specified therefor shall not relieve the other Lenders of their respective obligations to make
their Loans on such date; but in
no event shall any Lender be responsible for the failure of the other Lenders to make Loans to be
made by such other Lenders.
2
2.8 Pro Rata Treatment Among Lenders.
Except as otherwise provided herein: (i) each scheduled
payment of principal and Basic Interest on the Loans, if timely paid by Borrower, and any voluntary
prepayments of principal, shall be paid to the Lenders according to the amortization schedule
provided for in each Lender’s Note evidencing such Loans (in the event such scheduled payment is
less than the aggregate amount due to be paid to all Lenders under their Notes, but prior to any
acceleration of the Notes, such payment shall be allocated Pro Rata among the Lenders in proportion
to the regular installment amounts provided in the Notes); and (ii) all Terminal Payments shall be
allocated Pro Rata among the Lenders. If any payment under clause (i) or (ii) of this Section 2.8
is not paid Pro Rata among the Lenders, whether as a result of the Borrower’s failure to make a
particular payment to one or more Lenders while paying other Lenders, or otherwise, then each
Lender that has actually received a payment in excess of its Pro Rata share shall promptly remit to
the other Lender who received no payment or payment less than its Pro Rata share such amount as is
necessary to ensure the Pro Rata treatment of such payment and make such other adjustments from
time to time as shall be equitable, to the end that all Lenders shall share in such payments Pro
Rata in the aforesaid manner (however, no such adjustments shall affect the calculation of Pro Rata
items or the determination of Majority Lenders). If prior to all Obligations of Borrower to the
Lenders having been paid in full, any action to realize upon the Collateral is taken following an
Event of Default, then proceeds of Collateral and any other payments or distributions received on
account of the Loans shall be distributed in accordance with the terms of this Agreement.
2.9 Sharing of Payments and Set-Off Among Lenders.
Borrower hereby agrees that, in addition
to (and without limitation of) any right of set-off, banker’s lien or counterclaim a Lender may
otherwise have, each Lender shall be entitled, at its option, to offset balances held by it at any
of its offices against any principal of or interest on any of its Loans hereunder, or any fee
payable to it, that is not paid when due in which case it shall promptly notify the Borrower and
the other Lenders thereof, provided that its failure to give such notice shall not affect the
validity thereof. If a Lender shall effect payment of any principal of or interest on Loans held
by it under this Agreement through the exercise of any right of set-off, banker’s lien,
counterclaim or similar right, it shall promptly remit to the other Lender such amounts and make
such other adjustments from time to time as shall be equitable, to the end that all the Lenders
shall share the benefit of such payment pro rata in accordance with the unpaid principal and
interest on the Loans held by each of them (however, no such adjustments shall affect the
calculation of Pro Rata items or the determination of Majority Lenders). To such end, all the
Lenders shall make appropriate adjustments among themselves if such payment is rescinded or must
otherwise be restored. Nothing contained herein shall require any Lender to exercise any such
right or shall affect the right of any Lender to exercise and retain the benefits of exercising,
any such right with respect to any other indebtedness or obligation of the Borrower.
2.10 Interest
. Except as otherwise specified in the applicable Note, Basic Interest on the
outstanding principal balance of each Loan shall accrue daily at the Designated Rate from the
Borrowing Date until the Maturity Date. If the outstanding principal balance of such Loan is not
paid on the Maturity Date, interest shall accrue at the Default Rate until paid in full, as further
set forth herein.
2.11 Terminal Payment
. Except as otherwise specified in the applicable Note, Borrower shall
pay the Terminal Payment with respect to each Loan on the Maturity Date of such Loan.
2.12 Interest Rate Calculation
. Basic Interest, along with charges and fees under this
Agreement and any Loan Document, shall be calculated for actual days elapsed on the basis of a
360-day year, which results in higher interest, charge or fee payments than if a 365-day year were
used. In no event shall Borrower be obligated to pay any Lender interest, charges or fees at a
rate in excess of the highest rate permitted by applicable law from time to time in effect.
2.13 Default Interest
. Any unpaid payments of principal or interest or the Terminal Payment,
or any portion thereof, with respect to any Loan shall bear interest from their respective
maturities, whether scheduled or accelerated, at the Designated Rate for such Loan
plus
five percent (5.00%) per annum, until paid in full, whether before or after judgment (the “Default
Rate”). Borrower shall pay such interest on
demand.
2.14 Late Charges.
If Borrower is late in making any payment of principal or interest or
3
Terminal Payment under this Agreement by more than five (5) Business Days, Borrower agrees to pay a
late charge of five percent (5%) of the unpaid amount due, but not less than fifty dollars ($50.00)
for any one such delinquent payment. This late charge may be charged by the Lenders for the purpose
of defraying the expenses incidental to the handling of such delinquent amounts. Borrower
acknowledges that such late charge represents a reasonable sum considering all of the circumstances
existing on the date of this Agreement and represents a fair and reasonable estimate of the costs
that will be sustained by Lenders due to the failure of Borrower to make timely payments. Borrower
further agrees that proof of actual damages would be costly and inconvenient. Such late charge
shall be paid without prejudice to the rights of Lenders to collect any other amounts provided to
be paid or to declare a default under this Agreement or any of the other Loan Documents or from
exercising any other rights and remedies of Lenders.
2.15 Lender’s Records
. Principal, Basic Interest, Terminal Payments and all other sums owed
under any Loan Document shall be evidenced by entries in records maintained by each Lender for such
purpose. Each payment on and any other credits with respect to principal, Basic Interest, Terminal
Payments and all other sums outstanding under any Loan Document shall be evidenced by entries in
such records. Absent manifest error, a Lender’s records shall be conclusive evidence thereof.
2.16 Grant of Security Interests; Filing of Financing Statements.
(a)
To secure the timely payment and performance of all of Borrower’s Obligations to Lenders,
Borrower hereby grants to Agent for the benefit of the Lenders continuing security interests in all
of the Collateral. In connection with the foregoing, Borrower authorizes Agent to prepare and file
any financing statements describing the Collateral without otherwise obtaining the Borrower’s
signature or consent with respect to the filing of such financing statements.
(b)
Borrower is and shall remain absolutely and unconditionally liable for the performance of
its obligations under the Loan Documents, including, without limitation, any deficiency by reason
of the failure of the Collateral to satisfy all amounts due Lenders under any of the Loan
Documents.
(c)
All Collateral pledged by Borrower under this Agreement and any Supplement shall secure
the timely payment and performance of all Obligations under this Agreement, the Notes and the other
Loan Documents. Except as expressly provided in this Agreement, no Collateral pledged under this
Agreement or any Supplement shall be released until such time as all Obligations under this
Agreement and the other Loan Documents have been satisfied and paid in full.
ARTICLE 3 — REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Agent and each Lender that, except as set forth in either
the Supplement or the Schedule of Exceptions hereto, as of the Closing Date and each Borrowing
Date:
3.1 Due Organization
. Borrower is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation, and is duly qualified to conduct
business and is in good standing in each other jurisdiction in which its business is conducted or
its properties are located, except where the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect.
3.2 Authorization, Validity and Enforceability
. The execution, delivery and performance of
all Loan Documents executed by Borrower are within Borrower’s powers, have been duly authorized,
and are not in conflict with Borrower’s certificate of incorporation or by laws, or the terms of
any charter or other organizational document of Borrower, as amended from time to time; and all
such Loan Documents constitute valid and binding obligations of Borrower, enforceable in accordance
with their terms (except as may be limited by bankruptcy, insolvency and similar laws affecting the
enforcement of creditors’ rights in general, and subject to general principles of equity).
3.3 Compliance with Applicable Laws
. Borrower has complied with all material licensing,
permit and fictitious name requirements necessary to lawfully conduct the business in which it is
engaged,
and to any sales, leases or the furnishing of services by Borrower, including without limitation
those requiring consumer or other disclosures, the noncompliance with which would have a Material
Adverse Effect.
3.4 No Conflict
. The execution, delivery, and performance by Borrower of all Loan Documents
and Warrants are not in conflict with any law, rule,
4
regulation, order or directive applicable to
Borrower, or any indenture, agreement, or undertaking to which Borrower is a party or by which
Borrower may be bound or affected, except where such conflict would not have a Material Adverse
Effect. Without limiting the generality of the foregoing, the issuance of the Warrants to Lenders
(or their designees) will not violate any agreement or instrument by which Borrower is bound or
require the consent of any holders of Borrower’s securities other than consents which have been
obtained prior to the Closing Date or prior to the issuance of Warrants, as applicable.
3.5 No Litigation, Claims or Proceedings
. There is no litigation, tax claim, proceeding or
dispute pending, or, to the knowledge of Borrower, threatened against or affecting Borrower, or its
property or the conduct of business, which is reasonably likely to be determined adversely to
Borrower and , if so adversely determined, would result in a Material Adverse Effect.
3.6 Correctness of Financial Statements
. Parent’s financial statements which have been
delivered to each Lender fairly and accurately reflect in all material respects Borrowers’
consolidated financial condition in accordance with GAAP (except for the absence of footnote
disclosures and subject to normal year end adjustments) as of the latest date of such financial
statements; and, since that date there has been no Material Adverse Change.
3.7 No Subsidiaries
. As of the Closing Date, Borrower is not a majority owner of or in a
control relationship with any other business entity. Borrower may from time to time amend or
update the Schedule of Exceptions to reflect additions and/or deletions of subsidiaries and control
relationships with other entities. Each such update shall be effective immediately upon delivery to
Agent.
3.8 Environmental Matters
. To its knowledge, Borrower is in compliance with Environmental
Laws applicable to its business, except to the extent a failure to be in such compliance would not
have a Material Adverse Effect.
3.9 No Event of Default
. No Default or Event of Default has occurred and is continuing.
3.10 Full Disclosure
. None of the representations or warranties made by Borrower in the Loan
Documents as of the date such representations and warranties are made or deemed made, and none of
the factual statements contained in any exhibit, report, statement or certificate furnished by or
on behalf of Borrower in connection with the Loan Documents (including disclosure materials
delivered by or on behalf of Borrower to any Lender prior to the Closing Date or pursuant to
Section 5.2 hereof), contains any untrue statement of a material fact or omits any material fact
required to be stated therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made or delivered; it
being understood and agreed that Borrower gives no representation or warranty with respect to
projections, forecasts or other forward-looking statements prepared in good faith.
3.11 Specific Representations Regarding Collateral.
(a) Title.
Except for the security interests created by this Agreement and Permitted Liens,
(i) Borrower is and will be the unconditional legal and beneficial owner of the Collateral, and
(ii) the Collateral is genuine and subject to no Liens, rights or defenses of others. Except for
any applicable Permitted Liens, there exist no assignments or encumbrances properly recorded with
the U.S. Patent and Trademark Office or the U.S. Copyright Office currently affecting any
Collateral in favor of any third party.
(b) Rights to Payment.
The names of the obligors, amount owing to Borrower, due dates and all
other information with respect to the Rights to Payment are and will be correctly stated in all
material respects in all Records relating to the Rights to Payment. Borrower further represents
and warrants, to its knowledge, that each Person appearing to be obligated on a Right to Payment
has authority and capacity to contract and is bound as it appears to be.
(c) Location of Collateral.
Borrower’s chief executive office, Inventory, Records, Equipment,
and any other offices or places of business are located at the address(es) shown on the Supplement.
Any notice of a change of location provided pursuant to section 5.1(a)
shall amend the Supplement automatically on the thirtieth day after receipt thereof.
(d) Business Names.
Other than its full corporate name, Borrower has not conducted business
using any trade names or fictitious business names except as shown on the Supplement.
3.12 Copyrights, Patents, Trademarks and Licenses
.
5
(a) Borrower owns or is licensed or otherwise has the right to use or has in its possession
all of the patents, trademarks, service marks, trade names, copyrights, contractual franchises,
authorizations and other similar rights that are reasonably necessary for the operation of its
business as currently conducted, to Borrower’s knowledge, without conflict with the rights of any
other Person.
(b) To Borrower’s knowledge, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be employed, by Borrower
infringes upon any rights held by any other Person.
(c) No claim or litigation involving Borrower regarding any of the subject matter of Section
3.12(a) and (b) is pending or, to Borrower’s knowledge, threatened, and, to Borrower’s knowledge,
no statute, law, rule, regulation, standard or code applicable to Borrower is pending or proposed
which, if became effective, could reasonably be expected to have a Material Adverse Effect.
3.13 Debt Obligations Current.
Borrower is solvent and able to pay its debts (including trade
debts) as they mature.
3.14 Regulatory Compliance.
Borrower has met the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA. No event has occurred resulting from
Borrower’s failure to comply with ERISA that will have a Material Adverse Effect. Borrower is not
required to register as an “investment company” or a company “controlled” by an entity required to
register as an “investment company” within the meaning of the Investment Company Act of 1940.
Borrower is not engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within the meaning of
Regulations T and U of the Board of Governors of the Federal Reserve System). Borrower has
complied in all material respects with all the provisions of the Federal Fair Labor Standards Act.
3.15 Survival.
The representations and warranties of Borrower as set forth in this Agreement
survive the execution and delivery of this Agreement.
ARTICLE 4 — CONDITIONS PRECEDENT
4.1 Conditions to First Loan
. The obligation of each Lender to make its first Loan hereunder
is, in addition to the conditions precedent specified in Section 4.2 and in the Supplement, subject
to the fulfillment of the following conditions and to the receipt by Agent of the documents
described below, duly executed and in form and substance satisfactory to Agent and Lenders:
(a) Resolutions
. A certified copy of the resolutions of the Board of Directors of each
Borrower authorizing the execution, delivery and performance by Borrower of the Loan Documents.
(b) Incumbency and Signatures
. A certificate of an authorized officer of Borrower certifying
the names of the officer or officers of Borrower authorized to sign the Loan Documents, together
with a sample of the true signature of each such officer.
(c) Legal Opinion
. The opinion of legal counsel for each Borrower as to such matters as Agent
or any Lender may reasonably request, in substantially the form of
Exhibit “E”
to the
Supplement.
(d) Charter and By Laws
. Certified copies of the Certificate of Incorporation and By Laws of
each Borrower, as amended through the Closing Date.
(e) This Agreement
. Original counterparts of this Agreement and an initial Supplement, with
all schedules completed and attached thereto, and disclosing such information as is acceptable to
Agent and Lenders exercising reasonable discretion.
(f) Financing Statements; Lien Perfection Documents
. Filing copies (or other evidence of
filing satisfactory to Agent, Lenders and their respective counsel) of such UCC financing
statements, collateral assignments, account control agreements, and termination statements, with
respect to the Collateral as Agent or Lenders shall reasonably request.
(g) Lien Searches
. Uniform Commercial Code lien, judgment, bankruptcy and tax lien searches
of Borrower from such jurisdictions or offices as Agent or any Lender may reasonably request, all
as of a date reasonably satisfactory to Agent, Lenders and their counsel.
(h) Good Standing Certificate
. A Certificate of status or good standing of each Borrower as
of a date acceptable to Agent from the jurisdiction of such Borrower’s organization and any
material foreign jurisdictions where Borrower is qualified to do business.
6
(i) Other Documents
. Such other documents and instruments as Agent or Lenders may reasonably
request to effectuate the intents and purposes of this Agreement.
4.2 Conditions to All Loans
. The obligation of each Lender to make its initial Loan and each
subsequent Loan is subject to the following further conditions precedent that:
(a) No Default
. No Default or Event of Default has occurred and is continuing or will result
from the making of any such Loan, and the representations and warranties of Borrower contained in
Article 3 of this Agreement and Part 3 of the Supplement are true and correct (i) in all respects,
with respect to those representations and warranties qualified by materiality, and (ii) in all
material respects, with respect to those representations and warranties not so qualified as of the
Borrowing Date of such Loan.
(b) No Material Adverse Change
. No Material Adverse Effect has occurred since the date of the
Parent’s last annual audited financial statements.
(c) Borrowing Request
. Borrowers shall have delivered to Agent a Borrowing Request for such
Loan.
(d) Note
. Borrowers shall have delivered to Agent an original executed Note for each Lender
evidencing such Lender’s Loan, substantially in the form of
Exhibit “A”
attached to the
Supplement.
(e) Supplemental Lien Filings
. Borrowers shall have executed and delivered such amendments or
supplements to this Agreement and additional Security Documents, financing statements and third
party waivers as Agent may reasonably request in connection with the proposed Loan, in order to
create, protect or perfect or to maintain the perfection of Agent’s Liens on the Collateral for the
benefit of the Lenders.
(f) VCOC Limitation
. Absent the failure of VLL to exercise commercially reasonable efforts and
to act in good faith to qualify and remain so qualified, VLL shall not be obligated to make any
Loan under its Commitment if at the time of or after giving effect to the proposed Loan VLL would
no longer qualify as: (A) a “venture capital operating company” under U.S. Department of Labor
Regulations Section 2510.3-101(d), Title 29 of the Code of Federal Regulations, as amended; and (B)
a “business development company” under the provisions of federal Investment Company Act of 1940, as
amended; and (C) a “regulated investment company” under the provisions of the Internal Revenue Code
of 1986, as amended. VLL does not know, and has no reason to know of any facts or circumstances
that could reasonably be expected to cause VLL to no longer qualify as (A) a “venture capital
operating company”, (B) a “business development company”, or (C) a “regulated investment company”
as those terms are defined above.
(g) Financial Projections.
Borrower shall have delivered to each Lender Borrower’s financial
projections or business plan as prepared by or at the direction of Borrower’s management.
ARTICLE 5 — AFFIRMATIVE COVENANTS
During the term of this Agreement so long as any Obligations to Agent and Lenders remain
outstanding, Borrower will:
5.1 Notice to Lender
. Promptly give written notice to Lenders of:
(a) Any litigation or administrative or regulatory proceeding affecting Borrower where the
amount claimed against Borrower is at the Threshold Amount or more, or where the granting of the
relief requested would reasonably be expected to have a Material Adverse Effect.
(b) Any substantial dispute which may exist between Borrower or any governmental or regulatory
authority.
(c) The occurrence of any Default or any Event of Default.
(d) Any change in the location of any of Borrower’s places of business or Collateral within
thirty (30) days of such change, or of the establishment of any new, or the discontinuance of any
existing, place of business.
(e) Any dispute or default by Borrower or any other party under any joint venture, partnering,
distribution, cross-licensing, strategic alliance, collaborative research or manufacturing, license
or similar agreement which would reasonably be expected to have a Material Adverse Effect.
(f) Any other matter which has resulted in a Material Adverse Change since December 31, 2003.
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5.2 Financial Statements
. Deliver to each Lender or cause to be delivered to each Lender, in
form and detail satisfactory to Lenders the following financial information, which Parent warrants
shall be accurate and complete in all material respects:
(a) Monthly Financial Statements
. As soon as available but no later than thirty (30) days
after the end of each month, Parent’s consolidated unaudited balance sheet as of the end of such
period, and its consolidated unaudited income statement and consolidated unaudited cash flow
statement for such period and for that portion of its financial reporting year ending with such
period, prepared in accordance with GAAP (except for the absence of footnotes and subject to normal
year end adjustments), and attested by a responsible financial officer of Parent as being complete
and correct and fairly presenting in all material respects Borrowers’ financial condition on a
consolidated basis and the results of Borrowers’ operations. After an Initial Public Offering, the
foregoing interim financial statements may be provided on a quarter-annual basis and shall be
deemed delivered upon timely filing by Parent of its quarterly and annual reports with the
Securities and Exchange Commission (“SEC”).
(b) Year-End Financial Statements
. As soon as available but no later than one hundred twenty
(120) days after and as of the end of each financial reporting year, a complete copy of Parent’s
audit report, which shall include consolidated balance sheet, income statement, statement of
changes in equity and statement of cash flows for such year, prepared in accordance with GAAP, and
certified by an independent certified public accountant selected by Parent (the “Accountant”). The
Accountant’s certification shall not be qualified or limited without the prior written consent of
each Lender.
(c) Compliance Certificates
. Simultaneously with the delivery of each set of financial
statements referred to in paragraphs (a) and (b) above, a certificate of the chief financial
officer or other executive officer of Parent substantially in the form of
Exhibit “C”
to
the Supplement stating whether any Default or Event of Default exists on the date of such
certificate, and if so, setting forth in reasonable detail thereof and the action which Borrower is
taking or proposes to take with respect thereto.
(d) Government Required Reports; Press Releases
. Promptly after sending, issuing, making
available, or filing, copies of all statements released to any news media for publication, all
annual and quarterly reports, proxy statements, and financial statements that Parent sends or makes
available to its stockholders, and, not later than five (5) Business Days after actual filing or
the date such filing was first due, all registration statements and reports that Parent files or is
required to file with the Securities and Exchange Commission, or any other governmental or
regulatory authority.
(e) Other Information
. Such other statements, lists of property and accounts, budgets,
forecasts, reports, or other information as Agent or any Lender may from time to time reasonably
request.
5.3 Managerial Assistance from VLL
. Permit VLL to substantially participate in, and
substantially influence the conduct of management of Borrower through the exercise of “management
rights,” as that term is defined in 29 C.F.R. § 2510.3-101(d), including without limitation the
following rights:
(a) Borrower agrees that (i) it will make its officers, directors, employees and affiliates
available at such times as VLL may reasonably request for VLL to consult with and advise as to the
conduct of Borrower’s business, its equipment and financing plans, and its financial condition and
prospects, (ii) VLL shall have the right to inspect Borrower’s books, records, facilities and
properties at reasonable times during normal business hours on reasonable advance notice at its own
expense, and (iii) VLL shall be entitled to recommend prospective candidates for election or
nomination for election to Borrower’s Board of Directors, and Borrower shall give due consideration
to (but shall not be bound by) such recommendations, it being the
intention of the parties that VLL shall be entitled through such rights,
inter alia
, to furnish
“significant managerial assistance”, as defined in Section 2(a)(47) of the Investment Company Act
of 1940, to Borrower.
(b) Without limiting the generality of (a) above, if VLL reasonably believes that financial or
other developments affecting Borrower have impaired or are likely to impair Borrower’s ability to
perform its obligations under this Agreement, permit VLL reasonable access to Borrower’s management
and/or Board of Directors and opportunity to present VLL’s views with respect to such developments.
VLL shall cooperate with Borrower to ensure that the exercise of VLL’s rights shall not disrupt the
business of Borrower. The rights enumerated above shall not be construed as giving VLL control
over Borrower’s management or policies. Borrower
8
agrees that this Section 5.3 does not apply to
any Lender hereunder other than VLL. VLL agrees that it will indemnify, defend and hold harmless
each other Lender for any claims arising as a result of VLL’s exercise of its rights under this
Section 5.3.
5.4 Existence
. Maintain and preserve Borrower’s existence, present form of business, and all
material rights and privileges necessary or desirable in the normal course of its business; and
keep all Borrower’s property in good working order and condition, ordinary wear and tear excepted.
5.5 Insurance
. Obtain and keep in force insurance in such amounts and types as is usual in the
type of business conducted by Borrower with insurance carriers having a policyholder rating of not
less than “A-” and financial category rating of Class VII in “Best’s Insurance Guide,” unless
otherwise approved by Agent. Such insurance policies must be in form and substance satisfactory to
Agent. All property policies will have a lender’s loss payable endorsement showing Agent, for the
benefit of Lenders, as a loss payee and all liability policies will show the Agent, for the benefit
of Lenders, as an additional insured. At Agent’s request, Borrower will deliver to Agent certified
copies of policies, endorsements or a certificate of insurance evidencing the same, and evidence of
all premium payments. If no Event of Default has occurred and is continuing, proceeds payable under
any casualty policy will, at Borrower’s option, be payable to Borrower to replace the property
subject to the claim, provided that any such replacement property shall be deemed Collateral in
which Agent, for the benefit of Lenders, has been granted a first priority security interest. If
an Event of Default has occurred and is continuing, then proceeds payable under any policy will be
payable to Agent, for the benefit of Lenders, toward the satisfaction of the Obligations in
accordance with the terms of this Agreement.
5.6 Accounting Records
. Maintain adequate books, accounts and records, and prepare all
financial statements in accordance with GAAP (except for the absence of footnotes and subject to
normal year end adjustments with respect to unaudited financial statements), and in compliance with
the regulations of any governmental or regulatory authority having jurisdiction over Borrower or
Borrower’s business; and permit employees or agents of Agent and any Lender at such reasonable
times and upon reasonable notice as they may request, at Borrower’s expense after the occurrence of
an Event of Default, to inspect Borrower’s properties, and to examine, and make copies and
memoranda of Borrower’s books, accounts and records.
5.7 Compliance With Laws
. Comply with all laws (including, without limitation, Environmental
Laws) rules, regulations applicable to, and all orders and directives of any governmental or
regulatory authority having jurisdiction over, Borrower or Borrower’s business, and with all
material agreements to which Borrower is a party, except where the failure to so comply would not
have a Material Adverse Effect.
5.8 Taxes and Other Liabilities
. Pay all Borrower’s Indebtedness when due; and pay all taxes
and other governmental or regulatory assessments before delinquency or before any penalty attaches
thereto, in each case, except as may be contested in good faith by the appropriate procedures and
for which Borrower shall maintain appropriate reserves in accordance with GAAP; and timely file all
required tax returns.
5.9 Special Collateral Covenants.
(a) Maintenance of Collateral; Inspection.
Do all things reasonably necessary to maintain,
preserve, protect and keep all tangible Collateral in good working order and salable condition,
ordinary wear and tear excepted, utilize the Collateral for its intended use or as otherwise may be
used in the ordinary course of Borrower’s business, and use the Collateral lawfully
and, to the extent applicable, only as permitted by Borrower’s insurance policies. Maintain, or
cause to be maintained, complete and accurate Records relating to the Collateral. Upon reasonable
prior notice at reasonable times during normal business hours, Borrower hereby authorizes Agent and
each Lender’s officers, employees, representatives and agents to inspect the Collateral and to
discuss the Collateral and the Records relating thereto with Borrower’s officers and employees,
and, in the case of any Right to Payment, with any Person which is or may be obligated thereon.
(b) Financing Statements and Other Actions.
Execute and deliver to Agent all financing
statements, account control agreements, notices and other documents from time to time reasonably
requested by Agent to maintain a first perfected security interest in the Collateral in favor of
Agent, for the benefit of Lenders subject only to Permitted Liens; perform such other acts, and
execute and deliver to Agent such additional conveyances, assignments, agreements and instruments,
as Agent may at any time reasonably
9
request in connection with the administration and enforcement
of this Agreement or Agent’s or Lender’s rights, powers and remedies hereunder.
(c) Liens
. Not create, incur, assume or permit to exist any Lien or grant any other Person a
negative pledge on any Collateral, except Permitted Liens.
(d) Documents of Title.
Other than as required in connection with Permitted Liens or as set
forth in Section 6.1, not sign or authorize the signing of any financing statement or other
document naming Borrower as debtor or obligor, or acquiesce or cooperate in the issuance of any
bill of lading, warehouse receipt or other document or instrument of title with respect to any
Collateral, except those negotiated to Agent, or those naming Agent as secured party.
(e) Change in Location or Name.
Without at least 30 days’ prior written notice to Lenders:
(a) not relocate any Collateral or Records, its chief executive office, or establish a place of
business at a location other than as specified in the Supplement; and (b) not change its name,
mailing address, location of Collateral, jurisdiction of incorporation or its legal structure.
(f) Decals, Markings.
At the request of Agent, firmly affix a decal, stencil or other
marking to designated items of Equipment, indicating thereon the security interest of Agent.
(g) [Intentionally omitted]
(h) Certain Agreements on Rights to Payment.
Other than in the ordinary course of business,
not make any material discount, credit, rebate or other reduction in the original amount owing on a
Right to Payment or accept in satisfaction of a Right to Payment an amount materially less than the
original amount thereof.
5.10 Authorization for Automated Clearinghouse Funds Transfer.
(i) Authorize each Lender to
initiate debit entries to Borrower’s Primary Operating Account, specified in the Supplement hereto,
through Automated Clearinghouse (“ACH”) transfers, in order to satisfy regularly scheduled payments
of principal, interest and Terminal Payments; (ii) provide Lenders at least thirty (30) days notice
of any change in Borrower’s Primary Operating Account; and (iii) grant Lenders any additional
authorizations necessary to begin ACH debits from a new account which becomes the Primary Operating
Account.
ARTICLE 6 — NEGATIVE COVENANTS
During the term of this Agreement so long as any Obligations remain outstanding, Borrower will
not (without Majority Lenders’ prior written consent):
6.1 Indebtedness.
Be indebted for borrowed money, the deferred purchase price of property, or
leases which would be capitalized in accordance with GAAP; or become liable as a surety, guarantor,
accommodation party or otherwise for or upon the obligation of any other Person, except:
(a) Indebtedness existing on the date hereof;
(b) Indebtedness incurred for the acquisition of supplies or inventory on normal trade
credit;
(c) Indebtedness incurred pursuant to one or more transactions permitted under
Section
6.4
;
(d) Indebtedness of Borrower under this Agreement;
(e) any Subordinated Debt;
(f) Indebtedness arising out of earnout and
similar contingent payment obligations of Borrower in existence as of the Closing Date;
(g) bridge loan financing, whether or not convertible into Borrower’s equity securities; and
(h) and, in addition to the foregoing, up to Three Million Dollars ($3,000,000) in aggregate
principal amount of Indebtedness outstanding at any time.
6.2 Liens
. Create, incur, assume or permit to exist any Lien, or grant any other Person a
negative pledge, on any of Borrower’s property, except Permitted Liens. Borrower and Lender agree
that this covenant is not intended to constitute a lien, deed of trust, equitable mortgage, or
security interest of any kind on any of Borrower’s real property, and this Agreement shall not be
recorded or recordable. Without limiting the generality of the foregoing, and as a material
inducement to the Lenders’ making of the Commitment and entering into the Loan Documents, Borrower
agrees that it shall not assign, mortgage, pledge, grant a security interest in, or encumber any of
Borrower’s Intellectual Property, or enter into any agreement, document, instrument or other
arrangement (except with or in favor of Agent and Lenders) with any Person which directly or
10
indirectly prohibits or has the effect of prohibiting Borrower from assigning, mortgaging,
pledging, granting a security interest in or upon, or encumbering any of Borrower’s Intellectual
Property, except as is otherwise permitted in Section 6.5 of this Agreement and the definition of
“Permitted Lien” herein.
6.3 Dividends
. Except after an Initial Public Offering, pay any dividends or purchase, redeem
or otherwise acquire or make any other distribution with respect to any of Parent’s capital stock,
except (a) dividends or other distributions solely of capital stock of Parent, (b) cash payments
for fractional shares of Parent’s capital stock, including, without limitation, upon the exercise
or conversion of options, warrants, rights and other similar instruments exercisable or convertible
into Parent’s capital stock, (c) dividends by Advanced Biotheropeutics, Inc. to its Parent, and (d)
so long as no Event of Default has occurred and is continuing, (i) repurchases of stock from
employees, directors or consultants upon termination of employment under reverse vesting or similar
repurchase plans not to exceed $100,000 in aggregate in any calendar year and (ii) dividends and
distributions in respect of Financing Shares equating to periodic, unaccelerated cash payments of
non-default rate accrued interest on comparable Subordinated Debt financing.
6.4 Changes/Mergers
. Liquidate or dissolve; or enter into any consolidation, merger or other
combination in which the stockholders of the Borrower immediately prior to the first such
transaction own less than 50% of the voting stock of the Borrower or the entity that results from
such merger or consolidation (the “Surviving Entity”) immediately after giving effect to such
transaction or related series of such transactions, except that Borrower may consolidate or merge
so long as: (A) the Surviving Entity shall have executed and delivered to Agent an agreement in
form and substance reasonably satisfactory to Lenders, containing an assumption by the Surviving
Entity of the due and punctual payment and performance of all Obligations and performance and
observance of each covenant and condition of Borrower in the Loan Documents; (B) all such
obligations of the Surviving Entity to Lenders shall be guaranteed by any entity that directly or
indirectly owns or controls more than 50% of the voting stock of the Surviving Entity; (C)
immediately after giving effect to such merger or consolidation, no Default or Event of Default
shall have occurred and be continuing; and (D) the credit risk to Lenders, in their sole
discretion, of the Surviving Entity shall not be increased. In determining whether the proposed
merger or consolidation would result in an increased credit risk, Lenders may consider, among other
things, changes in Borrower’s management team, employee base, access to equity markets, venture
capital support, financial position and/or disposition of intellectual property rights which may
reasonably be anticipated as a result of the transaction.
6.5 Sales of Assets
. Sell, transfer, lease, license or otherwise dispose of (a “Transfer”) any
of Borrower’s assets except (i) exclusive and non-exclusive licenses of Intellectual Property
consistent with industry practice, including, without limitation, research and product development
collaborations (so long as no one exclusive license or series of exclusive licenses to any one
licensee covers all or substantially all of Borrower’s Intellectual Property assets and rights);
(ii) Transfers of worn-out, obsolete or surplus property (each as determined by the Borrower in its
reasonable judgment) not constituting Equipment as to which a Loan was made hereunder; (iii)
Transfers of Inventory not constituting Equipment as to which a Loan was made hereunder; (iv)
Transfers constituting
Permitted Liens; (v) Transfers permitted in Section 6.6 hereunder; (vi) Transfers in connection
with research and product development collaborations involving a joint venture or Delayed Joint
Venture, (vii) Transfers of equity interests to a Collaborator pursuant to a Delayed Joint Venture,
and (viii) Transfers of Collateral for fair consideration and in the ordinary course of its
business.
6.6 Loans/Investments
. Make or suffer to exist any loans, guaranties, advances, or
investments, except:
(a) Accounts receivable in the ordinary course of Borrower’s business;
(b) Investments other than in accordance with the investment policy approved by the Parent’s
Board of Directors, a copy of which has been made available to the Agent.
(c) Temporary advances to cover incidental expenses to be incurred in the ordinary course of
business;
(d) Investments in and loans to joint ventures, strategic alliances, licensing and similar
arrangements customary in Borrower’s industry;
11
(e) other than as provided in Section 6.5, investments and loans which do not require Borrower
to assume or otherwise become liable for the obligations of any third party not directly related to
or arising out of such arrangement or, without the prior written consent of Lender, require
Borrower to transfer ownership of non-cash assets to a joint venture or other similar entity;
(f) Investments and loans by Parent to direct and indirect in its wholly-owned subsidiaries,
including re-advance of Loan proceeds by Parent to its wholly-owned subsidiaries;
(g) Investments and loans outstanding on the date hereof; and
(h) Other loans, investments and advances in any amount not to exceed the Threshold Amount at
anytime outstanding.
6.7 Transactions With Related Persons
. Except as permitted under Section 6.6(f), or except in
connection with a strategic collaboration and as approved by Parent’s Board of Directors, directly
or indirectly enter into any transaction with or for the benefit of a Related Person on terms more
favorable to the Related Person than would have been obtainable in an “arms’ length” dealing except
agreements and transactions with and payments to Related Persons that are entered into outside the
ordinary course of business, not otherwise prohibited by this Loan Agreement and affirmatively
approved by a majority of the disinterested directors and of the stockholders of Borrower.
6.8 Other Business
. Engage in any material line of business other than the business Borrower
conducts as of the Closing Date or any business reasonably related or incidental thereto.
6.9 Compliance.
Become required to register as an “investment company” or controlled by an
entity required to register as an “investment company,” within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or carrying margin
stock, or use the proceeds of any Loan for such purpose. Fail to meet the minimum funding
requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to
occur, fail to comply in all material respects with the Federal Fair Labor Standards Act or violate
any law or regulation, but only to the extent any such violation results in a Material Adverse
Effect or a material adverse effect on the Collateral or the priority of Agent’s Lien on the
Collateral, or permit any of its subsidiaries to do any of the foregoing.
6.11 Other Deposit and Securities Accounts.
Maintain any deposit accounts or accounts holding
securities owned by Borrower except (i) Deposit Accounts and investment/securities accounts as set
forth in the Supplement, and (ii) other Deposit Accounts and securities/investment accounts, in
each case, Agent shall have taken such action as Lenders reasonably deem necessary to obtain a
perfected first security interest therein.
6.12 Prepayment of Indebtedness
. Prepay, redeem or otherwise satisfy in any manner prior to
the scheduled repayment thereof any Indebtedness (other than the Loans).
6.13 Relationship of Borrowers
. Parent ceases to own all of the issued and outstanding
capital stock of Advanced Biotherapeutics, Inc.
ARTICLE 7 — EVENTS OF DEFAULT
7.1 Events of Default; Acceleration
. Upon the occurrence and during the continuation of any
Default, the obligation of each Lender to make any additional Loan shall be suspended. The
occurrence of any of the following (each, an “Event of Default”) shall terminate any obligation of
Lenders to make any additional Loan; and shall, at the option of Majority Lenders (1) make all sums
of Basic Interest and principal, all Terminal Payments, and any Obligations and other amounts owing
under any Loan Documents immediately due and payable without notice of default, presentment or
demand for payment, protest or notice of nonpayment or dishonor or any other notices or demands,
and (2) give Agent and Lenders the right to exercise any other right or remedy provided by contract
or applicable law:
(a) Borrower shall fail to pay any principal or interest or Terminal Payment under this
Agreement or any Note when due; or shall fail to pay any fees or other charges when due under any
Loan Document and such failure continues for five (5) Business Days or more after the same first
becomes due; or an Event of Default as defined in any other Loan Document shall have occurred.
(b) Any representation or warranty made, or financial statement, certificate or other document
provided, by Borrower under any Loan Document
12
shall prove to have been false or misleading in any
material respect when made or deemed made herein.
(c) Borrower shall fail to pay its debts generally as they become due or shall commence any
Insolvency Proceeding with respect to itself; an involuntary Insolvency Proceeding shall be filed
against Borrower, or a custodian, receiver, trustee, assignee for the benefit of creditors, or
other similar official, shall be appointed to take possession, custody or control of the properties
of Borrower, and such involuntary Insolvency Proceeding, petition or appointment is acquiesced to
by Borrower or is not dismissed within forty five (45) days; or results in the dissolution or
termination of the business of Borrower.
(d) Borrower shall be in default beyond any applicable period of grace or cure under any other
agreement involving the borrowing of money, the purchase of property, the advance of credit or any
other monetary liability of any kind to Lenders or to any Person which results in the acceleration
of payment of such obligation in an amount in excess of the Threshold Amount.
(e) Any governmental or regulatory authority shall take any judicial or administrative action,
or any defined benefit pension plan maintained by Borrower shall have any unfunded liabilities, any
of which, in the reasonable judgment of Agent, would result in a Material Adverse Effect.
(f) Any sale, transfer or other disposition of all or substantially all of the assets of
Borrower, including without limitation to any trust or similar entity, shall occur except as
permitted under Sections 6.4 or 6.5.
(g) Any judgment(s) singly or in the aggregate in excess of the Threshold Amount shall be
entered against Borrower which is not fully covered by insurance and which remain unsatisfied,
unvacated or unstayed pending appeal for thirty (30) or more days after entry thereof.
(h) Any Person or two or more Persons who are not stockholders of Parent as of the Closing
Date acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3
of the Securities and Exchange Commission) of the voting stock of Parent representing fifty percent
(50%) or more of the outstanding voting power of Parent.
(i) Borrower shall fail to perform or observe any covenant contained in Article 6 of this
Agreement.
(j) Borrower shall fail to perform or observe any covenant contained in Section 5.9 of this
Agreement.
(k) Borrower shall fail to perform or observe any covenant contained in this Agreement or any
other Loan Document (other than a covenant which is dealt with specifically elsewhere in this
Article 7) and, if capable of being cured, the breach of such covenant is not cured within 30 days
after the sooner to occur of Borrower’s receipt of notice of such breach from Agent or any Lender
or the date on which such breach first becomes known to any officer of Borrower;
provided
,
however
that if such breach is not capable of being cured within such 30-day period and
Borrower timely notifies Agent of such fact and Borrower diligently pursues such cure, then the
cure period shall be extended to the date requested in Borrower’s notice but in no event more than
90 days from the initial breach;
provided
,
further
, that such additional 60-day
opportunity to cure shall not apply in the case of any
failure to perform or observe any covenant which has been the subject of a prior failure within the
preceding 180 days or which is a willful and knowing breach by Borrower.
7.2 Remedies Upon Default.
Upon the occurrence and during the continuance of an Event of
Default, Agent shall be entitled to, at the direction of the Majority Lenders, exercise any or all
of the rights and remedies available to a secured party under the UCC or any other applicable law,
and exercise any or all of its rights and remedies provided for in this Agreement and in any other
Loan Document, including, without limitation, delivering a notice of exclusive control (or similar
document) under a deposit account control agreement and/or securities account control agreement, as
applicable; provided, however, that Agent agrees and acknowledges that neither it nor any Lender
shall deliver any such notice of exclusive control (or similar document) until an Event of Default
occurs and continues thereafter without cure before such notice has been given. The obligations of
Borrower under this Agreement shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any Obligations is rescinded or must otherwise be returned by Agent
or any Lender upon, on account of, or in connection with, the insolvency, bankruptcy or
reorganization of Borrower or otherwise, all as though such payment had not been made.
7.3 Sale of Collateral.
Subject only to all rights of redemption and rights of stay or appeal
afforded to Borrower under applicable law, upon the occurrence and during the continuance of an
Event of Default,
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Agent shall, at the direction of the Majority Lenders, sell all or any part of
the Collateral, at public or private sales, to a wholesaler, retailer or investor, for cash, upon
credit or for future delivery, and at such price or prices as Agent may deem commercially
reasonable. The Agent and/or any Lender may bid and purchase at any public sale of the Collateral.
Any such public or private sales shall be held at such times and at such place(s) as Agent may
determine. In case of the sale of all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by Agent until the selling price is paid by the
purchaser, but Agent shall not incur any liability in case of the failure of such purchaser to pay
for the Collateral and, in case of any such failure, such Collateral may be resold. Agent shall,
at the direction of the Majority Lenders instead of exercising its power of sale, proceed to
enforce the Lenders’ security interest in the Collateral by seeking a judgment or decree of a court
of competent jurisdiction.
7.4 Borrower’s Obligations Upon Default.
Upon the request of Agent after the occurrence and
during the continuance of an Event of Default, Borrower will:
(a)
Assemble and make available to Agent the Collateral at such place(s) as Agent shall
reasonably designate, segregating all Collateral so that each item is capable of identification;
and
(b)
Subject to the rights of any lessor, permit Agent, by Agent’s officers, employees, agents
and representatives, to enter any premises where any Collateral is located, to take possession of
the Collateral, to complete the processing, manufacture or repair of any Collateral, and to remove
the Collateral, or to conduct any public or private sale of the Collateral, all without any
liability of Agent or any Lender for rent or other compensation for the use of Borrower’s premises.
ARTICLE 8 — SPECIAL COLLATERAL PROVISIONS
8.1 Compromise and Collection.
Borrower, Agent and Lenders recognize that setoffs,
counterclaims, defenses and other claims may be asserted by obligors with respect to certain of the
Rights to Payment; that certain of the Rights to Payment may be or become uncollectible in whole or
in part; and that the expense and probability of success of litigating a disputed Right to Payment
may exceed the amount that reasonably may be expected to be recovered with respect to such Right to
Payment. Borrower hereby authorizes Agent, after and during the continuance of an Event of
Default, to compromise with the obligor, accept in full payment of any Right to Payment such amount
as Agent shall negotiate with the obligor, or abandon any Right to Payment. Any such action by
Agent shall be considered commercially reasonable so long as Agent acts in good faith based on
information known to it at the time it takes any such action.
8.2 Performance of Borrower’s Obligations.
Without having any obligation to do so, upon
reasonable prior notice to Borrower, Agent may perform or pay any obligation which Borrower has
agreed to perform or pay under this Agreement, including, without limitation, the payment or
discharge
of taxes or Liens levied or placed on or threatened against the Collateral. In so performing or
paying, Agent shall determine the action to be taken and the amount necessary to discharge such
obligations. Borrower shall reimburse Agent on demand for any amounts paid by Agent pursuant to
this Section, which amounts shall constitute Obligations secured by the Collateral and shall bear
interest from the date of demand at the Default Rate.
8.3 Power of Attorney.
For the purpose of protecting and preserving the Collateral and
Agent’s and each Lender’s rights under this Agreement, Borrower hereby irrevocably appoints Agent
for the benefit of Lenders, with full power of substitution, as its attorney-in-fact with full
power and authority, after the occurrence and during the continuance of an Event of Default, to do
any act which Borrower is obligated to do hereunder; to exercise such rights with respect to the
Collateral as Borrower might exercise; to use such Inventory, Equipment, Fixtures or other property
as Borrower might use; to enter Borrower’s premises; to give notice of Agent’s security interest
in, and to collect the Collateral; and before or after Default, to execute and file in Borrower’s
name any financing statements, amendments and continuation statements necessary or desirable to
perfect or continue the perfection of Agent’s security interests in the Collateral. Borrower
hereby ratifies all that Agent shall lawfully do or cause to be done by virtue of this appointment.
8.4 Authorization for Agent to Take Certain Action.
The power of attorney created in Section
8.3 is a power coupled with an interest and shall be irrevocable. The powers conferred on Agent
hereunder are solely to protect Lenders’ interests in the Collateral and shall not impose any duty
upon Agent or any Lender to exercise such powers. Agent shall be
14
accountable only for amounts that
it actually receives as a result of the exercise of such powers and in no event shall Agent or any
of its directors, officers, employees, agents or representatives be responsible to Borrower for any
act or failure to act, except for gross negligence or willful misconduct. After the occurrence and
during the continuance of an Event of Default, Agent may exercise this power of attorney without
notice to or assent of Borrower, in the name of Borrower, or in Agent’s or any Lender’s own name,
from time to time in Agent’s sole discretion and at Borrower’s expense. To further carry out the
terms of this Agreement, after the occurrence and during the continuance of an Event of Default,
Agent may:
(a)
Execute any statements or documents or take possession of, and endorse and collect and
receive delivery or payment of, any checks, drafts, notes, acceptances or other instruments and
documents constituting Collateral, or constituting the payment of amounts due and to become due or
any performance to be rendered with respect to the Collateral.
(b)
Sign and endorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts; drafts, certificates and statements under any commercial or standby letter of
credit relating to Collateral; assignments, verifications and notices in connection with Accounts;
or any other documents relating to the Collateral, including without limitation the Records.
(c)
Use or operate Collateral or any other property of Borrower for the purpose of preserving
or liquidating Collateral.
(d)
File any claim or take any other action or proceeding in any court of law or equity or as
otherwise deemed appropriate by Agent in its reasonable discretion for the purpose of collecting
any and all monies due or securing any performance to be rendered with respect to the Collateral.
(e)
Commence, prosecute or defend any suits, actions or proceedings or as otherwise deemed
appropriate by Agent for the purpose of protecting or collecting the Collateral. In furtherance of
this right, upon the occurrence and during the continuance of an Event of Default, Agent may apply
for the appointment of a receiver or similar official to operate Borrower’s business.
(f)
Prepare, adjust, execute, deliver and receive payment under insurance claims, and collect
and receive payment of and endorse any instrument in payment of loss or returned premiums or any
other insurance refund or return, and apply such amounts at Agent’s sole discretion, toward
repayment of the Obligations or replacement of the Collateral.
8.5 Application of Proceeds.
Any Proceeds and other monies or property received by Agent or
any Lender pursuant to the terms of this Agreement or any Loan Document shall be applied in
accordance with the terms of this Agreement.
8.6 Deficiency.
If the Proceeds of any disposition of the Collateral are insufficient to
cover all
costs and expenses of such sale and the payment in full of all the Obligations, plus all other sums
required to be expended or distributed by Agent or any Lender, then Borrower shall be liable for
any such deficiency.
8.7 Lender Transfer.
Upon the transfer of all or any part of the Obligations, any Lender may
transfer all or part of its interest in the Collateral and shall be fully discharged thereafter
from all liability and responsibility with respect to such Collateral so transferred, and the
transferee shall be vested with all the rights and powers of such Lender hereunder with respect to
such Collateral so transferred, but with respect to any Collateral not so transferred, such Lender
shall retain all rights and powers hereby given.
8.8 Agent’s Duties.
(a)
Agent shall use reasonable care in the custody and preservation of any Collateral in its
possession. Without limitation on other conduct which may be considered the exercise of reasonable
care, Agent shall be deemed to have exercised reasonable care in the custody and preservation of
such Collateral if such Collateral is accorded treatment substantially equal to that which Agent
accords its own property, it being understood that Agent and Lenders shall not have any
responsibility for ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, declining value, tenders or other matters relative to any Collateral, regardless of
whether Agent or any Lender has or is deemed to have knowledge of such matters; or taking any
necessary steps to preserve any rights against any Person with respect to any Collateral. Under no
circumstances shall Agent or any Lender be responsible for any injury or loss to the Collateral, or
any part thereof, arising from any cause beyond the reasonable control of Agent.
(b)
Agent may at any time deliver the Collateral or any part thereof to Borrower and the
receipt of Borrower shall be a complete and full acquittance for
15
the Collateral so delivered, and
Agent and Lenders shall thereafter be discharged from any liability or responsibility therefor.
(c)
Neither Agent, any Lender, nor any of their respective directors, officers, employees,
agents, attorneys or any other person affiliated with or representing Agent or any Lender shall be
liable for any claims, demands, losses or damages, of any kind whatsoever, made, claimed, incurred
or suffered by Borrower or any other party other than by the gross negligence and/or willful
misconduct of Agent or any Lender, or any of their respective directors, officers, employees,
agents, attorneys or any other person affiliated with or representing Agent or any Lender.
8.9 Termination of Security Interests.
Upon the indefeasible payment in full of the
Obligations (other than contingent indemnification obligations) and satisfaction of all Borrower’s
obligations under this Agreement and the other Loan Documents, and if Lenders have no further
obligations under their respective Commitments, the security interest granted hereby shall
terminate and all rights to the Collateral shall revert to Borrower. Upon any such termination,
the Agent shall, at Borrower’s expense, execute and deliver to Borrower such documents as Borrower
shall reasonably request to evidence such termination.
ARTICLE 9 — THE AGENT
9.1 Appointment, Powers and Immunities.
Each Lender hereby irrevocably appoints and
authorizes Agent to act as its agent hereunder, under the Security Documents and the other Loan
Documents with such powers as are specifically delegated to the Agent by the terms of this
Agreement, the Security Documents and the other Loan Documents together with such other powers as
are reasonably incidental thereto. The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement, the Security Documents and the other Loan Documents and
shall not be a trustee for any Lender. The Agent shall not be responsible to the Lenders for any
recitals, statements, representations or warranties contained in this Agreement, the Security
Documents, or the other Loan Documents, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement, the Security Documents or the
other Loan Documents, or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement, the Security Documents, the other Loan Documents, or any other
document referred to or provided for herein or therein, or for the collectibility of the Loans or
for the validity, effectiveness or value of any interest or security covered by the Security
Documents or for the value of any Collateral or for the validity or effectiveness of any
assignment, mortgage, pledge, security agreement, financing statement, document or instrument, or
for any failure by the Borrower to perform any of its obligations here-under or under the other
Loan Documents. Agent may employ agents and attorneys-in-fact and shall only be answerable,
including as to money or securities received by it or its authorized agents, for the gross
negligence and/or willful misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care. Neither Agent nor any of its directors, officers, employees or agents shall be
liable or responsible for any action taken or omitted to be taken by it or them hereunder, under
the Security Documents or the other Loan Documents or in connection herewith or therewith, except
for its or their own gross negligence, willful misconduct, or breach of this Agreement.
9.2 Reliance by Agent.
Agent shall be entitled to rely upon any certification, notice or
other communication (including any thereof by telephone, facsimile transmission, or email) believed
by it to be genuine and correct and to have been signed or sent by or on behalf of the proper
person or persons, and upon advice and statements of legal counsel, independent accountants and
other experts selected by Agent. As to any matters not expressly provided for by this Agreement,
the Security Documents or the other Loan Documents, Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder, under the Security Documents or the other Loan
Documents in accordance with instructions signed by the Majority Lenders, and such instructions of
the Majority Lenders and any action taken or failure to act pursuant thereto shall be binding on
all of the Lenders.
9.3 Knowledge of Default; Cross Defaults.
Agent shall not be deemed to have knowledge of the
occurrence of a default or event of default, however defined in any Loan Document, unless Agent has
received notice from a Lender or the Borrower specifying such default or event of default and
stating that such notice is a “Notice of Default”. In the event that Agent receives such a notice
of the occurrence of a default or event of default, Agent shall give notice thereof to the Lenders.
The occurrence of an Event of Default under this Agreement shall constitute an Event of Default
under each other Loan Document. Upon becoming aware of the occurrence of an Event
16
of Default under
this Agreement, a Lender shall give notice thereof to all Lenders.
9.4 Rights as a Lender.
With respect to its Commitment and the Loans made by it, Agent in its
capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not acting as an Agent, and the term “Lender” or
“Lenders” shall, unless the context other-wise indicates, include Agent in its individual capacity.
9.5 Indemnification.
The Lenders shall indemnify Agent ratably in accordance with the
aggregate principal amount of the Loans made by the Lenders (or, if no Loans are at the time
outstanding, ratably in accordance with their respective Commitments), for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of this Agreement, the Security Documents
or any of the other Loan Documents or any other documents contemplated by or referred to herein or
therein or the transactions contemplated by or referred to herein or therein or the transactions
contemplated hereby and thereby (but excluding, unless a default or event of default has occurred
and is continuing, normal administrative costs and expenses incident to the performance of its
agency duties hereunder or under the Security Documents) or the enforcement of any of the terms
hereof or of the Security Documents, or of any such other documents, provided that no Lender shall
be liable for any of the foregoing to the extent they arise from the gross negligence, breach of
this Agreement, or willful misconduct of the party to be indemnified.
9.6 Failure to Act.
Except for action expressly required of an Agent hereunder or under the
Security Documents, Agent shall in all cases be fully justified in failing or refusing to act
hereunder or thereunder unless it shall be indemnified to its satisfaction by the Lenders against
any and all liability, cost and expense that may be incurred by it by reason of taking or
continuing to take any such action.
9.7 Resignation or Removal of Agent.
If at any time Agent deems it advisable, in its sole
discretion, it may submit to each of the Lenders a written notification of its resignation as Agent
under this Agreement and the Security Documents, such resignation to be effective on the thirtieth
(30th) day after the date of such notice. Agent may be removed at any time, with or without cause,
by vote of the Majority Lenders, provided, that if Agent is also one of the Lenders its vote shall
not be counted and the decision of the remaining Lenders must be unanimous. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a successor Agent from
among the Lenders. If no
successor Agent shall have been so appointed by the Majority Lenders and accepted such appointment
within 30 days after the retiring Agent’s giving of notice of resignation, then the retiring Agent
may, on behalf of Lenders, appoint a successor Agent, which successor Agent shall be either an
existing Lender or a commercial bank organized under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least $100,000,000, and which
successor Agent (if not also a Lender), if no event of default on the part of Borrower shall have
occurred and be continuing, shall be reasonably satisfactory to Borrower. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and obligations under this
Agreement. Borrower and the Lenders shall execute such documents as shall be necessary to effect
such appointment. After any retiring Agent’s resignation hereunder as Agent, the provisions of
this Section 9.7 shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
9.8 Credit Decision.
Each Lender acknowledges that none of Agent or the other Lenders has
made any representation or warranty to it, and that no act by Agent or one Lender hereinafter
taken, including any review of the affairs of Borrower, shall be deemed to constitute any
representation or warranty by the Agent or such Lender to any other Lender. Each Lender represents
to the other Lenders that it has, independently and without reliance upon any other Lender and
based on such documents and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower, and all applicable bank, lending, interest rate and securities
regulatory laws relating to the transactions contemplated hereby, and made its own decision to
enter into this Agreement and to extend credit to Borrower thereunder. Each Lender also represents
that it will, independently and without reliance upon any other
17
Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and the other Loan
Documents, and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and creditworthiness of
Borrower. Except for any notices, reports and other documents expressly herein required to be
furnished to other Lenders by a Lender, such Lender shall not have any duty or responsibility to
provide such other Lenders with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of Borrower which may come
into the possession of any of such Lender.
9.9 Lenders’ Representations Regarding IRS Withholding; Delivery of Tax Forms.
To the extent
Agent may hold from time to time payments for the account of the Lenders, each Lender represents
and agrees as follows:
(a)
Lender represents and warrants that it is entitled to receive any payments under the Loan
Documents to which it is a party without the withholding of any tax, and will furnish to the Agent
such forms, certifications, statements and other documents as Agent may request from time to time
to evidence such Lender’s exemption from the withholding of any tax imposed by any jurisdiction or
to enable Agent to comply with any applicable laws or regulations relating thereto.
(b)
Without limiting the effect of the foregoing, if Lender is not created or organized under
the laws of the United States or any state thereof, Lender further represents and warrants (i)
that it is engaged in the conduct of a business within the United States and that the payments made
hereunder are or are reasonably expected to be effectively connected with the conduct of that trade
or business and are or will be includible in its gross income; or (ii) if Lender is not engaged in
a U.S. trade or business with which such payments are effectively connected, that Lender is
entitled to the benefits of a tax convention which exempts the income from U.S. withholding tax and
that it has satisfied all requirements to qualify for the exemption from tax.
(c)
Lender agrees that it will, immediately upon the request of Agent, furnish to Agent Form
4224 or Form 1001 of the Internal Revenue Service, or such other forms, certifications, statements
or documents, duly executed and completed by Lender as evidence of Lender’s exemption from the
withholding of U.S. tax with respect thereto. If Lender determines that, as a result of any change
in applicable law, regulation,
or treaty or in any official application or interpretation thereof, it ceases to qualify for
exemption from any tax imposed by any jurisdiction with respect to payments made hereunder, Lender
shall promptly notify Agent of such fact and Agent may, but shall not be required to withhold the
amount of any such applicable tax from amounts paid to Lender hereunder. Agent shall not be
obligated to make any payments hereunder to Lender in respect of Lender’s Loan until Lender shall
have furnished to Agent the requested form, certification, statement or document and may withhold
the amount of such applicable tax from amounts paid to Lender hereunder.
(d)
Lender shall reimburse, indemnify and hold Agent harmless for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed upon, incurred by or asserted
against Agent due to its reliance upon the representation hereby made that Lender is exempt from
withholding of tax. Unless Agent receives written notice to the contrary, Lender shall be deemed
to have made the representations contained in this Section 9.9 and in each subsequent tax year of
Lender.
ARTICLE 10 — GENERAL PROVISIONS
10.1 Notices
. Any notice given by any party under any Loan Document shall be in writing and
personally delivered, sent by overnight courier, or United States mail, postage prepaid, or sent by
facsimile, or other authenticated message, charges prepaid, to the other party’s or parties’
addresses shown on the Supplement. Each party may change the address or facsimile number to which
notices, requests and other communications are to be sent by giving written notice of such change
to each other party. Notice given by hand delivery shall be deemed received on the date delivered;
if sent by overnight courier, on the next Business Day after delivery to the courier service; if by
first class mail, on the third Business Day after deposit in the U.S. Mail; and if by facsimile, on
the date of transmission.
10.2 Binding Effect
. The Loan Documents shall be binding upon and inure to the benefit of
Borrower, Agent and Lenders and their respective
18
successors and permitted assigns; provided,
however, that Borrower may not assign or transfer Borrower’s rights or obligations under any Loan
Document (except as otherwise provided herein). Each Lender reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any interest in, such
Lender’s rights and obligations under the Loan Documents. In connection with any of the foregoing,
any Lender may disclose all documents and information which Agent or such Lender now or hereafter
may have relating to the Loans, Borrower, or its business; provided that any person who receives
such information shall have agreed in writing in advance to maintain the confidentiality of such
information on terms reasonably acceptable to Borrower. It is the intention of the parties that, as
a “venture capital operating company,” Venture Lending & Leasing IV, LLC (“LLC”), the parent and
sole owner of VLL, shall have the benefit of, and the power to exercise independent of any other
Lender, those “management rights” provided in Section 5.3. To that end, the references to Lender
and VLL in Sections 4.2(f), 5.1, 5.2, 5.3 and 5.9(a) hereof shall include LLC, and LLC shall have
the right to exercise the advisory, inspection, information and other rights given to Lender under
those Sections independently of any Lender. No amendment or modification of this Agreement shall
alter or diminish LLC’s rights under the preceding sentence without the consent of LLC.
10.3 No Waiver
. Without the written consent of each Lender affected thereby (and the
Agent if expressly required in this Agreement or any of the Loan Documents), no amendment,
modification or waiver of any provision of this Agreement or any of the other Loan Documents shall
be effective if the result of which would be to (i) extend the Termination Date, (ii) extend the
Maturity Date of, or otherwise forgive or waive default in payment of, or postpone any date fixed
for any payment of principal or interest due from the Borrower under the Notes, (iii)
change the rate of interest applicable to any Loan, (iv) release the Lien on any portion of the
Collateral granted under any of the Security Documents except as and to the extent expressly
contemplated under the Security Documents or this Agreement, (v) change any provision of this
Agreement, or any of the Security Documents which, by its terms, requires the consent of all
Lenders, (vi) change the percentage specified in the definition of Majority Lenders, or (vii)
change the Commitment set forth on the Supplement with respect to any Lender. Each Lender
agrees that if the assignee of any Lender is a creditor of such Lender to whom such Lender has
granted a security interest in
this Agreement, then following the occurrence of an event of default (however defined) under or
with respect to the indebtedness held by such assignee or the occurrence of an event which with the
giving of notice or the passage of time or both would constitute such an event of default, the
written consent of such assignee, rather than of such assignor Lender, shall be required for any
modification or amendment to this Agreement. Any waiver, consent or approval by Agent or
any Lender of any Event of Default or breach of any provision, condition, or covenant of any Loan
Document must be in writing and shall be effective only to the extent set forth in writing. No
waiver of any breach or default shall be deemed a waiver of any later breach or default of the same
or any other provision of any Loan Document. No failure or delay on the part of Agent or any
Lender in exercising any power, right, or privilege under any Loan Document shall operate as a
waiver thereof, and no single or partial exercise of any such power, right, or privilege shall
preclude any further exercise thereof or the exercise of any other power, right or privilege.
Agent or any Lender has the right at its sole option to continue to accept interest and/or
principal payments due under the Loan Documents after default, and such acceptance shall not
constitute a waiver of said default or an extension of the Maturity Date unless Agent or such
Lender agrees otherwise in writing.
10.4 Rights Cumulative
. All rights and remedies existing under the Loan Documents are
cumulative to, and not exclusive of, any other rights or remedies available under contract or
applicable law.
10.5 Unenforceable Provisions
. Any provision of any Loan Document executed by Borrower which
is prohibited or unenforceable in any jurisdiction, shall be so only as to such jurisdiction and
only to the extent of such prohibition or unenforceability, but all the remaining provisions of any
such Loan Document shall remain valid and enforceable.
10.6 Accounting Terms
. Except as otherwise provided in this Agreement, accounting terms and
financial covenants and information shall be determined and prepared in accordance with GAAP.
10.7 Indemnification; Exculpation
. Borrower shall pay and protect, defend and indemnify
Agent and all Lenders and Agent and each Lender’s employees, officers, directors, shareholders,
affiliates, agents and representatives (collectively, the
19
“Indemnitees”) against, and hold Indemnitees harmless from, all claims, actions,
proceedings, liabilities, damages, losses, expenses (including, without limitation, reasonable
attorneys’ fees and costs) and other amounts actually incurred by such Indemnitee arising from (i)
the matters contemplated by this Agreement or any other Loan Documents (ii) any dispute between
Borrower and a third party or (iii) any contention that Borrower has failed to comply with any law,
rule, regulation, order or directive applicable to Borrower’s business;
provided, however
, that
this indemnification shall not apply to any of the foregoing incurred solely as the result of any
Indemnitee’s gross negligence or willful misconduct. This indemnification shall survive the
payment and satisfaction of all of Borrower’s Obligations to Agent and Lenders.
10.8 Reimbursement
. Borrower shall reimburse Agent and each Lender for all costs and
expenses, including without limitation reasonable attorneys’ fees and disbursements expended or
incurred by Agent or any Lender in any arbitration, mediation, judicial reference, legal action or
otherwise in connection with (a) the preparation and negotiation of the Loan Documents, (b) the
amendment and enforcement of the Loan Documents, including without limitation during any workout,
attempted workout, and/or in connection with the rendering of legal advice as to Agent’s or any
Lender’s rights, remedies and obligations under the Loan Documents, (c) collecting any sum which
becomes due Lenders under any Loan Document, (d) any proceeding for declaratory relief, any
counterclaim to any proceeding, or any appeal, or (e) the protection, preservation or enforcement
of any rights of Agent or Lenders. For the purposes of this section, attorneys’ fees shall
include, without limitation, reasonable and actual documented fees incurred in connection with the
following: (1) contempt proceedings; (2) discovery; (3) any motion, proceeding or other activity
of any kind in connection with an Insolvency Proceeding; (4) garnishment, levy, and debtor and
third party examinations; and (5) postjudgment motions and proceedings of any kind, including
without limitation any activity taken to collect or enforce any judgment. All of the foregoing
costs and expenses shall be payable upon demand by Lender, and if not paid within forty-five (45)
days of presentation of invoices shall bear interest at the highest applicable Default Rate.
10.9 Execution in Counterparts
. This Agreement may be executed in any number of counterparts
which, when taken together, shall constitute but one agreement.
10.10 Entire Agreement
. The Loan Documents are intended by the parties as the final
expression of their agreement and therefore contain the entire agreement between the parties and
supersede all prior understandings or agreements concerning the subject matter hereof. This
Agreement may be amended only in a writing signed by each Borrower, Agent and Lenders.
10.11 Governing Law and Jurisdiction
.
(a)
THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
(b)
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN
DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER, AGENT AND
EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF
THOSE COURTS. EACH BORROWER, AGENT AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF
THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. BORROWER, AGENT AND EACH LENDER EACH WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED
BY CALIFORNIA LAW.
10.12 Waiver of Jury Trial
. EACH BORROWER, AGENT AND LENDER WAIVES ITS RESPECTIVE RIGHTS TO A
TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN
20
ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
BORROWER, AGENT AND LENDER EACH AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEMS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
ARTICLE 11 — DEFINITIONS
The definitions appearing in this Agreement or any Supplement shall be applicable to both the
singular and plural forms of the defined terms:
“Account”
means any “account,” as such term is defined in the UCC, now owned or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest and, in any event,
shall include, without limitation, all accounts receivable, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper, Documents or Instruments)
now owned or hereafter received or acquired by or belonging or owing to Borrower (including,
without limitation, under any trade name, style or division thereof) whether arising out of goods
sold or services rendered by Borrower or from any other transaction, whether or not the same
involves the sale of goods or services by Borrower (including, without limitation, any such
obligation that may be characterized as an account or contract right under the UCC) and all of
Borrower’s rights in, to and under all purchase orders or receipts now owned or hereafter acquired
by it for goods or services, and all of Borrower’s rights to any goods represented by any of the
foregoing (including, without limitation, unpaid seller’s rights of rescission, replevin,
reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods), and
all monies due or to become due to Borrower under all purchase orders and contracts for the sale of
goods or the performance of services or both by Borrower or in connection with any other
transaction (whether or not yet earned by performance on the part of Borrower), now in existence or
hereafter occurring, including, without limitation, the right to receive the proceeds of said
purchase orders and contracts, and all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.
“Affiliate”
means any Person which directly or indirectly controls, is controlled by, or is under
common control with Borrower. “Control,” “controlled by” and “under common control with” mean
direct or indirect possession of the power to direct or cause the direction of management or
policies (whether through ownership of voting securities, by contract or otherwise); provided, that
control shall be conclusively presumed when any Person or affiliated group directly or indirectly
owns ten percent (10%) or more of the securities having ordinary voting power for the election of
directors of a corporation.
“Agreement”
means this Loan and Security Agreement and each Supplement thereto, as each may be
amended or supplemented from time to time.
“Agent”
means Venture Lending & Leasing IV, Inc., not in its individual capacity, but solely in its
capacity as agent on behalf of and for the benefit of Lenders and any permitted successor agent
appointed hereunder.
“Bankruptcy Code”
means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101,
et
seq
.), as amended.
“Basic Interest”
means the fixed rate of interest payable on the outstanding balance of each Loan
at the applicable Designated Rate.
“Borrowing Date”
means the Business Day on which the proceeds of a Loan are disbursed by Lender.
“Borrowing Request”
means a written request from Borrower in substantially the form of
Exhibit
“B”
to the Supplement, requesting the funding of one or more Loans on a particular Borrowing
Date.
“Business Day”
means any day other than a Saturday, Sunday or other day on which commercial banks
in New York City or San Francisco are authorized or required by law to close.
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“Chattel Paper”
means any “chattel paper,” as such term is defined in the UCC, now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.
“Closing Date”
means the date of this Agreement.
“Collateral”
means, with respect to a Borrower, all of such Borrower’s right, title and interest in
and to the following property, whether now owned or hereafter acquired and wherever located: (a)
all Receivables; (b) all Equipment; (c) all Fixtures; (d) all General Intangibles; (e) all
Inventory; (f) all Investment Property; (g) all Deposit Accounts; (h) all other Goods and personal
property of Borrower, whether tangible or intangible and whether now or hereafter owned or
existing, leased, consigned by or to, or acquired by, Borrower and wherever located; (i) all
Records; and (j) all Proceeds of each of the foregoing and all accessions to, substitutions and
replacements for, and rents, profits and products of each of the foregoing;
provided,
however,
that except as otherwise provided in the Supplement upon the happening of certain
events, “Collateral” shall not include Intellectual Property.
“Commitment”
means the obligation of each Lender to make Loans to Borrower up to the aggregate
principal amount set forth in the Supplement opposite the name of such Lender.
“Commitment Percentage”
is defined in the Supplement.
“Copyright License”
means any written agreement granting any right to use any Copyright or
Copyright registration now owned or hereafter acquired by Borrower or in which Borrower now holds
or hereafter acquires any interest.
“Copyrights”
means all of the following now owned or hereafter acquired by Borrower or in which
Borrower now hold or hereafter acquires any interest: (i) all copyrights, whether registered or
unregistered, held pursuant to the laws of the United States, any State thereof or of any other
country; (ii) all registrations, applications and recordings in the United States Copyright Office
or in any similar office or agency of the United States, any State thereof or any other country;
(iii) all renewals or extensions thereof; and (iv) any registrations to be issued under any pending
copyright applications.
“Default”
means an event which with the giving of notice, or passage of time, or both would
constitute an Event of Default.
“Default Rate”
is defined in Section 2.13.
“Deposit Accounts”
means any “deposit accounts,” as such term is defined in the UCC, now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.
“Designated Rate”
means the rate of interest per annum described in the Supplement as being
applicable to an outstanding Loan from time to time.
“Documents”
means any “documents,” as such term is defined in the UCC, now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.
“Environmental Laws”
means all federal, state or local laws, statutes, common law duties, rules,
regulations, ordinances and codes, together with all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements with, any governmental
authorities, in each case relating to environmental, health, or safety matters.
“Equipment”
means any “equipment,” as such term is defined in the UCC, now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any interest and any and
all additions, substitutions and replacements of any of the foregoing, wherever located, together
with all attachments, components, parts, equipment and accessories installed thereon or affixed
thereto.
“Event of Default”
means any event described in Section 7.1.
“Financing Shares”
means shares of Parent’s preferred stock issued to investors in connection with
a financing round occurring after the Closing Date in lieu of comparable debt securities of Parent.
“Fixtures”
means any “fixtures,” as such term is defined in the UCC, now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.
“Funding Amount”
means the amount of the Loan to be made by each respective Lender on the Borrowing
Date (net of any payments of interest and/or principal required to be paid by the Borrower
22
on the
Borrowing Date under the terms of this Agreement).
“GAAP”
means generally accepted accounting principles and practices consistent with those
principles and practices promulgated or adopted by the Financial Accounting Standards Board and the
Board of the American Institute of Certified Public Accountants, their respective predecessors and
successors. Each accounting term used but not otherwise expressly defined herein shall have the
meaning given it by GAAP.
“General Intangibles”
means any “general intangibles,” as such term is defined in the UCC, now
owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest and, in any event, shall include, without limitation, all right, title and interest that
Borrower may now or hereafter have in or under any contract, all customer lists, Intellectual
Property, claims in or under insurance policies, including unearned premiums, uncertificated
securities, money, cash or cash equivalents, deposit, checking and other bank accounts, right to
sue for past, present and future infringement of Copyrights, Trademarks and Patents, rights to
receive tax refunds and other payments and rights of indemnification.
“Goods”
means any “goods,” as such term is defined in the UCC, now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
“Indebtedness”
of any Person means at any date, without duplication and without regard to whether
matured or unmatured, absolute or contingent: (i) all obligations of such Person for borrowed
money; (ii) all obligations of such Person evidenced by bonds, debentures, notes, or other similar
instruments; (iii) all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of business; (iv) all
obligations of such Person as lessee under capital leases; (v) all obligations of such Person to
reimburse or prepay any bank or other Person in respect of amounts paid under a letter of credit,
banker’s acceptance, or similar instrument, whether drawn or undrawn; (vi) other than obligations
related to any subsidiary of Parent, all obligations of such Person to purchase, redeem, exchange,
convert or otherwise acquire for cash any capital stock of such Person or any warrants, rights or
options to acquire such capital stock, now or hereafter outstanding, except to the extent that such
obligations remain performable solely at the option of such Person; (vii) all obligations to
repurchase assets previously sold (including any obligation to repurchase any accounts or chattel
paper under any factoring, receivables purchase, or similar arrangement); (viii) obligations of
such Person under interest rate swap, cap, collar or similar hedging arrangements; and (ix) all
obligations of others of any type described in clause (i) through clause (viii) above guaranteed by
such Person.
“Insolvency Proceeding”
means (a) any case, action or proceeding before any court or other
governmental authority relating to bankruptcy, reorganization, insolvency, liquidation,
receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial portion of its creditors,
undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code.
“Instruments”
means any “instrument,” as such term is defined in the UCC, now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.
“Intellectual Property”
means all Copyrights, Trademarks, Patents, Licenses, trade secrets, source
codes, customer lists, proprietary or confidential information, inventions (whether or not patented
or patentable), technical information, designs, knowledge, know-how, software, databases,
processes, models, drawings, materials, records and goodwill associated
with the foregoing.
“Inventory”
means any “inventory,” as such term is defined in the UCC, wherever located, now owned
or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest, and, in any event, shall include, without limitation, all inventory, goods and other
personal property that are held by or on behalf of Borrower for sale or lease or are furnished or
are to be furnished under a contract of service or that constitute raw materials, work in process
or materials used or consumed or to be used or consumed in Borrower’s business, or the processing,
packaging, promotion, delivery or shipping of the same, and all finished goods, whether or not the
same is in transit or in the constructive, actual or exclusive possession of Borrower or is held by
others for Borrower’s account, including, without limitation, all goods covered by purchase orders
and contracts with suppliers and all goods billed and held by suppliers and all such property first
may be in the possession or custody of any carriers, forwarding
23
agents, truckers, warehousemen,
vendors, selling agents or other Persons.
“Investment Property”
means any “investment property,” as such term is defined in the UCC, now
owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest.
“Letter of Credit Rights”
means any “letter of credit rights,” as such term is defined in the UCC,
now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires
any interest, including any right to payment under any letter of credit.
“License”
means any Copyright License, Patent License, Trademark License or other license of rights
or interests now held or hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest and any renewals or extensions thereof.
“Lien”
means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security
interest, encumbrance, levy, lien or charge of any kind, whether voluntarily incurred or arising by
operation of law or otherwise, against any property, any conditional sale or other title retention
agreement, any lease in the nature of a security interest, and the filing of any financing
statement (other than a precautionary financing statement with respect to a lease that is not in
the nature of a security interest) under the UCC or comparable law of any jurisdiction.
“Loan”
means an extension of credit by a Lender under this Agreement.
“Loan Documents”
means, individually and collectively, this Loan and Security Agreement, each
Supplement, each Note, and any other security or pledge agreement(s) (including any account control
agreements), and all other contracts, instruments, addenda and documents executed in connection
with this Agreement or the extensions of credit which are the subject of this Agreement.
“Majority Lenders”
means, at any time while no Loans are outstanding hereunder, Lenders having
Commitment Percentages totaling at least 51% of the aggregate Commitments, and at any time while
Loans are outstanding, Lenders holding at least 51% of the outstanding aggregate principal amount
of the Loans.
“Material Adverse Effect”
or “
Material Adverse Change
” means (a) on a consolidated basis for all
Borrowers and their respective subsidiaries, a material adverse change in, or a material adverse
effect upon, the operations, business, properties, or condition (financial or otherwise) of any
Borrower; (b) a material impairment of the ability of Borrower to materially perform under any Loan
Document; or (c) a material adverse effect upon the legality, validity, binding effect or
enforceability against Borrower of any Loan Document.
“Maturity Date”
means, with regard to a Loan, the earlier of (i) its maturity by reason of
acceleration, or (ii) its stated maturity date; and is the date on which payment of all outstanding
principal, accrued interest, and the Terminal Payment with respect to such Loan is due.
“Note”
means a promissory note substantially in the form of
Exhibit “A-1
”
or
Exhibit “A-2
” attached to the Supplement, executed by Borrowers evidencing each Loan.
“Obligations”
means all debts, obligations and liabilities of Borrower to Agent or any Lender
currently existing or now or hereafter made, incurred or created under, pursuant to or in
connection with this Agreement or any other Loan Document, whether voluntary or involuntary and
however arising or evidenced, whether direct or acquired by Agent or such Lender by assignment or
succession, whether due or not due, absolute or contingent (except as otherwise described below),
liquidated or unliquidated, determined or undetermined, and whether Borrower may be liable
individually or jointly, or whether recovery upon such debt may be or become barred by any statute
of limitations or otherwise unenforceable; and all renewals, extensions and modifications thereof;
and all attorneys’ fees and costs incurred by Agent or any Lender in connection with the collection
and enforcement thereof as provided for in any Loan Document excluding for all purposes (i)
contingent obligations for indemnity for which no claim has been asserted and (ii) upon issuance
thereof, all obligations in connection with or arising under the Warrants prior to exercise.
“Parent”
means Borrower Athersys, Inc.
“Patent License”
means any written agreement granting any right with respect to any Patent now
owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest.
24
“Patents”
means all of the following property now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest: (a) all patents, or rights
corresponding thereto granted in, the United States or any other country, all
applications for patents or rights corresponding thereto existing in, the United States or any
other country, including, without limitation, applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any State thereof or any
other country; (b) all reissues, continuations, continuations-in-part or extensions thereof; (c)
all petty patents, divisionals, and patents of addition; and (d) all patents to be issued under any
such applications.
“Permitted Lien”
means
(a)
involuntary Liens which, in the aggregate, would not have a Material Adverse Effect and
which in any event would not exceed, in the aggregate, the Threshold Amount;
(b)
Liens for current taxes or other governmental or regulatory assessments which are not
delinquent, or which are contested in good faith by the appropriate procedures and for which
appropriate reserves are maintained;
(c)
security interests on any property held or acquired by Borrower in the ordinary course of
business securing Indebtedness incurred or assumed for the purpose of financing all or any part of
the cost of acquiring such property;
provided
, that such Lien attaches solely to the
property acquired with such Indebtedness and that the principal amount of such Indebtedness does
not exceed one hundred percent (100%) of the cost of such property; and
further
provided
, that such property is not Eligible Equipment or other property with respect to
which a Loan has been made hereunder to finance the acquisition thereof;
(d)
Liens in favor of Agent for the benefit of Lenders hereunder;
(e)
bankers’ liens, rights of setoff and similar Liens incurred on deposits made in the
ordinary course of business;
(f)
materialmen’s, mechanics’, repairmen’s, employees’ or other like Liens arising in the
ordinary course of business and which are not delinquent for more than 45 days or are being
contested in good faith by appropriate proceedings;
(g)
any judgment, attachment or similar Lien, unless the judgment it secures has not been
discharged or execution thereof effectively stayed and bonded against pending appeal within 30 days
of the entry thereof;
(h)
to the extent permitted under Section 6.5, non-exclusive and exclusive licenses or
sublicenses of Patents, Patent Licenses, Trademarks or Trademark Licenses;
(i)
Liens existing on the Closing Date and which are set forth on the schedule of exceptions
attached hereto;
(j)
any interest or title of a lessor under any lease entered into by Borrower in the ordinary
course of its business and covering the assets so leased; and
(k)
purchase money Liens in favor of a Collaborator or an affiliate for assets purchased using
Eligible Funding, including, without limitation, any license agreement between the Collaborator and
Borrower.
“Person”
means any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, limited liability company, institution,
public benefit corporation, other entity or government (whether federal, state, county, city,
municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or
department thereof).
“Proceeds”
means “proceeds,” as such term is defined in the UCC and, in any event, shall include,
without limitation, (a) any and all Accounts, Chattel Paper, Instruments, cash or other forms of
money or currency or other proceeds payable to Borrower from time to time in respect of the
Collateral, (b) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to
Borrower from time to time with respect to any of the Collateral, (c) any and all payments (in any
form whatsoever) made or due and payable to Borrower from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral
by any governmental authority (or any Person acting under color of governmental authority), (d) any
claim of Borrower against third parties (i) for past, present or future infringement of any
Copyright, Patent or Patent License or (ii) for past, present or future infringement or dilution of
any Trademark or Trademark License or for injury to the goodwill associated with any Trademark,
Trademark
25
registration or Trademark licensed under any Trademark License and (e) any and all other
amounts from time to time paid or payable under or in connection with any of the Collateral.
“Pro Rata”
means, as to any Lender at any time, (a) with respect to the Loans, the percentage
equivalent at such time of (i) such Lender’s aggregate unpaid principal amount of Loans, divided by
(ii) the combined aggregate unpaid principal amount of all Loans of all Lenders, and (b) with
respect to the Commitments, the percentage equivalent at such time of (i) such Lender’s Commitment,
divided by (ii) the amount of the Total Commitment of all Lenders.
“Receivables”
means all of Borrower’s Accounts, Instruments, Documents, Chattel Paper, Supporting
Obligations, and letters of credit and Letter of Credit Rights.
“Records”
means all Borrower’s computer programs, software, hardware, source codes and data
processing information, all written documents, books, invoices, ledger sheets, financial
information and statements, and all other writings concerning Borrower’s business.
“Related Person”
means any Affiliate of Borrower, or any officer, employee, director or equity
security holder of Borrower or any Affiliate.
“Rights to Payment”
means all Borrower’s accounts, instruments, contract rights, documents, chattel
paper and all other rights to payment, including, without limitation, the Accounts, all negotiable
certificates of deposit and all rights to payment under any Patent License, any Trademark License,
or any commercial or standby letter of credit.
“Security Documents”
means this Loan and Security Agreement, the Supplement hereto, and any and all
account control agreements, collateral assignments, chattel mortgages, financing statements,
amendments to any of the foregoing and other documents from time to time executed or filed to
create, perfect or maintain the perfection of the Agent’s and Lender’s Liens on the Collateral.
“Subordinated Debt”
means Indebtedness subordinated to the Obligations, including without limiting
the generality of the foregoing, subordination of such Indebtedness in right of payment to the
prior payment in full of the Obligations, the subordination of the priority of any Lien (other than
Permitted Liens) at any time securing such Indebtedness to the Lien of Agent for the benefit of
Lenders in the collateral covered thereby, and the subordination of the rights of the holder of
such Indebtedness to enforce its junior Lien following the occurrence and continuation of an Event
of Default hereunder pursuant to a written subordination agreement approved by Agent in its sole
and good faith discretion, which agreement may provide that regularly scheduled payments of accrued
interest on such subordinated Indebtedness may be paid by Borrower and retained by the holder so
long as no Event of Default has occurred and is continuing.
“Supplement”
means that certain supplement to the Loan and Security Agreement, as the same may be
amended or restated from time to time, and any other supplements entered into between Borrower and
Lenders, as the same may be amended or restated from time to time.
“Supporting Obligations”
means any “supporting obligations,” as such term is defined in the UCC,
now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires
any interest.
“Terminal Payment”
means, with respect to each Loan, an amount payable on the Maturity Date of such
Loan in an amount equal to that percentage of the original principal amount of such Loan as is
specified in the Supplement.
“Termination Date”
has the meaning specified in the Supplement.
“Threshold Amount”
has the meaning specified in the Supplement.
“Total Commitment”
means the aggregate Commitments of the Lenders to make Loans hereunder.
“Trademark License”
means any written agreement granting any right to use any Trademark or
Trademark registration now owned or hereafter acquired by Borrower or in which Borrower now holds
or hereafter acquires any interest.
“Trademarks”
means all of the following property now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest: (a) all trademarks, tradenames,
corporate names, business names, service marks, logos, other source or business identifiers,
designs of like nature, all registrations and recordings thereof, and any
26
applications in
connection therewith, including, without limitation, registrations, recordings and applications in
the United States Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country or any political
subdivision thereof and (b) extensions or renewals thereof.
“UCC”
means the Uniform Commercial Code as the same may, from time to time, be in effect in the
State of California;
provided
, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection or priority of, or remedies with respect to, Agent’s
or any Lender’s Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in
effect in a jurisdiction other than the State of California, the term “UCC” shall mean the Uniform
Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the
provisions thereof relating to such attachment, perfection, priority or remedies and for purposes
of definitions related to such provisions. Unless otherwise defined herein, terms that are defined
in the UCC and used herein shall have the meanings given to them in the UCC.
27
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.
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BORROWER:
ATHERSYS, INC.
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By:
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Name:
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Title:
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LENDERS:
VENTURE LENDING & LEASING IV, INC., as
a Lender and in its capacity as Agent
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By:
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Name:
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Title:
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COSTELLA KIRSCH IV, L.P.,
as a Lender
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By:
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Name:
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Title:
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Signature Page to Loan and Security Agreement
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BORROWER (together with Athersys, Inc.):
ADVANCED BIOTHERAPEUTICES, INC.
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By:
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Name:
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Title:
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EXHIBIT
10.33
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of June 8, 2007, is made by
and among BTHC VI, Inc., a Delaware corporation with headquarters located at 12890 Hilltop Road,
Argyle, Texas 76226 (the “Company”), Athersys, Inc., a Delaware corporation with headquarters
located at 3201 Carnegie Avenue, Cleveland, Ohio 44115 (“Athersys”), and the investors listed on
the Schedule of Investors attached hereto as
Exhibit A-1
(individually, an “Investor” and
collectively, the “Investors”).
BACKGROUND
A. The Company and Athersys are parties to a Merger Agreement and Plan of Reorganization (the
“
Merger Agreement
”) pursuant to which, in exchange for certain consideration payable to the
security holders of Athersys prior to the Merger (the “
Athersys Stockholders
”), a wholly-owned
subsidiary of the Company will be merged with and into Athersys, with Athersys as the surviving
entity (the “
Merger
”). As a result of the Merger, Athersys will be a wholly-owned subsidiary of
the Company. The closing date for the Merger is targeted for any date up to and including June 29,
2007 (the “
First Closing Date
”).
B. The Company and each Investor are executing and delivering this Agreement in reliance upon
the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended
(the “
Securities Act
”), and Rule 506 of Regulation D (“
Regulation D
”) as promulgated by the United
States Securities and Exchange Commission (the “
SEC
”) under the Securities Act.
C. Each Investor, severally and not jointly, wishes to purchase, and the Company
wishes to sell, upon the terms and conditions stated in this Agreement, (i) that aggregate number
of shares of the Common Stock, par value $0.001 per share, of the Company (the “
Common Stock
”), set
forth opposite such Investor’s name in column two (2) on the Schedule of Investors in
Exhibit
A-1
(“
Initial Common Shares
”), (ii) initial warrants, in substantially the form attached hereto
as
Exhibit E
(the “
Initial Warrants
”) to acquire up to that number of additional shares of
Common Stock set forth opposite such Investor’s name in column three (3) on the Schedule of
Investors (as exercised, collectively, the “
Initial Warrant Shares
”).
D. Each Investor listed on
Exhibit A-2
hereto (the “
Second Closing Schedule of
Investors
”), severally and not jointly, wishes to purchase, and the Company wishes to sell, upon
the terms and conditions stated in this Agreement in a Second Closing (as defined in
Section
2.1(b)
below) (i) that aggregate number of shares of the Common Stock, par value $0.001 per
share, of the Company, set forth opposite such Investor’s name in column two (2) on the Second
Closing Schedule of Investors (“
Additional Common Shares
” and collectively with the Initial Common
Shares, the “
Common Shares
”), (ii) warrants, in substantially the form attached hereto as
Exhibit E
(the “
Additional Warrants
” and collectively with the Initial Warrants, the
“
Warrants
”) to acquire up to that number of additional shares of Common Stock set forth opposite
such Investor’s name in column three (3) on such Second Closing Schedule of Investors (as
exercised, collectively, the
“
Additional Warrant Shares
” and collectively with the Initial Warrant Shares, the “
Warrant Shares
”).
E. The aggregate number of shares of Common Stock that is required to be sold in the First
Closing is at least 8,000,000 shares, although it is currently contemplated that at least
12,600,000 shares (and up to a total of 13,000,000 shares) of Common Stock shall be sold in the
First Closing, with the aggregate number of shares of Common Stock to be sold to Investors in both
the First Closing and the Second Closing not to exceed 13,000,000 shares of Common Stock.
F. The Common Shares, the Warrants and the Warrant Shares issued pursuant to this Agreement
are collectively referred to herein as the “
Securities,”
and the Common Shares and the Warrants are
collectively referred to in the Private Placement Memorandum (as defined in
Section 3.1(g)
below) as
“Units”
.
G. At the time of the First Closing, 3,210,523 shares of Common Stock will be issued to the
Athersys Stockholders in connection with the Merger in accordance with the Merger Agreement.
H. Athersys, the Agents (as defined in
Section 3.1(o)
below) and Signature Bank, as
escrow agent (the “
Escrow Agent
”), have entered into an Escrow Agreement (the “
Escrow Agreement
”)
to provide for the safekeeping of funds received and documents executed in connection with the
offering of the Securities. Such funds shall be held in escrow until the Closing and delivered by
the Escrow Agent on behalf of the Investors to the Company upon the satisfaction of the Company’s
closing conditions.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company and the Investors agree as follows:
ARTICLE I
DEFINITIONS
1.1
Definitions
. In addition to the terms defined elsewhere in this Agreement, the
following terms have the meanings indicated:
“
Additional Common Shares
” has the meaning set forth in recitals to this Agreement.
“
Additional Purchase Price
” has the meaning set forth in
Section 2.1
.
“
Additional Warrant Shares
” has the meaning set forth in recitals to this Agreement.
“
Additional Warrants
” has the meaning set forth in recitals to this Agreement.
“
Affiliate
” means any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such terms are used in
and construed under Rule 144 under the Securities Act.
-2-
“
Agents
” has the meaning set forth in
Section 3.1(o)
.
“
Agreement
” has the meaning set forth in the preamble to this Agreement.
“
Athersys”
has the meaning set forth in the preamble to this Agreement.
“
Athersys Counsel
” means Jones Day, counsel to Athersys.
“
Beneficial Interest Holder
” has the meaning set forth in
Section 3.3(a)
.
“
Benefit Arrangements
” means all material plans, contracts, bonuses, commissions,
profit-sharing, savings, stock options, insurance, deferred compensation, or other similar fringe
or employee benefits covering former or current employees of the Company or any of its Subsidiaries
or under which the Company or any of its Subsidiaries has any obligation or liability.
“
Best Efforts
” means the reasonable best efforts that a prudent person desirous of achieving a
result would use in similar circumstances to ensure that such result is achieved as expeditiously
as practical;
provided, however
, that an obligation to use Best Efforts under this Agreement does
not require the Company to dispose of or make any change to its business, expend any material funds
or incur any other material burden.
“
Bridge Noteholders
” means the holders of the Bridge Notes that execute a joinder agreement
agreeing to be bound by the terms of Article VI of this Agreement.
“
Bridge Notes
” means the $2,500,000 in aggregate principal amount of convertible secured notes
of Athersys issued in October 2006.
“
Bridge Shares
” means the shares of Common Stock issuable pursuant to the exercise of the
Bridge Warrants and the 531,781
shares of Common Stock issuable upon conversion of the
Bridge Notes.
“
Bridge Warrants
” means the warrants to acquire 132,945 shares of Common Stock issuable to the
Bridge Noteholders in connection with the consummation of the offering the Securities.
“
Business Day
” means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.
“
Closing
” has the meaning set forth in
Section 2.1(c)
.
“
Closing Date
” has the meaning set forth in
Section 2.3
.
“
Closing Price
” means, for any date, the closing price per share of the Common Stock for such
date (or the nearest preceding date) on the primary Eligible Market or Trading Market on which the
Common Stock is then listed or quoted.
-3-
“
Company”
has the meaning set forth in the preamble to this Agreement.
“
Company Counsel
” means (a) with respect to certain pre-Merger matters, Thelen Reid Brown
Raysman & Steiner LLP, and (b) with respect to certain post-Merger matters, Jones Day, in each case
counsel to the Company.
“
Common Shares
” has the meaning set forth in the recitals to this Agreement.
“
Common Stock
” has the meaning set forth in the recitals to this Agreement.
“
Common Stock Equivalents
” means, collectively, Options and Convertible Securities.
“
Contingent Obligation
” has the meaning set forth in
Section 3.1(cc)
.
“
Convertible Securities
” means any capital stock or securities (other than Options)
convertible into or exercisable or exchangeable for Common Stock.
“
Covering Shares
” has the meaning set forth in
Section 4.1(b)
.
“
Cut Back Securities
” has the meaning set forth in
Section 6.8
.
“
Disclosure Materials
” has the meaning set forth in
Section 3.1(g)
.
“
Effective Date
” means the date that the Registration Statement is first declared effective by
the SEC.
“
Effectiveness Period
” has the meaning set forth in
Section 6.1(b)
.
“
8-K Filing
” has the meaning set forth in
Section 4.5
.
“
Eligible Market
” means any of the New York Stock Exchange, the American Stock Exchange, The
Nasdaq Global Select Market, The Nasdaq Global Market, The Nasdaq Capital Market or the NASD OTC
Bulletin Board.
“
Environmental Laws
” has the meaning set forth in
Section 3.1(ff)
.
“
Event
” has the meaning set forth in
Section 6.1(d)
.
“
Event Payments
” has the meaning set forth in
Section 6.1(d)
.
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended.
“
Excluded Events
” has the meaning set forth in
Section 6.1(d)(ii)
.
“
Excluded Investors
” means Cowen and Company, LLC and its Affiliates, National Securities
Corporation and its Affiliates, and any other Investor that executes a confidentiality
-4-
agreement in connection with the receipt of material non-public information regarding the
Company or Athersys.
“
Filing Date
” means 45 days after the First Closing Date.
“
First Closing”
has the meaning set forth in
Section 2.1(a)
.
“
First Closing Date”
has the meaning set forth in recitals to this Agreement.
“
GAAP
” has the meaning set forth in
Section 3.1(h)
.
“
Hazardous Materials
” has the meaning set forth in
Section 3.1(ff)
.
“
Indebtedness
” has the meaning set forth in
Section 3.1(cc)
.
“
Indemnified Party
” has the meaning set forth in
Section 6.4(c)
.
“
Indemnifying Party
” has the meaning set forth in
Section 6.4(c)
.
“
Insolvent
” has the meaning set forth in
Section 3.1(k)
.
“
Intellectual Property Rights
” has the meaning set forth in
Section 3.1(v)
.
“
Initial Common Shares
” has the meaning set forth in recitals to this Agreement.
“
Initial Purchase Price
” has the meaning set forth in
Section 2.1
.
“
Initial Warrant Shares
” has the meaning set forth in recitals to this Agreement.
“
Investor
” has the meaning set forth in the preamble to this Agreement. For purposes of
Article VI of this Agreement only, the term Investor shall also include the Agents and the Bridge
Noteholders.
“
knowledge of the Company
” means the knowledge of the Company and the Subsidiaries, including
Athersys.
“
Lien
” means any lien, charge, claim, security interest, encumbrance, right of first refusal
or other restriction.
“
Losses
” means any and all losses, claims, damages, liabilities, settlement costs and
expenses, including, without limitation, reasonable attorneys’ fees, but excluding any decrease in
the market price of the Common Stock.
“
Material Adverse Effect
” means (i) a material adverse effect on the results of operations,
assets, business, prospects or financial condition of the Company and the Subsidiaries, taken as a
whole on a consolidated basis, or (ii) materially and adversely impair the Company’s ability to
-5-
perform its obligations under any of the Transaction Documents, provided, that none of the
following alone shall be deemed, in and of itself, to constitute a Material Adverse Effect: (i) a
change in the market price or trading volume of the Common Stock or (ii) changes in general
economic conditions or changes affecting the industry in which the Company operates generally (as
opposed to Company-specific changes) so long as such changes do not have a disproportionate effect
on the Company and its Subsidiaries taken as a whole.
“
Material Permits
” has the meaning set forth in
Section 3.1(x)
.
“
Options
” means any outstanding rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities.
“
Person
” means any individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, or joint stock company.
“
Placement Agency Agreement
” means that certain Placement Agency Agreement dated as of April
19, 2007 among Athersys and the Agents.
“
Placement Agent Securities
” mean the Placement Agent Warrants and the Placement Agent Warrant
Shares.
“
Placement Agent Warrants
” mean the warrants to purchase Common Stock issuable to the Agents
as partial consideration for their services as placement agents in connection with the sale of the
Securities in accordance with the terms of the Placement Agency Agreement.
“
Placement Agent Warrant Shares
” mean the shares of Common Stock issuable to the Agents or
their designees upon exercise of the Placement Agent Warrants.
“
Private Placement Memorandum
” has the meaning set forth in
Section 3.1(g)
.
“
Proceeding
” means an action, claim, suit, investigation or proceeding, whether commenced or
threatened in writing.
“
Prospectus
” means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A or Rule 430C promulgated
under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to
the terms of the offering of any portion of the Registrable Securities covered by the Registration
Statement, and all other amendments and supplements to the Prospectus including post-effective
amendments, and all material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
“
Purchase Price
” has the meaning set forth in
Section 2.1
.
“
Qualification Date
” has the meaning set forth in
Section 6.1(c)
.
-6-
“
Qualification Deadline
” has the meaning set forth in
Section 6.1(c)
.
“
Radius
” means Radius Venture Partners II, LLC, Radius Venture Partners III, LLC or any of
their respective Affiliates.
“
Radius Director
” has the meaning set forth in
Section 4.7
.
“
Registrable Securities
” means the Common Shares and the Warrant Shares issued or issuable
pursuant to the Transaction Documents or the Placement Agent Warrant Shares issued or issuable
pursuant to the Placement Agent Warrants and the Bridge Shares, together with any securities issued
or issuable upon any stock split, dividend or other distribution, recapitalization or similar event
with respect to the foregoing, provided, that a security shall cease to be a Registrable Security
upon (a) sale pursuant to the Registration Statement or Rule 144 under the Securities Act or (b)
such security becoming eligible for sale immediately and without restriction pursuant to Rule
144(k) under the Securities Act.
“
Registration Statement
” means each registration statement required to be filed under Article
VI of the Agreement, including (in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated by reference in
such registration statement.
“
Regulation D
” has the meaning set forth in the recitals to this Agreement.
“
Related Person
” has the meaning set forth in
Section 3.3
.
“
Repurchase Notice
” has the meaning set forth in
Section 6.1
.
“
Repurchase Price
” has the meaning set forth in
Section 6.1
.
“
Required Effectiveness Date
” means the date which is the earliest of (a) ninety (90) days
after the Filing Date and (b) if the Registration Statement does not become subject to review by
the SEC, five (5) Trading Days after the Company receives written notification from the SEC that
the Registration Statement will not be subject to review.
“
Rule 144
,” “
Rule 415
,” and “
Rule 424
” means Rule 144, Rule 415 and Rule 424, respectively,
promulgated by the SEC pursuant to the Securities Act, as such Rules may be amended from time to
time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same
effect as such Rule.
“
SEC”
has the meaning set forth in the recitals to this Agreement.
“
SEC Reports
” has the meaning set forth in
Section 3.1(g)
.
“
Second Closing”
has the meaning set forth in
Section 2.1(b)
.
-7-
“
Second Closing Date”
has the meaning set forth in
Section 2.3
.
“
Second Closing Notice”
has the meaning set forth in
Section 2.3
.
“
Second Closing Schedule of Investors
” has the meaning set forth in the recitals to this
Agreement.
“
Securities
” has the meaning set forth in the recitals to this Agreement.
“
Securities Act
” has the meaning set forth in the recitals to this Agreement.
“
Shares
” means shares of the Company’s Common Stock.
“
Shelf Registration Statement
” has the meaning set forth in
Section 6.1(c)
.
“
Significant Investor
” means any Investor that purchases at least $3,000,000 of Securities
pursuant to this Agreement.
“
Short Sales
” has the meaning set forth in
Section 3.2(h)
.
“
Subsidiary
” means any direct or indirect subsidiary of the Company, including Athersys after
consummation of the Merger.
“
Substitute Director
” has the meaning set forth in
Section 4.7
.
“
Trading Day
” means (a) any day on which the Common Stock is listed or quoted and traded on
its primary Trading Market, (b) if the Common Stock is not then listed or quoted and traded on any
Trading Market, then a day on which trading occurs on the Nasdaq Global Select Market (or any
successor thereto), or (c) if trading ceases to occur on the Nasdaq Global Select Market (or any
successor thereto), any Business Day.
“
Trading Market
” means any Eligible Market, or any other national securities exchange, market
or trading or quotation facility on which the Common Stock is then listed or quoted.
“
Transaction Documents
” means this Agreement, including the schedules and exhibits attached
hereto, the Warrants, the Transfer Agent Instructions, the Escrow Agreement, the Placement Agency
Agreement and the Placement Agent Warrants.
“
Transfer Agent
” means National City Bank, or any successor transfer agent for the Company.
“
Transfer Agent Instructions
” means, with respect to the Company, the Irrevocable Transfer
Agent Instructions, substantially in the form of
Exhibit C
, executed by the Company and
delivered to and acknowledged in writing by the Transfer Agent.
“
Warrants
” has the meaning set forth in the recitals to this Agreement.
-8-
“
Warrant Shares
” has the meaning set forth in the recitals to this Agreement.
“
Wiring Institution
” has the meaning set forth in
Section 3.3(b)
.
“
Withdrawing Director
” has the meaning set forth in
Section 4.7
.
ARTICLE II
PURCHASE AND SALE
2.1
Closings
.
(a)
First Closing
. Subject to the terms and conditions set forth in this Agreement,
the Company shall issue and sell to each Investor, and each Investor shall, severally and not
jointly, purchase from the Company on the First Closing Date, such number of Initial Common Shares
and Initial Warrants set forth opposite such Investor’s name on
Exhibit A-1
for the First
Closing hereto under the headings “Common Shares” and “Warrants” (the “
First Closing
”).
Notwithstanding anything to the contrary in this Agreement, up to 13,000,000 shares of Common Stock
may be issued and sold at the First Closing.
(b)
Second Closing
. The Company agrees to issue and sell to each Investor listed on
the Second Closing Schedule of Investors, and each Investor agrees, severally and not jointly, to
purchase from the Company on such Second Closing Date (as defined below), up to such number of
Additional Common Shares and Additional Warrants set forth opposite such Investor’s name on the
Second Closing Schedule of Investors for the Second Closing under the headings “Common Shares” and
“Warrants” (the “
Second Closing
”). Notwithstanding the foregoing, the aggregate number of shares
of Common Stock to be sold to Investors in both the First Closing and the Second Closing shall not
exceed 13,000,000 shares of Common Stock.
(c)
Closing.
The First Closing and the Second Closing are each referred to in this
Agreement as a “
Closing.
” The date and time of each Closing shall occur on the applicable Closing
Date at the offices of Jones Day, North Point, 901 Lakeside Avenue, Cleveland, Ohio 44114-1190 or
remotely via the exchange of documents and signatures.
(d)
Purchase Price
. The purchase price for each Investor of the Initial Common Shares
and the related Initial Warrants to be purchased by each such Investor at the First Closing shall
be the amount set forth opposite such Investor’s name on
Exhibit A-1
for the First Closing
(the “
Initial Purchase Price
”). The purchase price for each Investor of the Additional Common
Shares and the related Additional Warrants to be purchased by each such Investor at the Second
Closing shall be the amount set forth opposite such Investor’s name on the Second Closing Schedule
of Investors at the Second Closing (the “
Additional Purchase Price
”, and together with the Initial
Purchase Price, the “
Purchase Price
”).
-9-
2.2
First Closing Date
. Subject to the terms and conditions set forth in this
Agreement, the date and time of the First Closing shall be the First Closing Date (or such later
date as is mutually agreed to by the Company and each Investor).
2.3
Second Closing Date
. Subject to the terms and conditions set forth in this
Agreement, the date and time of the Second Closing (the “
Second Closing Date
,” and together with
the First Closing Date, each a “
Closing Date
” and collectively, the “
Closing Dates
”) shall be 11:00
a.m., New York City Time, on the date mutually agreed to by the Company and the Investor listed in
the Second Closing Schedule of Investors;
provided
,
however
, that such date is not
expected to be later than five (5) Business Days following the First Closing Date.
2.4
Closing Deliveries
.
(a) At the First Closing, the Company shall deliver or cause to be delivered to each Investor
the following:
(i) a legal opinion of (A) Company Counsel and (B) Athersys Counsel, in each case dated as of
the date of such Closing, substantially in the form reasonably acceptable to counsel for the Agents
and counsel for Radius; and
(ii) duly executed Transfer Agent Instructions substantially in the form of
Exhibit D
hereto acknowledged by the Company’s transfer agent.
(b) On the First Closing Date, each Investor shall deliver or cause to be delivered to the
Company the Initial Purchase Price set forth opposite such Investor’s name on
Exhibit A-1
hereto under the heading “Purchase Price” by paying United States dollars via bank, certified or
personal check which has cleared prior to the First Closing Date or in immediately available funds,
by wire transfer to the following escrow account:
Acct. Name: Signature Bank as Escrow Agent for Athersys, Inc.
ABA Number: 026013576
Acct Number: 1500892524
On the Second Closing Date, each Investor listed on the Second Closing Schedule of Investors shall
pay the Additional Purchase Price set forth opposite such Investor’s name on the Second Closing
Schedule of Investors to the Company for the Additional Common Shares to be issued and sold to such
Investor at the Additional Closing by paying United States dollars via bank, certified or personal
check which has cleared prior to the Second Closing Date or in immediately available funds, by wire
transfer to the above-referenced escrow account.
(c) The Company shall cause its Transfer Agent to issue one or more stock certificates to
each Investor, free and clear of all restrictive and other legends (except as expressly provided
in
Section 4.1(b
) hereof), evidencing such number of Common Shares equal
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to the number of Shares set forth opposite such Investor’s name on
Exhibit A-1
hereto or the Second Closing Schedule of Investors, as applicable, under the heading “Common
Shares” registered in the name of such Investor within five (5) Business Days of the applicable
Closing.
(d) The Company shall cause its Transfer Agent to issue a Warrant to each Investor, issued
in the name of such Investor, pursuant to which such Investor shall have the right to acquire
such number of Warrant Shares set forth opposite such Investor’s name on
Exhibit A-1
hereto or the Second Closing Schedule of Investors, as applicable, under the heading “Warrant
Shares” issued in the name of such Investor within five (5) Business Days of the applicable
Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1
Representations and Warranties of the Company
. The Company hereby represents and
warrants to the Investors as follows (which representations and warranties shall be deemed to
apply, where appropriate, to each Subsidiary of the Company, including Athersys, after giving
effect to the Merger):
(a)
Subsidiaries
. The Company has no Subsidiaries other than Athersys and those
listed in
Schedule 3.1(a
) hereto. Except as disclosed in
Schedule 3.1(n
)
hereto, the Company owns, directly or indirectly, all of the capital stock or comparable equity
interests of each Subsidiary free and clear of any Lien and all the issued and outstanding
shares of capital stock or comparable equity interest of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights.
(b)
Organization and Qualification
. Each of the Company and the Subsidiaries is an
entity duly organized, validly existing and in good standing under the laws of the jurisdiction
of its incorporation or organization (as applicable), with the requisite legal authority to own
and use its properties and assets and to carry on its business as currently conducted. Neither
the Company nor any Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or charter documents.
Each of the Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification necessary, except where
the failure to be so qualified or in good standing, as the case may be, would not, individually
or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.
(c)
Authorization; Enforcement
. The Company has the requisite corporate authority
to enter into and to consummate the transactions contemplated by each of the Transaction
Documents to which it is a party and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of each of the Transaction Documents to which it is a
party by the Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part of the Company
and no further consent or action is required by the Company, its Board of Directors or its
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stockholders. Each of the Transaction Documents to which it is a party has been (or upon
delivery will be) duly executed by the Company and is, or when delivered in accordance with the
terms hereof, will constitute, the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as may be limited by (i) applicable
bankruptcy, insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors’ rights generally, and (ii) the effect of rules of law
governing the availability of specific performance and other equitable remedies.
(d)
No Conflicts
. The execution, delivery and performance of the Transaction
Documents to which it is a party by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not, and will not, (i) conflict with or violate
any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound, or affected, except to the extent that such conflict, default, termination,
amendment, acceleration or cancellation right would not reasonably be expected to have a
Material Adverse Effect, (iii) other than as contemplated in this Agreement, the other
Transaction Documents or in the Placement Agency Agreement or except as disclosed in
Schedule 3.1(d)
hereto, result in any obligation of the Company or any of its
Subsidiaries to make any payment as a result of the consummation of the Merger or the
transactions contemplated by this Agreement or (iv) result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject (including, assuming the
accuracy of the representations and warranties of the Investors set forth in
Section 3.2
hereof, federal and state securities laws and regulations and the rules and regulations of any
self-regulatory organization to which the Company or its securities are subject, including all
applicable Trading Markets), or by which any property or asset of the Company or a Subsidiary is
bound or affected, except to the extent that such violation would not reasonably be expected to
have a Material Adverse Effect.
(e)
The Securities
. The Securities (including the Warrant Shares) and the
Placement Agent Securities (including the Placement Agent Warrant Shares) have been duly
authorized, and the Common Shares, the Warrant Shares and the Placement Agent Warrant Shares,
when issued and paid for in accordance with the Transaction Documents, will be validly issued,
fully paid and non-assessable, free and clear of all Liens and shall not be subject to
preemptive or similar rights of stockholders. Assuming the accuracy of the representations and
warranties of (i) each Investor set forth in
Section 3.2
hereof and (ii) the Agents set
forth in the Placement Agency Agreement, it is not necessary in connection with the offer and
sale of the Common Shares and the Warrants to the Investors to register such Common Shares and
the Warrants under the Securities Act and the Securities will be issued in compliance with
applicable federal and state securities laws.
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(f)
Capitalization
.
(i) Immediately prior to the Merger, the aggregate number of shares and type of all
authorized, issued and outstanding classes of capital stock, options and other securities of the
Company (whether or not presently convertible into or exercisable or exchangeable for shares of
capital stock of the Company) is set forth in
Schedule 3.1(f)
hereto.
(ii) Immediately prior to the Merger, the aggregate number of shares and type of all
authorized, issued and outstanding classes of capital stock, options and other securities of
Athersys (whether or not presently convertible into or exercisable or exchangeable for shares of
capital stock of Athersys) is set forth in
Schedule 3.1(f)
hereto.
(iii) As of the date hereof, immediately prior to the First Closing and immediately after the
Merger, the aggregate number of shares and type of all authorized, issued and outstanding classes
of capital stock, options and other securities of the Company (whether or not presently convertible
into or exercisable or exchangeable for shares of capital stock of the Company) is set forth in
Schedule 3.1(f)
hereto.
(iv) All outstanding shares of capital stock of the Company and Athersys are duly authorized,
validly issued, fully paid and nonassessable and have been issued in compliance in all material
respects with all applicable securities laws.
(v) Except as disclosed in
Schedule 3.1(f)
hereto and except in connection with the
sale of the Securities, as of the date hereof, immediately prior to the First Closing and
immediately after the Merger, the Company does not have outstanding any other options, warrants,
script rights to subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or exchangeable for, or entered
into any agreement giving any Person any right to subscribe for or acquire, any shares of Common
Stock or Common Stock Equivalents. Except as set forth on
Schedule 3.1(f)
hereto, and
except for customary adjustments as a result of stock dividends, stock splits, combinations of
shares, reorganizations, recapitalizations, reclassifications or other similar events, as of the
date hereof, there are no anti-dilution or price adjustment provisions contained in any security
issued by the Company (or in any agreement providing rights to security holders), and the issuance
and sale of the Securities will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Investors) and will not result in a right of any holder of
securities to adjust the exercise, conversion, exchange or reset price under such securities. To
the knowledge of the Company, except as disclosed in the SEC Reports and any Schedules filed with
the SEC pursuant to Rule 13d-1 of the Exchange Act by reporting persons or in
Schedule
3.1(f)
hereto and except in connection with the sale of the Securities, as of the date hereof,
no Person or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 under
the Exchange Act), or has the right to acquire, by agreement with or by obligation binding upon the
Company, beneficial ownership of in excess of 5% of the outstanding Common Stock.
(g)
SEC Reports
. The Company has filed all reports required to be filed by it
under the Exchange Act, including pursuant to Section 13(a) or Section 15(d) thereof, for the 12
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months preceding the date hereof (or for such shorter period the Company was required to
file such reports) on a timely basis or has received a valid extension of such time of filing
and has filed any such SEC Reports prior to the expiration of any such extension and has filed
all reports required to be filed by it under the Exchange Act, including pursuant to Section
13(a) or Section 15(d) thereof, for the two years preceding the date hereof. Such reports
required to be filed by the Company under the Exchange Act, including pursuant to Section 13(a)
or Section 15(d) thereof, together with any materials filed or furnished by the Company under
the Exchange Act, whether or not any such reports were required being collectively referred to
herein as the “
SEC Reports
” and, together with this Agreement, including the Schedules and
Exhibits hereto, and Athersys’ Confidential Private Placement Memorandum, dated April 19, 2007,
and any amendment or supplement thereto (the “
Private Placement Memorandum
”), are collectively
referred to as the “
Disclosure Materials
”. As of their respective dates, the SEC Reports filed
by the Company complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the SEC promulgated thereunder, and none of the SEC Reports, when
filed by the Company, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading.
(h)
Financial Statements
. The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable the rules and regulations of the SEC
with respect thereto as in effect at the time of filing. Such financial statements and the
financial statements of Athersys included in the Private Placement Memorandum, have been
prepared in accordance with United States generally accepted accounting principles applied on a
consistent basis during the periods involved (“
GAAP
”), except as may be otherwise specified in
such financial statements, the notes thereto and except that unaudited financial statements may
not contain all footnotes required by GAAP or may be condensed or summary statements, and fairly
present in all material respects the consolidated financial position of the Company and
Athersys, as applicable, as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements, to normal,
year-end audit adjustments.
(i)
Absence of Undisclosed Liabilities
Except (a) as disclosed in the SEC Reports
or the Private Placement Memorandum, (b) current liabilities incurred and obligations under
agreements entered into in the usual and ordinary course of business and (c) as would not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect,
neither the Company nor any of its Subsidiaries has any debt, obligation or liability (whether
accrued, absolute, contingent, liquidated or otherwise, whether due or to become due, whether or
not known to the Company) arising out of any transaction entered into at or prior to the
Closing, or any act or omission at or prior to the Closing, or any state of facts existing at or
prior to the Closing, including taxes with respect to or based upon the transactions or events
occurring at or prior to the Closing, and including, without limitation, unfunded past service
liabilities under any pension, profit sharing or similar plan.
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(j)
Material Agreements
. As of the date hereof and prior to the Merger, all
material agreements to which the Company or any Subsidiary is a party or to which the property
or assets of the Company or any Subsidiary are subject are included as part of or identified in
the SEC Reports or the Private Placement Memorandum, except as disclosed on
Schedule
3.1(j)
. Except as described in
Schedule 3.1(j)
, neither the Company nor any
Subsidiary, except in each case as would not, individually or in the aggregate, reasonably be
expected to have or result in a Material Adverse Effect, is in default under or in violation of
(and no event has occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received written notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or not such
default or violation has been waived).
(k)
Absence of Certain Developments
. Since December 31, 2006, except as disclosed
in the SEC Reports or the Private Placement Memorandum and except in connection with the Merger,
(i) there has been no event, occurrence or development that, individually or in the aggregate,
has had or that would result in a Material Adverse Effect, (ii) the Company has not incurred any
material liabilities other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in
filings made with the SEC, (iii) the Company has not altered its method of accounting or the
changed its auditors, (iv) the Company has not declared or made any dividend or distribution of
cash or other property to its stockholders, in their capacities as such, or purchased, redeemed
or made any agreements to purchase or redeem any shares of its capital stock (except for
repurchases by the Company of shares of capital stock or options therefor held by current or
former employees, officers, directors, or consultants pursuant to Athersys’ incentive plans
being terminated in connection with the Merger or an option of the Company to repurchase such
shares upon the termination of employment or services), and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except pursuant to existing Company
stock-based plans. Except as disclosed in the SEC Reports, the Company has not taken any steps
to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or
reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or
any actual knowledge of any fact which would reasonably lead a creditor to do so. After giving
effect to the transactions contemplated hereby to occur at the applicable Closing, the Company
will not be Insolvent (as defined below). For purposes of this
Section 3.1(k)
,
“Insolvent” means (i) the present fair saleable value of the Company’s assets is less than the
amount required to pay the Company’s total Indebtedness (as defined in
Section 3.1(y)
),
(ii) the Company is unable to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured, (iii) the Company intends
to incur or believes that it will incur debts that would be beyond its ability to pay as such
debts mature or (iv) the Company has unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is proposed to be
conducted.
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(l)
Absence of Litigation
. Except as disclosed in the SEC Reports or the Private
Placement Memorandum, there is no Proceeding before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the Company,
threatened in writing against or affecting the Company or any of its Subsidiaries that would
reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
(m)
Compliance with Law
.
(i) Neither the Company nor any Subsidiary, except in each case as would not, individually or
in the aggregate, reasonably be expected to have or result in a Material Adverse Effect, (A) is in
violation of any order of any applicable court, arbitrator or governmental body, or (B) is or has
been in violation of any applicable statute, rule or regulation of any governmental authority.
(ii) The Company and the Subsidiaries are in compliance, and for the past three years have
been in compliance, with all applicable rules and regulations of the United States Food and Drug
Administration (“
FDA
”) (including the “Good Manufacturing Practices” regulations, if and when
applicable), and all applicable rules and regulations of any analogous foreign regulatory
authority. The Company and its subsidiaries have developed and maintain quality control procedures
in accordance with applicable rules and regulations of the FDA and any analogous foreign regulatory
authority. None of the products manufactured, marketed, or currently in development by the Company
or the Subsidiaries has been the subject of any voluntary or involuntary recall or any governmental
investigation other than routine inspections of the Subsidiaries’ facilities and any United States
and international regulatory approvals or premarket notifications therefor are owned by and
registered in the name one of the Subsidiaries and are in full force and effect. Neither the
Company nor any of the Subsidiaries has received any notice from the FDA or any other federal,
state or foreign regulatory agency questioning its practices or threatening to impose any penalties
or sanctions, and neither the Company nor any of the Subsidiaries is aware of any intent to deliver
any such notice.
(n)
Title to Assets; Condition of Properties
. The Company and the Subsidiaries
have good and marketable title to all real property owned by them that is material to the
business of the Company and the Subsidiaries and good and marketable title in all tangible
personal property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except as described in
Schedule
3.1(n)
and except for Liens that do not, individually or in the aggregate, have or result in
a Material Adverse Effect. Any real property and facilities held under lease by the Company and
the Subsidiaries are held by them under leases that are valid, binding and enforceable against
the Company or such Subsidiary and, to the Company’s knowledge, the other parties thereto. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used
by the Company and the Subsidiaries and necessary for their respective businesses are in good
operating condition and repair, are reasonably fit and usable for the purposes for which they
are being used, are adequate and sufficient for the Company’s or such Subsidiary’s business.
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(o)
No General Solicitation; Placement Agent’s Fees
. Neither the Company,
nor any of its Affiliates, nor any Person acting on its or their behalf (other than the Agents
and their respective Affiliates, with respect to whom the Company makes no representation or
warranty), has engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offer or sale of the Securities. The Company
shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or
brokers’ commission (other than for persons engaged by any Investor or its investment advisor)
relating to or arising out of the issuance of the Securities pursuant to this Agreement. The
Company shall pay, and hold each Investor harmless against, any Loss arising in connection with
any such claim for fees arising out of the issuance of the Securities pursuant to this
Agreement. Athersys acknowledges that it has engaged Cowen and Company, LLC and National
Securities Corporation as its exclusive placement agents (the “
Agents
”) in connection with the
sale of the Securities. Other than the Agents, the Company has not engaged any placement agent
or other agent in connection with the sale of the Securities.
(p)
Private Placement
. Neither the Company nor any of its Affiliates, nor any
Person acting on its or their behalf (other than the Agents and their respective Affiliates,
with respect to whom the Company makes no representation or warranty) has, directly or
indirectly, at any time within the past six months, made any offer or sale of any security or
solicitation of any offer to buy any security under circumstances that would (i) eliminate the
availability of the exemption from registration under the Securities Act under Section 4(2)
thereof in connection with the offer and sale by the Company of the Securities as contemplated
hereby or (ii) cause the offering of the Securities pursuant to the Transaction Documents to be
integrated with prior offerings by the Company for purposes of any applicable law, regulation or
stockholder approval provisions, including, without limitation, under the rules and regulations
of any Trading Market. The Company is not required to be registered as an “investment company”
within the meaning of the Investment Company Act of 1940, as amended. The Company is not
required to be registered as a United States real property holding corporation within the
meaning of the Foreign Investment in Real Property Tax Act of 1980.
(q)
Listing and Maintenance Requirements
. The Company has not, in the twelve
months preceding the date hereof, received notice (written or oral) from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market. The Company is
in compliance with all applicable listing and maintenance requirements of any such Trading
Market.
(r)
Registration Rights
. Except as contemplated pursuant to this Agreement, the
Company has not granted or agreed to grant to any Person any rights (including “piggy-back”
registration rights) to have any securities of the Company registered pursuant to the
Registration Statement contemplated by
Section 6.1(a)
that have not been satisfied or
waived.
(s)
Application of Takeover Protections
. There is no control share acquisition,
business combination, poison pill (including any distribution under a rights agreement) or other
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similar anti-takeover provision under the Company’s charter documents or the laws of its state
of incorporation that is or could become applicable to any of the Investors as a result of the
Investors and the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the Company’s issuance of
the Securities and the Investors’ ownership of the Securities.
(t)
Disclosure
. The Company confirms that neither it nor any of its officers,
directors or, to its knowledge, Affiliates has knowingly provided any of the Investors (other
than Excluded Investors) or their agents or counsel with any information that constitutes or
might constitute material, nonpublic information (other than the existence and terms of the
issuance of Securities, as contemplated by this Agreement). The Company understands and
confirms that each of the Investors will rely on the foregoing representations in effecting
transactions in securities of the Company (other than Excluded Investors). All disclosure
provided by the Company (including by Athersys) to the Investors regarding the Company, its
business and the transactions contemplated hereby, including the Schedules to this Agreement,
furnished by or on the behalf of the Company are true and correct in all material respects and
do not contain any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the circumstances under
which they were made, not misleading. To the Company’s knowledge, except for the Merger and the
transactions contemplated by this Agreement, no event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its or their
respective businesses, properties, operations or financial condition, which, under applicable
law, rule or regulation, requires public disclosure or announcement by the Company but which has
not been so publicly announced or disclosed. The Company acknowledges and agrees that no
Investor (other than Excluded Investors) makes or has made any representations or warranties
with respect to the transactions contemplated hereby other than those set forth in the
Transaction Documents.
(u)
Acknowledgment Regarding Investors’ Purchase of Securities
. Based upon the
assumption that the transactions contemplated by this Agreement are consummated in all material
respects in conformity with the Transaction Documents, the Company acknowledges and agrees that
each of the Investors (other than the Agents) is acting solely in the capacity of an arm’s
length purchaser with respect to the Transaction Documents and the transactions contemplated
hereby and thereby. The Company further acknowledges that no Investor (other than the Agents)
is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement and the transactions contemplated hereby and any advice given by any
Investor (other than the Agents) or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated hereby and thereby
is merely incidental to the Investors’ purchase of the Securities. The Company further
represents to each Investor that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
(v)
Patents and Trademarks
. To the Company’s knowledge, the Company and the
Subsidiaries own, or possess adequate rights or licenses to use, all registered trademarks,
trade
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names, service marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and
other intellectual property rights (“
Intellectual Property Rights
”) necessary to conduct their
respective businesses now conducted. None of the Company’s or the Subsidiaries’
Intellectual Property Rights have expired, or are expected to expire, within six months from the
date of this Agreement. The Company does not have any knowledge of any infringement by the
Company or the Subsidiaries of Intellectual Property Rights of others. Except as set forth on
Schedule 3.1(v)
hereto, there is no Proceeding being made or brought, or to the
knowledge of the Company, being threatened in writing, against the Company or the Subsidiaries
regarding its Intellectual Property Rights.
(w)
Insurance
. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses and location in which the Company and the Subsidiaries
are engaged.
(x)
Regulatory Permits
. The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in the SEC Reports and
the Private Placement Memorandum (“
Material Permits
”), except where the failure to possess such
permits would not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect, and neither the Company nor any Subsidiary has received any written
notice of Proceedings relating to the revocation or modification of any Material Permit.
(y)
Transactions With Affiliates and Employees
. Except as set forth in the
Company’s SEC Reports or in the Private Placement Memorandum, none of the officers, directors or
employees of the Company is presently a party to any transaction that would be required to be
reported pursuant to Item 404 of Regulation S-K promulgated under the Securities Act with the
Company or any of its Subsidiaries (other than for ordinary course services as employees,
officers or directors), including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any such officer, director or employee or, to the
Company’s knowledge, any corporation, partnership, trust or other entity in which any such
officer, director, or employee has a substantial interest or is an officer, director, trustee or
partner.
(z)
Internal Accounting Controls
. The Company and the Subsidiaries, taken as a
whole, maintain a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with management’s general
or specific authorization, and (iv) the recorded accountability for assets is compared with the
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existing assets at reasonable intervals and appropriate action is taken with respect to any
differences.
(aa)
Sarbanes-Oxley Act
. The Company is in compliance in all material respects with
applicable requirements of the Sarbanes-Oxley Act of 2002 and applicable rules
and regulations promulgated by the SEC thereunder, except where such noncompliance would
not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(bb)
Foreign Corrupt Practices
. Neither the Company nor any of its Subsidiaries
nor, to the knowledge of the Company, any director, officer, agent, employee or other Person
acting on behalf of the Company or any of its Subsidiaries has, in the course of its actions
for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity; (ii) made any
direct or indirect unlawful payment to any foreign or domestic government official or employee
from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic government
official or employee.
(cc)
Indebtedness
. Except as disclosed in the SEC Reports, the Private Placement
Memorandum or
Schedule 3.1(cc)
, neither the Company nor any of its Subsidiaries (i) has
any outstanding Indebtedness (as defined below), (ii) is in violation of any term of or in
default under any contract, agreement or instrument relating to any Indebtedness, except where
such violations and defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iii) is a party to any contract, agreement or instrument relating to any
Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect. For purposes of this Agreement: (x) “Indebtedness”
of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of property or services
(other than trade payables entered into in the ordinary course of business), (C) all
reimbursement or payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses, (E) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing, in either case with respect
to any property or assets acquired with the proceeds of such indebtedness (even though the
rights and remedies of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted accounting
principles, consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or
in any property or assets (including accounts and contract rights) owned by any Person, even
though the Person which
-20-
owns such assets or property has not assumed or become liable for the
payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses (A) through (G) above; and (y)
“Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or
otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation
of another Person if the primary purpose or intent of the Person incurring such liability, or
the primary effect thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with respect thereto.
(dd)
Employee Matters
.
(i) The Company and its Subsidiaries are in compliance with all applicable laws regarding
employment, wages, hours, equal opportunity, collective bargaining and payment of social security
and other taxes except to the extent that noncompliance would not, in the aggregate, reasonably be
expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or employs any member of a union. Neither the
Company nor any of its Subsidiaries is engaged in any unfair labor practice or discriminatory
employment practice, and no complaint has been filed or, to the Company’s knowledge, threatened to
be filed against the Company or any of its Subsidiaries with or by the National Labor Relations
Board, the Equal Employment Opportunity Commission or any other administrative agency, federal or
state, that regulates labor or employment practices, nor is any grievance filed or, to the
Company’s knowledge, threatened to be filed, against the Company or any Subsidiary by any employee
pursuant to any collective bargaining or other employment agreement to which the Company or any
Subsidiary is a party or is bound. The Company and its Subsidiaries are in compliance with all
applicable foreign, federal, state and local laws and regulations regarding occupational safety and
health standards except to the extent that noncompliance would not reasonably be expected to have a
Material Adverse Effect, and has received no complaints from any foreign, federal, state or local
agency or regulatory body alleging violations of any such laws and regulations.
(ii) Except as disclosed in the SEC Reports or in the Private Placement Memorandum, no
executive officer of the Company or any of its Subsidiaries has notified the Company or any such
Subsidiary that such officer intends to terminate such officer’s employment with the Company or any
such Subsidiary. To the knowledge of the Company or any such Subsidiary, no executive officer of
the Company or any of its Subsidiaries is in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant between the Company or
any Subsidiary and such executive officer. All sums required to be paid prior to the Closing Date
for employee compensation and benefits, and all vacation time owing to any employees of the Company
or any of its Subsidiaries as of the Closing Date, has either been paid or accrued on the
accounting records of the Company and its Subsidiaries.
-21-
(iii) To the knowledge of the Company, the Benefit Arrangements have been administered in
substantial compliance with their terms and with the requirements of applicable law. All payments
made by the Company and its Subsidiaries to current or former employees of the Company or any of
its Subsidiaries prior to the Closing Date pursuant to the Benefit Arrangements have been or, to
the knowledge of the Company, will be deductible under the Internal Revenue Code of 1986, as
amended.
(ee)
Labor Matters
. The Company and its Subsidiaries are in compliance in all
material respects with all applicable federal, state, local and foreign laws and regulations
respecting labor, employment practices, benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
(ff)
Environmental Laws
. The Company and its Subsidiaries (i) are in compliance
with any and all Environmental Laws (as hereinafter defined), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and conditions of any
such permit, license or approval where, in each of the foregoing clauses (i), (ii) and (iii),
the failure to so comply would be reasonably expected to have, individually or in the aggregate,
a Material Adverse Effect. The term “Environmental Laws” means all federal, state, local or
foreign laws relating to pollution or protection of human health (with respect to exposure to
releases of Hazardous Materials into the environment) or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges, releases or threatened
releases of Hazardous Materials into the environment, or otherwise relating to the manufacture,
processing, distribution, treatment, storage, disposal, transport or handling of Hazardous
Materials, as well as all legally binding codes, decrees, injunctions, judgments, orders or
regulations issued, entered or promulgated thereunder. The term “Hazardous Materials” means
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes as defined in or
regulated under any Environmental Law.
(gg)
Subsidiary Rights
. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive
dividends and distributions on, all capital stock or other equity securities of its Subsidiaries
as owned by the Company or such Subsidiary.
(hh)
Tax Status.
The Company and each of its Subsidiaries (i) has made or filed
all foreign, federal and state income and all other material tax returns, reports and
declarations required by any jurisdiction to which it is subject to be filed prior to the date
hereof, (ii) has paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and declarations, except those
being contested in good faith and (iii) has set aside on its books provision reasonably adequate
for the payment of all taxes for periods ending on or prior to the date hereof for which a tax
return, report or declaration has not yet been filed or for periods that include but do not end
on
-22-
the date hereof. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction.
3.2
Representations, Warranties and Covenants of the Investors
. Each Investor hereby,
as to itself only and for no other Investor, represents, warrants and covenants to the Company as
follows:
(a)
Organization; Authority
. Such Investor is either (i) an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its organization
with the requisite corporate, partnership or other power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents and otherwise to carry out
its obligations hereunder and thereunder or (ii) a natural person who has reached the age of 21
with the requisite power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents. The purchase by such Investor of the Securities hereunder
has been duly authorized by all necessary corporate, partnership or other action on the part of
such Investor. This Agreement has been duly executed and delivered by such Investor and
constitutes the valid and binding obligation of such Investor, enforceable against it in
accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the enforcement of
creditors’ rights generally, and (ii) the effect of rules of law governing the availability of
specific performance and other equitable remedies.
(b)
No Public Sale or Distribution
. Such Investor is (i) acquiring the Common
Shares and the Warrants and (ii) upon exercise of the Warrants will acquire the Warrant Shares
issuable upon exercise thereof, in the ordinary course of business for its own account and not
with a view towards, or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered under the Securities Act or under an exemption from such
registration and in compliance with applicable federal and state securities laws, and such
Investor does not have a present arrangement to effect any distribution of the Securities to or
through any person or entity;
provided
,
however
, that by making the
representations herein, such Investor does not agree to hold any of the Securities for any
minimum or other specific term and reserves the right to dispose of the Securities at any time
in accordance with or pursuant to a registration statement or an exemption under the Securities
Act.
(c)
Investor Status
. At the time such Investor was offered the Securities, it was,
and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the
Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a) under the
Securities Act. Such Investor is not a registered broker dealer registered under Section 15(a)
of the Exchange Act, or a member of the NASD, Inc. or an entity engaged in the business of being
a broker dealer. Except as otherwise disclosed in writing to the Company on
Exhibit B-2
(attached hereto) on or prior to the date of this Agreement, such Investor is not affiliated
with any broker dealer registered under Section 15(a) of the Exchange Act, or a member of the
NASD, Inc. or an entity engaged in the business of being a broker dealer.
(d)
Experience of Such Investor
. Such Investor, either alone or together with its
representatives has such knowledge, sophistication and experience in business and financial
-23-
matters so as to be capable of evaluating the merits and risks of the prospective investment in
the Securities, and has so evaluated the merits and risks of such investment. Such Investor
understands that it must bear the economic risk of this investment in the Securities
indefinitely, and is able to bear such risk and is able to afford a complete loss of such
investment.
(e)
Access to Information
. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded: (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Securities and the merits and risks of investing in
the Securities; (ii) access to information (other than material non-public information) about
the Company and the Subsidiaries and their respective financial condition, results of
operations, business, properties, management and prospects sufficient to enable it to evaluate
its investment; and (iii) the opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of such Investor or its representatives or counsel shall
modify, amend or affect such Investor’s right to rely on the truth, accuracy and completeness of
the Disclosure Materials and the Company’s representations and warranties contained in the
Transaction Documents. Such Investor acknowledges receipt of copies of the SEC Reports which
the Company has made available to such Investor through the EDGAR system.
(f)
No Governmental Review
. Such Investor understands that no United States
federal or state agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits of the offering
of the Securities.
(g)
No Conflicts
. The execution, delivery and performance by such Investor of this
Agreement and the consummation by such Investor of the transactions contemplated hereby will not
(i) result in a violation of the organizational documents, if any, of such Investor or (ii)
conflict with, or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which such Investor
is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws) applicable to such Investor, except in the
case of clauses (ii) and (iii) above, for such that are not material and do not otherwise affect
the ability of such Investor to consummate the transactions contemplated hereby.
(h)
Prohibited Transactions
. No Investor, directly or indirectly, and no
Person acting on behalf of or pursuant to any understanding with any Investor, has engaged
in any purchases or sales of any securities, including any derivatives, of the Company
(including, without limitation, any Short Sales involving any of the Company’s securities)
(a “
Transaction
”) since the time that such Investor was first contacted by the Company,
Athersys, the Agents or any other Person regarding an investment in the Company. Such
-24-
Investor covenants that neither it nor any Person acting on its behalf or pursuant to any
understanding with such Investor will engage, directly or indirectly, in any Transactions
prior to the time the transactions contemplated by this Agreement are publicly disclosed.
“Short Sales” include, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act and all types of direct and indirect
stock pledges, forward sale contracts, options, puts, calls, short sales, swaps, derivatives
and similar arrangements (including on a total return basis), and sales and other
transactions through non-U.S. broker-dealers or foreign regulated brokers.
(i)
Restricted Securities
. The Investors understand that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws inasmuch as
they are being acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited circumstances.
(j)
Legends
. It is understood that, except as provided in Section 4.1(b) of
this Agreement, certificates evidencing such Securities may bear the legend set forth in
Section 4.1(b)
(k)
No Legal, Tax or Investment Advice
. Such Investor understands that nothing
in this Agreement or any other materials presented by or on behalf of the Company to the
Investor in connection with the purchase of the Securities constitutes legal, tax or
investment advice. Such Investor has consulted such legal, tax and investment advisors as
it, in its sole discretion, has deemed necessary or appropriate in connection with its
purchase of the Securities. Such Investor understands that the Agents have acted solely as
the agent of the Company in this placement of the Securities, and that the Agents make no
representation or warranty with regard to the merits of this transaction or as to the
accuracy of any information such Investor may have received in connection therewith. Such
Investor acknowledges that he has not relied on any information or advice furnished by or on
behalf of the Agents.
3.3
Patriot Act Compliance
. To induce the Company to accept the Investor’s
investment, each Investor severally and not jointly hereby makes the following representations,
warranties and covenants to the Company:
(a) The undersigned represents and warrants that no holder of any beneficial interest
in the Investor (each a “
Beneficial Interest Holder
”) and, no Related Person (in the case
the undersigned is an entity) is or will be:
(i) A person or entity whose name appears on the list of specially designated nationals and
blocked persons maintained by the Office of Foreign Asset Control from time to time;
(ii) A Foreign Shell Bank; or
-25-
(iii) A person or entity resident in or whose subscription funds are transferred from or
through an account in a Non-Cooperative Jurisdiction.
(b) The Investor represents that the bank or other financial institution (the “
Wiring
Institution
”) from which the Investor’s funds will be wired is located in a FATF Country.
(c) The Investor represents that:
(i) Neither it, any Beneficial Interest Holder nor any Related Person (in the case of the
undersigned is an entity) is a Senior Foreign Political Figure, any member of a Senior Foreign
Political Figure’s Immediate Family or any Close Associate of a Senior Foreign Political Figure; or
(ii) Neither it, any Beneficial Interest Holder nor any Related Person (in the case the
undersigned is an entity) is resident in, or organized or chartered under the laws of, a
jurisdiction that has been designated by the Secretary of the Treasury under Section 311 or
312 of the USA PATRIOT Act as warranting special measures due to money laundering concerns.
(iii) Its investment funds do not originate from, nor will they be routed through, an account
maintained at a Foreign Shell Bank, an “offshore bank,” or a bank organized or chartered under the
laws of a Non-Cooperative Jurisdiction.
(d) For purposes of this
Section 3.3
, the following definitions shall apply:
Close Associate
: With respect to a Senior Foreign Political Figure, a person who
is widely and publicly known internationally to maintain an unusually close relationship with
the Senior Foreign Political Figure, and includes a person who is in a position to conduct
substantial domestic and international financial transactions on behalf of the Senior Foreign
Political Figure.
FATF
: The Financial Action Task Force on Money Laundering.
FATF Country
: A country that is a member of FATF. As of September 1, 2003, the
countries which are members of FATF are: Argentina; Australia; Austria; Belgium; Brazil; Canada;
Denmark; Finland; France; Germany; Greece; Hong Kong; Iceland; Ireland; Italy; Japan;
Luxembourg; Mexico; Kingdom of the Netherlands; New Zealand; Norway; Portugal; Singapore; South
Africa; Spain; Sweden; Switzerland; Turkey; United Kingdom and United States. For a current list
of FATF members see http://www1.oecd.org/fatf/Members_en.htm.
Foreign Bank
: An organization that (i) is organized under the laws of a country
outside the United States; (ii) engages in the business of banking; (iii) is recognized as a
bank by the bank supervisory or monetary authority of the country of its organization or
principal banking operations; (iv) receives deposits to a substantial extent in the regular
course of its business; and (v) has the power to accept demand deposits, but does not include
the U.S. branches or agencies of a foreign bank.
-26-
Foreign Shell Bank
: A Foreign Bank without a Physical Presence in any country, but
does not include a Regulated Affiliate.
Government Entity
: Any government or any state, department or other political
subdivision thereof, or any governmental body, agency, authority or instrumentality in any
jurisdiction exercising executive, legislative, regulatory or administrative functions of or
pertaining to government.
Immediate Family
: With respect to a Senior Foreign Political Figure, typically
includes the political figure’s parents, siblings, spouse, children and in-laws.
Non-Cooperative Jurisdiction
: Any foreign country or territory that has been
designated as non-cooperative with international anti-money laundering principles or procedures
by an intergovernmental group or organization, such as FATF, of which the United States is a
member and with which designation the United States representative to the group or organization
continues to concur. See http://www1.oecd.org/fatf/NCCT_en.htm for FATF’s list of
non-cooperative countries and territories.
Physical Presence
: A place of business that is maintained by a Foreign Bank and is
located at a fixed address, other than solely a post office box or an electronic address, in a
country in which the Foreign Bank is authorized to conduct banking activities, at which location
the Foreign Bank: (a) employs one or more individuals on a full-time basis; (b) maintains
operating records related to its banking activities; and (c) is subject to inspection by the
banking authority that licensed the Foreign Bank to conduct banking activities.
Publicly Traded Company
: An entity whose securities are listed on a recognized
securities exchange or quoted on an automated quotation system in the U.S. or country other than
a Non-Cooperative Jurisdiction or a wholly-owned subsidiary of such an entity.
Qualified Plan
: A tax qualified pension or retirement plan in which at least 100
employees participate that is maintained by an employer that is organized in the U.S. or is a
U.S. Government Entity.
Regulated Affiliate
: A Foreign Shell Bank that: (a) is an affiliate of a
depository institution, credit union, or Foreign Bank that maintains a Physical Presence in the
U.S. or a foreign country, as applicable; and (b) is subject to supervision by a banking
authority in the country regulating such affiliated depository institution, credit union, or
Foreign Bank.
Related Person
: With respect to any entity, any interest holder, director, senior
officer, trustee, beneficiary or grantor of such entity; provided that in the case of an entity
that is a Publicly Traded Company or a Qualified Plan, the term “Related Person” shall exclude
any interest holder holding less than 5% of any class of securities of such Publicly Traded
Company and beneficiaries of such Qualified Plan.
-27-
Senior Foreign Political Figure
: A senior official in the executive, legislative,
administrative, military or judicial branches of a non-U.S. government (whether elected or not),
a senior official of a major non-U.S. political party, or a senior executive of a non-U.S.
government-owned corporation. In addition, a Senior Foreign Political Figure includes any
corporation, business or other entity that has been formed by, or for the benefit of, a Senior
Foreign Political Figure.
USA PATRIOT Act
: The Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT Act) Act of 2001 (Pub. L. No.
107-56).
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1
Transfer Restrictions
.
(a) The Investors covenant that the Securities will only be disposed of pursuant to an
effective registration statement under, and in compliance with the requirements of, the
Securities Act or pursuant to an available exemption from the registration requirements of the
Securities Act, and in compliance with any applicable state securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration statement or to
the Company, or pursuant to Rule 144(k), the Company may require the transferor to provide to
the Company an opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does
not require registration under the Securities Act. Notwithstanding the foregoing, the Company
hereby consents to and agrees to register on the books of the Company and with its Transfer
Agent, without any such legal opinion, except to the extent that the Transfer Agent requests
such legal opinion, any transfer of Securities by an Investor to an Affiliate of such Investor,
provided that the transferee certifies to the Company that it is an “accredited investor” as
defined in Rule 501(a) under the Securities Act and provided that such Affiliate does not
request any removal of any existing legends on any certificate evidencing the Securities.
(b) The Investors agree to the imprinting, so long as is required by this
Section
4.1(b
), of the following legend on any certificate evidencing any of the Securities:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “
SECURITIES
ACT
”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
-28-
OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.
Certificates evidencing Securities shall not be required to contain such legend or any other
legend (i) while a registration statement (including the Registration Statement) covering the
resale of the Securities is effective under the Securities Act, (ii) following any sale of such
Securities pursuant to Rule 144 if the holder provides the Company with a legal opinion (and
the documents upon which the legal opinion is based) reasonably acceptable to the Company to
the effect that the Securities can be sold under Rule 144, (iii) if the holder provides the
Company with a legal opinion (and the documents upon which the legal opinion is based)
reasonably acceptable to the Company to the effect that the Securities are eligible for sale
under Rule 144(k), or (iv) if the holder provides the Company with a legal opinion (and the
documents upon which the legal opinion is based) reasonably acceptable to the Company to the
effect that the legend is not required under applicable requirements of the Securities Act
(including controlling judicial interpretations and pronouncements issued by the Staff of the
SEC). The Company shall issue a certificate in the form included in the Transfer Agent
Instructions to the Transfer Agent on the Effective Date. Following the Effective Date or at
such earlier time as a legend is no longer required for certain Securities, the Company will no
later than three Trading Days following the delivery by an Investor to the Company or the
Transfer Agent of (i) a legended certificate representing such Securities, and (ii) an opinion
of counsel to the extent required by
Section 4.1(a)
, deliver or cause to be delivered
to such Investor a certificate representing such
Securities that is free from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to the Transfer Agent that enlarge the
restrictions on transfer set forth in this Section.
If within three Trading Days after the Company’s receipt of a legended certificate and the
other documents as specified in Clauses (i) and (ii) of the paragraph immediately above, the
Company shall fail to issue and deliver to such Investor a certificate representing such
Securities that is free from all restrictive and other legends, and if on or after such Trading
Day the Investor purchases (in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by the Investor of shares of Common Stock that the
Investor anticipated receiving from the Company without any restrictive legend (the “
Covering
Shares
”), then the Company shall, within three Trading Days after the Investor’s request, pay
cash to the Investor in an amount equal to the excess (if any) of the Investor’s total purchase
price (including brokerage commissions, if any) for the Covering Shares, over the product of
(A) the number of Covering Shares, times (B) the closing sale price on the primary Trading
Market on which the Common Stock is listed or quoted on the date of delivery of such
certificate and the other documents as specified in Clauses (i) and (ii) of the paragraph
immediately above.
(c) The Company will not object to and shall permit (except as prohibited by law) an
Investor to pledge or grant a security interest in some or all of the Securities in
connection with a bona fide margin agreement or other loan or financing arrangement secured
by the Securities, and if required under the terms of such agreement, loan or arrangement,
the
-29-
Company will not object to and shall permit (except as prohibited by law) such Investor
to transfer pledged or secured Securities to the pledges or secured parties, provided, that
such pledgee or holder of security interest is an “accredited investor” as defined in Rule
501(a) under the Securities Act. Except as required by law, such a pledge or transfer would
not be subject to approval of the Company, no legal opinion of the pledgee, secured party or
pledgor shall be required in connection therewith, and no notice shall be required of such
pledge. Each Investor acknowledges that the Company shall not be responsible for any
pledges relating to, or the grant of any security interest in, any of the Securities or for
any agreement, understanding or arrangement between any Investor and its pledgee or secured
party. At the appropriate Investor’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may reasonably request
in connection with a pledge or transfer of the Securities, including the preparation and
filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder. Provided that the Company is in compliance with the terms of this
Section 4.1(c), the Company’s indemnification obligations pursuant to Section 6.4 shall not
extend to any Proceeding or Losses arising out of or related to this Section 4.1(c).
4.2
Furnishing of Information
. Until the date that any Investor owning Common Shares
or Warrant Shares may sell all of them under Rule 144(k) of the Securities Act (or any successor
provision), the Company covenants to use its commercially reasonable efforts to (a) timely file (or
obtain extensions in respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the Exchange Act and (b) make
and keep adequate “current public information” (as such term is described in Rule 144) available.
4.3
Integration
. The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act)
that would be integrated with the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of the Securities to the Investors or that
would be integrated with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.
4.4
Reservation of Securities
. The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the Warrants in such amount as may be
required to fulfill its obligations to issue such Warrant Shares. In the event that at any time
the then authorized shares of Common Stock are insufficient for the Company to satisfy its
obligations to issue such Warrant Shares under the Warrants, the Company shall promptly take such
actions as may be required to increase the number of authorized shares.
4.5
Securities Laws Disclosure; Publicity
. The Company shall, on or before 8:30 a.m.,
New York time, on the first Trading Day following execution of this Agreement, issue a press
release disclosing all material terms of the transactions contemplated hereby. On or prior to the
fourth Business Date following the First Closing Date, the Company shall file a Current Report on
Form 8-K with the SEC (the “
8-K Filing
”) providing a summary of the material terms of the
transactions
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contemplated by the Transaction Documents and including as exhibits to such Current
Report on Form 8-K copies of this Agreement and a form of Warrant (including the schedules and the
names, and addresses of the Investors and the amount(s) of Securities respectively purchased).
Thereafter, the Company shall timely file any filings and notices required by the SEC or applicable
law with respect to the transactions contemplated hereby. Except as herein provided, the Company
shall not publicly disclose the name of any Investor, or include the name of any Investor in any
press release without the prior written consent of such Investor, unless otherwise required by law,
including, without limitation, in the Registration Statement. The Company shall not, and shall
cause each of its Subsidiaries and its and each of their respective officers, directors, employees
and agents not to, provide any Investor with any material nonpublic information regarding the
Company or any of its Subsidiaries from and after the issuance of the above referenced press
release without the express written consent of such Investor, other than to any representative of
any Investor that is serving on the Company’s board of directors.
4.6
Use of Proceeds
. The Company intends to use the net proceeds from the sale of the
Securities substantially as set forth in the Private Placement Memorandum. Pending these uses, the
Company intends to invest the net proceeds from this offering in short-term, interest-bearing,
investment-grade securities, or as otherwise pursuant to the Company’s customary investment
policies.
4.7
Radius Director
. If Radius purchases Securities pursuant to this Agreement for an
aggregate purchase price of at least $6,000,000, and for so long as Radius owns beneficially
(within the meaning of Rule 13d-3 under the Exchange Act) at least 25% of the shares of Common
Stock purchased by Radius pursuant to this Agreement, the Company agrees that it shall take, and
shall cause its Board of Directors to take, all action within its powers to nominate one (1)
representative designated by Radius (the “
Radius Director
”) as a member of the Board of Directors,
who shall be initially Jordan Davis. In the event that any Radius Director designated in the
manner set forth in
this
Section 4.7
is unable to serve, or once having commenced to serve, is removed or
withdraws from the Board of Directors (a “
Withdrawing Director
”), the Company agrees that it shall
take, and shall cause its Board of Directors to take, all action within its powers to nominate or
elect an individual designated by Radius (the “
Substitute Director
”) as such Withdrawing Director’s
replacement.
ARTICLE V
CONDITIONS
5.1
Conditions Precedent to the Obligations of the Investors
. The obligation of each
Investor to acquire Securities at the First Closing is subject to the satisfaction or waiver by
such Investor, at or before the First Closing, of each of the following conditions:
(a)
Representations and Warranties
. The representations and warranties of the
Company contained herein shall be true and correct in all material respects as of the date when
made and as of the First Closing as though made on and as of such date.
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(b)
Performance
. The Company and each other Investor shall have performed,
satisfied and complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied with by it at or
prior to the First Closing.
(c)
Merger
. Contemporaneously with the First Closing, the Merger shall have been
consummated.
(d)
Injunction
. There shall be no effective injunction, writ, preliminary
restraining order or any order of any nature issued by a court of competent jurisdiction
directing that the transactions provided for herein or any of them not be consummated as herein
provided..
(e)
Officer’s Certificate
. Each of the Significant Investors shall have received a
certificate, dated the First Closing Date, signed by the Chief Executive Officer of the Company,
certifying that the conditions specified in the foregoing
Sections 5.1(a)
through
5.1(e)
hereof have been fulfilled.
(f)
Closing Deliveries
. All closing deliveries required to be made by the Company
pursuant to
Section 2.4(a)
hereof shall have been made.
(g)
Consents and Waivers
. Athersys shall have obtained the consents and waivers
set forth on
Schedule 5.1(g)
hereto, and such consents and waivers shall be in full
force and effect.
5.2
Conditions Precedent to the Obligations of the Company
. The obligation of the
Company to sell the Securities at the First Closing is subject to the satisfaction or waiver by the
Company, at or before the First Closing, of each of the following conditions:
(a)
Representations and Warranties
. The representations and warranties of the
Investors contained herein shall be true and correct in all material respects as of the date
when made and as of the First Closing Date as though made on and as of such date.
(b)
Performance
. The Investors shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Investors at or prior to the First
Closing.
(c)
Merger
. Contemporaneously with the First Closing, the Merger shall have been
consummated.
(d)
Closing Deliveries
. All closing deliveries required to be made by the
Investors pursuant to Section 2.4(b) hereof shall have been made.
(e)
Injunction
. There shall be no effective injunction, writ, preliminary restraining order or any order of any nature issued by a court of competent jurisdiction
directing
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that the transactions provided for herein or any of them not be consummated as herein
provided.
ARTICLE VI
REGISTRATION RIGHTS
6.1
Registration Statement
.
(a) As promptly as practical, and in any event on or prior to the Filing Date, the Company
shall prepare and file with the SEC a Registration Statement covering the resale of all
Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415.
The Registration Statement shall be on Form S-1 (except if the Company is not then eligible to
register for resale the Registrable Securities on Form S-1, in which case such registration
shall be on another appropriate form in accordance with the Securities Act, and except that, if
eligible, the Company may use Form S-3) and shall contain (except if otherwise directed by the
Investors or requested by the SEC) the “Plan of Distribution” in substantially the form attached
hereto as
Exhibit C
.
(b) The Company shall use its Best Efforts to cause the Registration Statement to be
declared effective by the SEC as promptly as possible after the filing thereof, but in any event
prior to the Required Effectiveness Date, and shall use its Best Efforts to keep the
Registration Statement continuously effective under the Securities Act until the earlier of the
date that all Common Shares and Warrant Shares covered by such Registration Statement have been
sold or can be sold publicly under Rule 144(k) (the
“Effectiveness Period
”).
(c) The Company shall timely file all reports and other material required to be filed
pursuant to the Exchange Act and otherwise use commercially reasonable efforts to qualify and
remain qualified to register securities pursuant to a registration statement on Form S-3 (or any
successor form) under the Securities Act. Subject to
Section 6.1(e)
, promptly following
the date (the “
Qualification Date
”) upon which the Company becomes eligible to use a
registration statement on Form S-3 to register the Registrable Securities for resale, but in no
event more than thirty (30) days after the Qualification Date (the “
Qualification Deadline
”),
the Company shall file a registration statement on Form S-3 covering the Registrable Securities
(or a post-effective amendment on Form S-3 to a registration statement on Form S-1) (a “
Shelf
Registration Statement
”) and shall use commercially reasonable efforts to cause such Shelf
Registration Statement to be declared effective as promptly as practicable thereafter.
(d) Should an Event (as defined below) occur, then upon the occurrence of such Event, and
on every monthly anniversary thereof until the applicable Event is cured (or, in the case of
Events relating to nonconsecutive Trading Days, upon the re-occurrence of such Event), the
Company shall pay to each Investor (other than an Agent with respect to Placement Agent Warrant
Shares or a Bridge Noteholder with respect to Bridge Shares) an amount in cash, as liquidated
damages and not as a penalty, equal to one percent (1.0%) of (i) the number of Common Shares
held by such Investor as of the date of such Event that are not registered pursuant to an
effective Registration Statement, or not listed or quoted, or are suspended from
trading on an Eligible Market (as the case may be),
multiplied by
(ii) the Purchase
Price paid by
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such Investor for such Common Shares;
provided
,
however
, that the
total amount of payments pursuant to this
Section 6.1(d)
shall not exceed, when
aggregated with all such payments paid to all Investors, ten percent (10%) of the aggregate
Purchase Price paid by all Investors. The payments to which an Investor shall be entitled
pursuant to this Section 6.1(d) are referred to herein as “
Event Payments.
” Any Event Payments
payable pursuant to the terms hereof shall apply on a pro rated basis for any portion of a month
prior to the cure of an Event. In the event the Company fails to make Event Payments in a
timely manner, such Event Payments shall bear interest at the rate of one percent (1.0%) per
month (pro rated for partial months) until paid in full. All pro rated calculations made
pursuant to this paragraph shall be based upon the actual number of days in such pro rated
month.
For such purposes, each of the following shall constitute an “Event”:
(i) the Registration Statement is not filed on or prior to the Filing Date or is not declared
effective on or prior to the Required Effectiveness Date;
(ii) except as provided for in
Section 6.1(e
) (the “
Excluded Events
”), after the
Effective Date, the Registration Statement or a subsequent Registration Statement filed in
replacement thereof) ceases to be effective for purposes of resale by the Investors (other than an
Agent with respect to Placement Agent Warrant Shares or a Bridge Noteholder with respect to Bridge
Shares) for any reason (including without limitation by reason of a stop order or the Company’s
failure to update the Registration Statement, other than the fault of such Investor) for five or
more consecutive Trading Days or for an aggregate of 15 Trading Days (whether or not consecutive)
in any 12-month period; and
(iii) except as a result of the Excluded Events, the Common Stock is not listed or quoted, or
is suspended from trading, on an Eligible Market for a period of three Trading Days (which need not
be consecutive Trading Days) during the Effectiveness Period.
(e) Notwithstanding anything in this Agreement to the contrary, after 60 consecutive
Trading Days of continuous effectiveness of the initial Registration Statement filed and
declared effective pursuant to this Agreement, the Company may, by written notice to the
Investors, suspend sales under a Registration Statement after the Effective Date thereof and/or
require that the Investors immediately cease the sale of shares of Common Stock pursuant thereto
and/or defer the filing of any subsequent Registration Statement if the Company, in the
reasonable judgment of its Board of Directors after consultation with counsel, believes that (i)
there is or may be in existence material nonpublic information or events involving the Company,
the failure of which to be disclosed in the prospectus included in the Registration Statement
could result in a violation of the Securities Act, the Exchange Act or any provision of any
applicable state securities law or (ii) it is in the best interests of the Company to suspend
sales under such registration at such time. Upon receipt of such notice, each Investor shall
immediately discontinue any sales of Registrable Securities pursuant to such registration until
such Investor is advised in writing by the Company that the current Prospectus or amended
Prospectus, as applicable, may be used. In no event, however, shall this right be exercised to
suspend sales beyond the period during which (in the reasonable judgment of its Board of
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Directors after consultation with counsel) the failure to require such suspension would be
materially detrimental to the Company. The Company’s rights under this
Section 6(e)
may
be exercised for a period of no more than 20 Trading Days at a time and not more than twice in
any twelve-month period, without such suspension being considered as part of an Event Payment
determination. Immediately after the end of any suspension period under this
Section
6(e)
, the Company shall take all necessary actions (including filing any required
supplemental prospectus) to restore the effectiveness of the applicable Registration Statement
and the ability of the Investors to publicly resell their Registrable Securities pursuant to
such effective Registration Statement.
6.2
Registration Procedures
. In connection with the Company’s registration
obligations hereunder, the Company shall:
(a) Not less than three Trading Days prior to the filing of a Registration Statement or any
related Prospectus or any amendment or supplement thereto, furnish via email to those
Significant Investors who have supplied the Company with email addresses copies of all such
documents proposed to be filed, which documents (other than any document that is incorporated or
deemed to be incorporated by reference therein) will be subject to the review of such
Significant Investors. The Company shall reflect in each such document when so filed with the
SEC such comments regarding the Significant Investors and the plan of distribution as the
Significant Investors may reasonably and promptly propose no later than two Trading Days after
the Significant Investors have been so furnished with copies of such documents as aforesaid.
(b) (i) Subject to
Section 6.1(e)
, prepare and file with the SEC such amendments,
including post-effective amendments, to each Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep the Registration Statement continuously
effective, as to the applicable Registrable Securities for the Effectiveness Period and prepare
and file with the SEC such additional Registration Statements in order to register for resale
under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to
be amended or supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to
any comments received from the SEC with respect to the Registration Statement or any amendment
thereto; and (iv) comply in all material respects with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of disposition by the
Investors thereof set forth in the Registration Statement as so amended or in such Prospectus as
so supplemented.
(c) Notify the Significant Investors as promptly as reasonably possible, and (if requested
by the Significant Investors) confirm such notice in writing no later than two Trading Days
thereafter, of any of the following events: (i) the SEC notifies the Company whether there will
be a “review” of any Registration Statement; (ii) the SEC comments in writing on any
Registration Statement; (iii) any Registration Statement or any post-effective amendment is
declared effective; (iv) the SEC or any other Federal or state governmental authority requests
any
amendment or supplement to any Registration Statement or Prospectus or requests additional
-35-
information related thereto; (v) the SEC issues any stop order suspending the effectiveness of
any Registration Statement or initiates any Proceedings for that purpose; (vi) the Company
receives notice of any suspension of the qualification or exemption from qualification of any
Registrable Securities for sale in any jurisdiction, or the initiation or threat in writing of
any Proceeding for such purpose; or (vii) any Registration Statement or Prospectus contains any
untrue statement of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(d) Use its reasonable Best Efforts to avoid the issuance of or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of any Registration Statement, or (ii)
any suspension of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, as soon as possible.
(e) If requested by an Investor, provide such Investor, without charge, at least one
conformed copy of each Registration Statement and each amendment thereto, including financial
statements and schedules, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the filing of such
documents with the SEC.
(f) Promptly deliver to each Investor, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Investors in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto to the extent permitted by federal and state securities laws and regulations.
(g) (i) In the time and manner required by each Trading Market, prepare and file with such
Trading Market any applicable additional shares listing application covering all of the
Registrable Securities, (ii) take all steps necessary to cause such Registrable Securities to be
approved for listing on each Trading Market as soon as possible thereafter, and (iii) except as
a result of the Excluded Events, during the Effectiveness Period, maintain the listing of such
Common Shares on each such Trading Market.
(h) Prior to any public offering of Registrable Securities, use its reasonable Best Efforts
to register or qualify or cooperate with the selling Investors in connection with the
registration or qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or blue sky laws of such
jurisdictions within the United States as any Investor requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective for so long as required, but
not to exceed the duration of the Effectiveness Period, and to do any and all other acts or
things reasonably necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement;
provided
,
however
,
that the
Company shall not be obligated to file any general consent to service of process or to
qualify as a
-36-
foreign corporation or as a dealer in securities in any jurisdiction in which it is
not so qualified or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject.
(i) Cooperate with the Investors to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent permitted by this
Agreement and under law, of all restrictive legends, and to enable such Registrable Securities
to be in such denominations and registered in such names as any such Investors may reasonably
request.
(j) Upon the occurrence of any event described in
Section 6.2(c)(vii
), subject to
Section 6.1(e)
, as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were made, not
misleading.
(k) Cooperate with any reasonable due diligence investigation undertaken by the Investors
in connection with the sale of Registrable Securities, including, without limitation, by making
available documents and information; provided that the Company will not knowingly deliver or
make available to any Investor material, nonpublic information unless such Investor requests in
advance in writing to receive material, nonpublic information and agrees to keep such
information confidential.
(l) Comply in all material respects with all rules and regulations of the SEC applicable to
the registration of the Registrable Securities.
(m) It shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable Securities of any
particular Investor or to make any Event Payments set forth in
Section 6.1(d)
to such
Investor that such Investor furnish to the Company the information specified in
Exhibits
B-1
,
B-2
and
B-3
hereto and such other information regarding itself, the
Registrable Securities and other shares of Common Stock held by it and the intended method of
disposition of the Registrable Securities held by it (if different from the Plan of Distribution
set forth on
Exhibit C
hereto) as shall be reasonably required to effect the
registration of such Registrable Securities, including, without limitation, requested by the SEC
in connection with any review of the Registration Statement or otherwise, and shall complete and
execute such documents in connection with such registration as the Company may reasonably
request.
6.3
Registration Expenses
. The Company shall pay all fees and expenses of the Company
incident to the performance of or compliance with Article VI of this Agreement by the Company,
including without limitation (a) all registration and filing fees and expenses, including
without
-37-
limitation those related to filings with the SEC, any Trading Market and in connection with
applicable state securities or blue sky laws, (b) printing expenses (including without limitation
expenses of printing certificates for Registrable Securities), (c) messenger, telephone and
delivery expenses, (d) fees and disbursements of counsel for the Company, (e) fees and expenses of
all other Persons retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement, and (f) all listing fees to be paid by the Company to the Trading
Market. The Company shall also reimburse the Agents for the fees and disbursements of their
counsel in connection with registration, filing or qualification of the Registration Statement and
to make the necessary filings with NASD Rule 2710 on behalf of the Placement Agents, which amount
shall be limited to $10,000;
provided
,
however
, that such amount shall be limited
to $5,000 if the SEC does not review the Registration Statement. The Company will also pay all
filing fees and reasonable legal fees in connection with the Agents’ NASD Rule 2710 filing to be
prepared by Agents’ counsel. The Company shall not be obligated to pay any fees of the
Investors in connection with the performance of or compliance with Article VI of this Agreement,
including any underwriting discounts or commissions or transfer taxes.
6.4
Indemnification
(a)
Indemnification by the Company
. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Investor, the officers,
directors, partners, members, agents and employees of each of them, each Person who controls any
such Investor (within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, partners, members, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law, from and against any and
all Losses, as incurred, arising out of or relating to (i) any misrepresentation by the Company
of any representation or warranty made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any breach by the
Company of any covenant, agreement or obligation of the Company contained in the Transaction
Documents or any other certificate, instrument or document contemplated hereby or thereby, or
(iii) any untrue or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of Company prospectus or in any amendment or supplement
thereto or in any Company preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or supplement thereto,
in the light of the circumstances under which they were made) not misleading, except to the
extent, but only to the extent, that (A) such untrue statements, alleged untrue statements,
omissions or alleged omissions are based solely upon information regarding such Investor
furnished in writing to the Company by such Investor for use therein, or to the extent that
such information relates to such Investor or such Investor’s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved by such Investor expressly for
use in the Registration Statement, or (B) with respect to any prospectus, if the untrue
statement or omission of material fact contained in such prospectus was corrected on a timely
basis in the prospectus, as then amended or supplemented, or in any free writing prospectus if
such corrected
prospectus or free writing prospectus was timely made available by the Company to the
Investor,
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and the Investor seeking indemnity hereunder was advised in writing not to use the
incorrect prospectus prior to the use giving rise to Losses.
(b)
Indemnification by Investors
. Each Investor shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of
Section 15
of the Securities Act
and
Section 20
of the Exchange Act), and the directors, officers, agents or employees of
such controlling Persons, to the fullest extent permitted by applicable law, from and against
all Losses arising solely out of any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or
supplement thereto, or arising out of or relating to any omission of a material fact required to
be stated therein or necessary to make the statements therein (in the case of any Prospectus or
form of prospectus or supplement thereto, in the light of the circumstances under which they
were made) not misleading, but only to the extent that such untrue statement or omission is
contained in any information so furnished by such Investor in writing to the Company
specifically for inclusion in such Registration Statement or such Prospectus or to the extent
that such untrue statements or omissions are based solely upon information regarding such
Investor furnished to the Company by such Investor in writing expressly for use therein, or to
the extent that such information relates to such Investor or such Investor’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved by such Investor
expressly for use in the Registration Statement (it being understood that the information
provided by the Investor to the Company in
Exhibits B-1
,
B-2
and
B-3
and
the Plan of Distribution set forth on
Exhibit C
, as the same may be modified by such
Investor and other information provided by the Investor to the Company in or pursuant to the
Transaction Documents constitutes information reviewed and expressly approved by such Investor
in writing expressly for use in the Registration Statement), such Prospectus or such form of
Prospectus or in any amendment or supplement thereto. In no event shall the liability of any
selling Investor hereunder be greater in amount than the dollar amount of the net proceeds
received by such Investor upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c)
Conduct of Indemnification Proceedings
. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “
Indemnified Party
”), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought (the
“
Indemnifying Party
”) in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof; provided, that the
failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of
its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that
it shall be finally determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such counsel shall be at
the
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expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (iii) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party
(in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall
not have the right to assume the defense thereof and the reasonable fees and expenses of separate
counsel shall be at the expense of the Indemnifying Party). It being understood, however, that the
Indemnifying Party shall not, in connection with any one such Proceeding (including separate
Proceedings that have been or will be consolidated before a single judge) be liable for the fees
and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties,
which firm shall be appointed by a majority of the Indemnified Parties. The Indemnifying Party
shall not be liable for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending Proceeding in
respect of which any Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the subject matter of such
Proceeding.
All reasonable fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party,
as incurred, within 20 Trading Days of written notice thereof to the Indemnifying Party (regardless
of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially determined that such
Indemnified Party is not entitled to indemnification hereunder).
(d)
Contribution
. If a claim for indemnification under
Section 6.4(a
) or
(b
) is unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute
to the amount paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken or made by, or
relates to information supplied by, such Indemnifying Party or Indemnified Party, and the
parties’ relative intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission.
The amount paid or payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in
Section 6.4(c
), any reasonable attorneys’ or
other reasonable
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fees or expenses incurred by such party in connection with any Proceeding to
the extent such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in accordance with its
terms.
The parties hereto agree that it would not be just and equitable if contribution pursuant to
this
Section 6.4(d
) were determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this
Section 6.4(d
), no
Investor shall be required to contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds actually received by such Investor from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such Investor has
otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.
6.5
Dispositions
. Each Investor agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement and shall sell its Registrable
Securities in accordance with the Plan of Distribution set forth in the Prospectus. Each Investor
further agrees that, upon receipt of a notice from the Company of the occurrence of any event of
the kind described in
Sections 6.2(c)(v
),
(vi
) or
(vii
), such Investor will
discontinue disposition of such Registrable Securities under the Registration Statement until such
Investor is advised in writing by the Company that the use of the Prospectus, or amended
Prospectus, as applicable, may be used. The Company may provide appropriate stop orders to enforce
the provisions of this paragraph.
6.6
No Piggyback on Registrations
. The Company may not include any of its securities
(whether for its own account or the account of any of its security holders (other than the
Investors in such capacity pursuant hereto)) in the Registration Statement other than the
Registrable Securities.
6.7
Piggy-Back Registrations
. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable Securities and
the Company shall determine to prepare and file with the SEC a registration statement relating
to an offering for its own account or the account of others under the Securities Act of any of
its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company shall send to
each Investor not then eligible to sell all of their Registrable Securities under Rule 144 in a
three-month period, written notice of such determination and if, within ten days after receipt
of such notice, any such Investor shall so request in writing, the Company shall include in
such registration statement all or any part of
such Registrable Securities such Investor requests to be registered. Notwithstanding the
foregoing, in the event that, in connection with any underwritten public offering, the managing
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underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock which
may be included in the Registration Statement because, in such underwriter(s)’ judgment,
marketing or other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such Registration Statement
only such limited portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit;
provided
,
however
, that (i) the Company shall not exclude any Registrable Securities unless the
Company has first excluded all outstanding securities, the holders of which are not
contractually entitled to inclusion of such securities in such Registration Statement or are
not contractually entitled to pro rata inclusion with the Registrable Securities and (ii) after
giving effect to the immediately preceding proviso, any such exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include Registrable Securities
and officers, directors and the holders of other securities having the contractual right to
inclusion of their securities in such Registration Statement by reason of demand or piggy-back
registration rights, in proportion to the number of Registrable Securities or other securities,
as applicable, sought to be included by each such Investor or other holder; and
provided
further
that, to the extent Cut Back Securities (as defined in Section 6.8 hereof) exist,
(i) the Company shall not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities held by officers, directors and all other holders of
securities of the Company (other than Registrable Securities and other than securities held by
holders who by contractual right demanded such registration (“
Demanding Holders
”)) and (ii)
after giving effect to the immediately preceding proviso, any such exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include Registrable Securities
and the Demanding Holders, in proportion to the number of Registrable Securities or other
securities, as applicable, sought to be included by each such Investor or other holder. If an
offering in connection with which an Investor is entitled to registration under this
Section 6.7
is an underwritten offering, then each Investor whose Registrable
Securities are included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten offering and shall
enter into an underwriting agreement in a form and substance reasonably satisfactory to the
Company and the underwriter or underwriters. Upon the effectiveness of the registration
statement for which piggy-back registration has been provided in this
Section 6.7
, any
Event Payments payable to an Investor whose Securities are included in such registration
statement shall terminate with respect to the Registrable Securities included in such
registration statement.
6.8
Reduction of Registrable Securities Included in a Registration Statement
.
Notwithstanding anything contained herein, in the event that the SEC requires the Company to
reduce the number of Registrable Securities to be included in a Registration Statement in order
to allow the Company to rely on Rule 415 with respect to a Registration Statement, then the
Company shall be obligated to include in such Registration Statement (which may be a subsequent
Registration Statement if the Company needs to withdraw the initial Registration
Statement and refile a new Registration Statement in order to rely on Rule 415) only such
limited portion of the Registrable Securities as the SEC shall permit. Any exclusion of
Registrable
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Securities shall be made pro rata among the Investors in proportion to the number
of Registrable Securities held such persons; provided, however, that 100% of the Registrable
Securities held by the Bridge Noteholders shall be excluded prior to the exclusion of any
Registrable Securities held by the remaining Investors, and 100% of the Registrable Securities
held by the Agents shall be excluded prior to the exclusion of any Registrable Securities held
by the remaining Investors. Thereafter, the order of Registrable Securities to be excluded
shall be the Warrant Shares (which may be some or all of such securities) and lastly, the
Common Shares (in such limited number until Rule 415 can be utilized). Any Registrable
Securities that are excluded in accordance with the foregoing terms are hereinafter referred to
as “Cut Back Securities.” To the extent Cut Back Securities exist, as soon as may be permitted
by the SEC, the Company shall be required to file a registration statement on Form S-3 (or, if
Form S-3 is not then available to the Company, on Form S-1 or such other form of registration
statement as is then available to effect a registration for resale of the Cut Back Securities)
covering the resale of the Cut Back Securities and shall use Best Efforts to cause such
Registration Statement to be declared effective as promptly as practicable thereafter;
provided, however, that the foregoing obligation shall cease with respect to any Cut Back
Securities at such time such Cut Back Securities are eligible for sale immediately and without
restriction pursuant to Rule 144(k) under the Securities Act.
6.9
Other Registrations
. Prior to and for a period of six months following the
Effective Date of the Registration Statement (or, in the event that the Company is required to
file any additional Registration Statements pursuant to
Section 6.8
, prior to and for a
period ending on the later of (a) the one-year anniversary of the First Closing and (b) the
six-month anniversary of the effective date of the first Registration Statement covering
Registrable Securities that is declared effective by the SEC), the Company shall not prepare
and file with the SEC a registration statement relating to an offering for its own account or
the account of others (other than Investors) under the Securities Act of any of its equity
securities, other than any registration statement or post-effective amendment to a registration
statement (or supplement thereto) on Form S-4 or relating to shares of Common Stock issuable in
connection with the Company’s employee benefit plans on Form S-8. The Company will not, on or
after the date of this Agreement, enter into any agreement with respect to its securities that
conflicts with the rights granted to the holders of the Registrable Securities in this
Agreement. The rights granted to the holders of the Registrable Securities hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the holders of the
Company’s securities under any agreement in effect on the date hereof, except to the extent
that such rights have been otherwise waived.
ARTICLE VII
MISCELLANEOUS
7.1
Termination
. This Agreement may be terminated by the Company, Athersys or any
Investor, by written notice to the other parties, if the Closing has not been consummated by the
third
Business Day following the date of this Agreement; provided that no such termination will
affect the right of any party to sue for any breach by the other party (or parties).
-43-
7.2
Fees and Expenses
. Except as expressly set forth in the Transaction Documents or
the Private Placement Memorandum to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties
levied in connection with the sale and issuance of the Securities by the Company.
7.3
Entire Agreement
. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules. At or after the Closing, and without further consideration, the Company will execute
and deliver to the Investors such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction Documents.
7.4
Notices
. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile or email at the facsimile number or email address specified in this Section prior to
6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile or email at the facsimile
number or email address specified in this Section on a day that is not a Trading Day or later than
6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of
deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the
party to whom such notice is required to be given. The addresses, facsimile numbers and email
addresses for such notices and communications are those set forth on the signature pages hereof, or
such other address or facsimile number as may be designated in writing hereafter, in the same
manner, by any such Person.
7.5
Amendments; Waivers
. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the Company, Athersys and
each of the Investors or, in the case of a waiver, by the party against whom enforcement of any
such waiver is sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver
of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the rights of Investors
under
Article VI
may be given by Investors holding at least a majority of the Registrable
Securities to which such waiver or consent relates.
7.6
Construction
. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
The language
used in this Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against any party.
-44-
7.7
Successors and Assigns
. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written consent of the
Investors. Any Investor may assign its rights under this Agreement to any Person to whom such
Investor assigns or transfers any Securities, provided (i) such transferor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the
Company after such assignment, (ii) the Company is furnished with written notice of (x) the name
and address of such transferee or assignee and (y) the Registrable Securities with respect to which
such registration rights are being transferred or assigned, (iii) following such transfer or
assignment, the further disposition of such securities by the transferee or assignee is restricted
under the Securities Act and applicable state securities laws, (iv) such transferee agrees in
writing to be bound, with respect to the transferred Securities, by the provisions hereof that
apply to the “Investors” and (v) such transfer shall have been made in accordance with the
applicable requirements of this Agreement and with all laws applicable thereto.
7.8
No Third-Party Beneficiaries
. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except that each Indemnified Party
is an intended third party beneficiary of
Section 6.4
and (in each case) may enforce the
provisions of such Sections directly against the parties with obligations thereunder and the
Placement Agents are intended third party beneficiaries of the representations and warranties made
by (x) the Company in Section 3.1 and (y) the Investors in Section 3.2 and 3.3 and the covenants of
the Company set forth in Article IV and Article VI.
7.9
Governing Law; Venue; Waiver of Jury Trial
. THE CORPORATE LAWS OF THE STATE OF
DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS
STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF
THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE
ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY INVESTOR HEREUNDER, IN CONNECTION
HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO
THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT
TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO
PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA
REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE
ADDRESS IN EFFECT FOR
-45-
NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE
COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
7.10
Survival
. The representations, warranties, agreements and covenants contained
herein shall survive the Closing.
7.11
Execution
. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission or email attachment, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or email-attached signature page were an original
thereof.
7.12
Severability
. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.
7.13
Rescission and Withdrawal Right
. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction Documents, whenever
any Investor exercises a right, election, demand or option owed to such Investor by the Company
under a Transaction Document and the Company does not timely perform its related obligations within
the periods therein provided, then, prior to the performance by the Company of the Company’s
related obligation, such Investor may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights.
7.14
Replacement of Securities
. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and the execution by the holder
thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and
hold harmless the Company for any losses in connection therewith. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
7.15
Remedies
. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Investors and the Company will be
entitled to seek specific performance under the Transaction Documents. The parties agree that
-46-
monetary damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence.
7.16
Payment Set Aside
. To the extent that the Company makes a payment or payments to
any Investor hereunder or any Investor enforces or exercises its rights hereunder or thereunder,
and such payment or payments or the proceeds of such enforcement or exercise or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from,
disgorged by or are required to be refunded, repaid or otherwise restored to the Company by a
trustee, receiver or any other person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such enforcement or
setoff had not occurred.
7.17
Adjustments in Share Numbers and Prices
. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or other securities or
rights convertible into, or entitling the holder thereof to receive directly or indirectly shares
of Common Stock), combination or other similar recapitalization or event occurring after the date
hereof and prior to the Closing, each reference in any Transaction Document to a number of shares
or a price per share shall be amended to appropriately account for such event.
7.18
Independent Nature of Investors’ Obligations and Rights
. The obligations of each
Investor under any Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under any Transaction Document. The decision of each Investor to purchase
Securities pursuant to this Agreement has been made by such Investor independently of any other
Investor and independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made or given by any other
Investor or by any agent or employee of any other Investor, and no Investor or any of its agents or
employees shall have any liability to any other Investor (or any other person) relating to or
arising from any such information, materials, statements or opinions. Nothing contained herein or
in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed
to constitute the Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the Transaction Document.
Each Investor acknowledges that no other Investor has acted as agent for such Investor in
connection with making its investment hereunder and that no other Investor will be acting as agent
of such Investor in connection with monitoring its investment hereunder. Each Investor shall be
entitled to independently protect and enforce its rights, including without limitation the rights
arising out of this
Agreement or out of the other Transaction Documents, and it shall not be necessary for any
other Investor to be joined as an additional party in any proceeding for such purpose.
[SIGNATURE PAGES TO FOLLOW]
-47-
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.
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BTHC VI, INC.
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By:
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/s/ Gil Van Bokkelen
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Name:
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Gil Van Bokkelen
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Title:
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Chief Executive Officer
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ATHERSYS, INC.
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By:
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/s/ Gil Van Bokkelen
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Name:
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Gil Van Bokkelen
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Title:
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Chief Executive Officer
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Address for Notice:
3201 Carnegie Avenue
Cleveland, Ohio 44115-2634
Facsimile No.: (216) 432-2461
Telephone No.: (216) 431-9900
Attn: Laura K. Campbell
With a copy to:
Jones Day
901 Lakeside Avenue
Cleveland, Ohio 44114
Facsimile: (216) 579-0212
Telephone: (216) 586-3939
Attn: Christopher M. Kelly, Esq.
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INVESTOR SIGNATURE PAGE
By its execution and delivery of this signature page, the undersigned Investor hereby joins in
and agrees to be bound by the terms and conditions of the Securities Purchase Agreement dated as of
June 8, 2007 (the “Purchase Agreement”) by and among BTHC VI, Inc., Athersys and the Investors (as
defined therein), as to the number of shares of Common Stock and Warrants set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or counterparts thereof.
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Name of Investor:
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By:
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Name:
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Title:
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Address:
Telephone No.:
Facsimile No.:
Email Address:
Number of Shares:
Number of Warrants:
Aggregate Purchase Price: $
-2-
Exhibits:
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A-1
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Schedule of Investors for First Closing
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A-2
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Schedule of Investors for Second Closing
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B
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Instruction Sheet for Investors
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B-1
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Stock Certificate Questionnaire
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B-2
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Registration Statement Questionnaire
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B-3
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Certificate for Individual Investors
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B-4
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Certificate for Corporate, Partnership, Limited Liability Company, Trust,
Foundation and Joint Investors
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C
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Plan of Distribution
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D
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Company Transfer Agent Instructions
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E
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Form of Warrant
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-3-
Exhibit A-1
Schedule of Investors
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Investor
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Common Shares
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Warrant Shares
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Purchase Price
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Roger J. & M. Jenai
Sullivan Wall
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10,000
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2,500
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$
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50,000
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Adam Tymrakiewicz
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10,000
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2,500
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$
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50,000
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Robert A. Koch
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20,000
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5,000
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$
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100,000
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Antonius Dekonink
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5,000
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1,250
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$
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25,000
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Richard & Jeffrey K. Ward
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5,000
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1,250
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$
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25,000
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Goldberg & Associates
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20,000
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5,000
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$
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100,000
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LBJ 8001 LP
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40,000
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10,000
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$
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200,000
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Jennifer R. Hohneke &
West Thomas Houle
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15,000
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3,750
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$
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75,000
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R & F Industries Inc.
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10,000
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2,500
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$
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50,000
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Cyber Calling Inc.
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5,000
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1,250
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$
|
25,000
|
|
|
Paradise Wire & Cable
Defined Benefit Pension
Plan
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
J. Russell LaBarge Jr.
Revocable Trust
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
William Ristvedt
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
V. Gopikrishna Reddy
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Dilmus R. Richey
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Gary W. Sargent
|
|
|
20,000
|
|
|
|
5,000
|
|
|
$
|
100,000
|
|
|
Joseph G. Ruppert
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor
|
|
Common Shares
|
|
Warrant Shares
|
|
Purchase Price
|
|
John P. & Kathleen J.
Gangl
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Richard & Kathleen Basch
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Neil H. & Karen J.
Rolstad
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Paul Yurfest
|
|
|
20,000
|
|
|
|
5,000
|
|
|
$
|
100,000
|
|
|
Peter Ohler
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Jim Swift
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Thomas Richard Bollinger
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Craig R. Whited
|
|
|
70,000
|
|
|
|
17,500
|
|
|
$
|
350,000
|
|
|
Garry Ard
|
|
|
20,000
|
|
|
|
5,000
|
|
|
$
|
100,000
|
|
|
John Gregory VanSchaack
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
William F. Herbes
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Louis Joseph & Carolyn
Hope Knauff
|
|
|
15,000
|
|
|
|
3,750
|
|
|
$
|
75,000
|
|
|
Jeff Pengra & Allen
Ofstehage
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Lloyd & Deborah Schill
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
John Anthony DeRungs
|
|
|
20,000
|
|
|
|
5,000
|
|
|
$
|
100,000
|
|
|
Eldon Marier
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Khuan K. Phu
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Bill Feniger
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Steve Huffman
|
|
|
20,000
|
|
|
|
5,000
|
|
|
$
|
100,000
|
|
|
Manzoor Hasan
|
|
|
30,000
|
|
|
|
7,500
|
|
|
$
|
150,000
|
|
-2-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor
|
|
Common Shares
|
|
Warrant Shares
|
|
Purchase Price
|
|
Bobby Sweeney
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
West & Laurie Houle
|
|
|
200,000
|
|
|
|
50,000
|
|
|
$
|
1,000,000
|
|
|
Yadon Arad Sep IRA
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Mike Kooyman
|
|
|
30,000
|
|
|
|
7,500
|
|
|
$
|
150,000
|
|
|
Stevan Birnbaum Trust
|
|
|
9,600
|
|
|
|
2,400
|
|
|
$
|
48,000
|
|
|
Charles Lowden
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Arthur G. Caputo
|
|
|
40,000
|
|
|
|
10,000
|
|
|
$
|
200,000
|
|
|
Wayne & Chen Lin
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
John Cotter
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
W.P. Malone Inc.
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Alan M. Johnson III &
Marta I. Johnson
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Henry Schwarzbach
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Brian E. Rabune
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Adel Sheshtawy
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Mayank C. Patel
|
|
|
6,000
|
|
|
|
1,500
|
|
|
$
|
30,000
|
|
|
Steven & Rita Yaroch
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Joseph C. & Loretta A.
Pillari
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Stephen Weiss
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Leonard DeOliveira
|
|
|
20,000
|
|
|
|
5,000
|
|
|
$
|
100,000
|
|
|
Ira & Paula Spodek
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Joel Hirsh
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
-3-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor
|
|
Common Shares
|
|
Warrant Shares
|
|
Purchase Price
|
|
Mark Wiley
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Rocco Fuschetto
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Paul Duncan
|
|
|
20,000
|
|
|
|
5,000
|
|
|
$
|
100,000
|
|
|
Charles P. Nicholson
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Clay Gibson
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Tom & Molly Hicks
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Ahmed Mohamed
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
James H. & Carole A.
Deney
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Robert Deane
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Graham A. Wilshier
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Mark A. Koerner
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Dennis Weichert
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
William N. Strawbridge
|
|
|
8,000
|
|
|
|
2,000
|
|
|
$
|
40,000
|
|
|
Steven J. & Sherri L.
Glock
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Anthony W. McCarthy
|
|
|
20,000
|
|
|
|
5,000
|
|
|
$
|
100,000
|
|
|
Kathleen Egan-Jerone
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Robert Jerone
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Joseph A. ManFredo
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Maurice & Karen
DeVerteuil
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Mark Peeples
|
|
|
20,000
|
|
|
|
5,000
|
|
|
$
|
100,000
|
|
-4-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor
|
|
Common Shares
|
|
Warrant Shares
|
|
Purchase Price
|
|
David Coates
|
|
|
15,000
|
|
|
|
3,750
|
|
|
$
|
75,000
|
|
|
Kathleen Ammann
|
|
|
20,000
|
|
|
|
5,000
|
|
|
$
|
100,000
|
|
|
Matthew Caldwell Nicholls
|
|
|
8,000
|
|
|
|
2,000
|
|
|
$
|
40,000
|
|
|
Joseph Q. Gibson
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Al Steffes
|
|
|
200,000
|
|
|
|
50,000
|
|
|
$
|
1,000,000
|
|
|
Gary Gengenbach
|
|
|
8,000
|
|
|
|
2,000
|
|
|
$
|
40,000
|
|
|
Sowmini
Sriram
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
James Hess Inc. ESOP
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Tees & Novelties Inc.
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Fergus Burke
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Gerald Singer
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
NG Company
|
|
|
9,000
|
|
|
|
2,250
|
|
|
$
|
45,000
|
|
|
Abraham Garfinkel
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Alan Kushner
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Elco Securities Ltd.
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Frederick Stanley
Shenstone
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Sio Partners, LP
|
|
|
40,000
|
|
|
|
10,000
|
|
|
$
|
200,000
|
|
|
John W. & Linda C. Irvine
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Richard C. Ernest
|
|
|
6,000
|
|
|
|
1,500
|
|
|
$
|
30,000
|
|
|
Thomas P. Darmstadter
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
-5-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor
|
|
Common Shares
|
|
Warrant Shares
|
|
Purchase Price
|
|
ATA Rahman
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
William Baisley
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Joseph Sensi Jr.
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Nayer Imam
|
|
|
8,000
|
|
|
|
2,000
|
|
|
$
|
40,000
|
|
|
David T. Gallagher
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Gary B. Kabat
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
David E. Anglemeyer
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Richard Carver
|
|
|
8,000
|
|
|
|
2,000
|
|
|
$
|
40,000
|
|
|
Bartholomew Murphy
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Richard H. Kantor
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
James T. & Linda J. Bego
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Theodore R. Reviglio
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
John Boulton
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Marc Kadish
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Chester P. Sadowski IRA
|
|
|
8,000
|
|
|
|
2,000
|
|
|
$
|
40,000
|
|
|
Tom Coehlo
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
William Carroll Campbell
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Casey C. Christofferson
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Timothy J. Smidt
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Mark & Judith Bowers
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Daniel I. & Sally E. Waki
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Noah Drezner
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
-6-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor
|
|
Common Shares
|
|
Warrant Shares
|
|
Purchase Price
|
|
Mark J. Ehlert
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
Magnus Coxner
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
|
David W. Drezner
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Bernie & Rita’s Limited
Partnership
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Nelson Penarreta &
Patricia Davila
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
David Shively
|
|
|
7,400
|
|
|
|
1,850
|
|
|
$
|
37,000
|
|
|
Higginbotham Family Trust
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Michael Moeller
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
Caduceus Private
Investment III, L.P.
|
|
|
2,971,698
|
|
|
|
742,925
|
|
|
$
|
14,858,490
|
|
|
OrbiMed Associates III,
L.P.
|
|
|
28,302
|
|
|
|
7,075
|
|
|
$
|
141,510
|
|
|
RA Capital Biotech Fund,
L.P.
|
|
|
1,178,880
|
|
|
|
294,720
|
|
|
$
|
5,894,400
|
|
|
RA Capital Biotech Fund
II, L.P.
|
|
|
21,120
|
|
|
|
5,280
|
|
|
$
|
105,600
|
|
|
Accipiter Life Sciences
Fund, L.P.
|
|
|
318,500
|
|
|
|
79,625
|
|
|
$
|
1,592,500
|
|
|
Accipiter Life Sciences
Fund (Offshore), L.P.
|
|
|
319,950
|
|
|
|
79,988
|
|
|
$
|
1,599,750
|
|
|
Accipiter Life Sciences
Fund II (Offshore), L.P.
|
|
|
271,450
|
|
|
|
67,863
|
|
|
$
|
1,357,250
|
|
|
Accipiter Life Sciences
Fund II, L.P.
|
|
|
132,350
|
|
|
|
33,087
|
|
|
$
|
661,750
|
|
-7-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor
|
|
Common Shares
|
|
Warrant Shares
|
|
Purchase Price
|
|
Accipiter Life Sciences
Fund II (QP), L.P.
|
|
|
157,750
|
|
|
|
39,437
|
|
|
$
|
788,750
|
|
|
H&Q Healthcare Investors
|
|
|
472,000
|
|
|
|
118,000
|
|
|
$
|
2,360,000
|
|
|
H&Q
Life Science Investors
|
|
|
328,000
|
|
|
|
82,000
|
|
|
$
|
1,640,000
|
|
|
Highbridge International
LLC
|
|
|
400,000
|
|
|
|
100,000
|
|
|
$
|
2,000,000
|
|
|
MPM Bioequities
Investors Fund, LLC
|
|
|
5,100
|
|
|
|
1,275
|
|
|
$
|
25,500
|
|
|
MPM Bioequities Master
Fund, L.P.
|
|
|
394,900
|
|
|
|
98,725
|
|
|
$
|
1,974,500
|
|
|
SF Capital Partners, Ltd.
|
|
|
400,000
|
|
|
|
100,000
|
|
|
$
|
2,000,000
|
|
|
Capital Ventures
International
|
|
|
400,000
|
|
|
|
100,000
|
|
|
$
|
2,000,000
|
|
|
A.M. Pappas Life Science
Ventures III, L.P.
|
|
|
338,928
|
|
|
|
84,732
|
|
|
$
|
1,694,640
|
|
|
PV III CEO Fund, L.P.
|
|
|
21,072
|
|
|
|
5,268
|
|
|
$
|
105,360
|
|
|
Passport Global Master
Fund SPC, Ltd.
|
|
|
160,000
|
|
|
|
40,000
|
|
|
$
|
800,000
|
|
|
Wexford Spectrum
Investors, LLC
|
|
|
165,000
|
|
|
|
41,250
|
|
|
$
|
825,000
|
|
|
Cornell Capital
Partners, L.P.
|
|
|
160,000
|
|
|
|
40,000
|
|
|
$
|
800,000
|
|
|
Crystal Cascades, L.P.
|
|
|
80,000
|
|
|
|
20,000
|
|
|
$
|
400,000
|
|
|
Cranshire Capital, L.P.
|
|
|
79,000
|
|
|
|
19,750
|
|
|
$
|
395,000
|
|
-8-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor
|
|
Common Shares
|
|
Warrant Shares
|
|
Purchase Price
|
|
HSMR Capital Partners
(QP), L.P.
|
|
|
71,000
|
|
|
|
17,750
|
|
|
$
|
355,000
|
|
|
Camber Capital Fund, L.P.
|
|
|
37,000
|
|
|
|
9,250
|
|
|
$
|
185,000
|
|
|
Bristol Investment Fund,
Ltd.
|
|
|
40,000
|
|
|
|
10,000
|
|
|
$
|
200,000
|
|
|
Chestnut Ridge Partners,
L.P.
|
|
|
38,000
|
|
|
|
9,500
|
|
|
$
|
190,000
|
|
|
RHP Master Fund, Ltd.
|
|
|
35,000
|
|
|
|
8,750
|
|
|
$
|
175,000
|
|
|
Radius Venture Partners
II, L.P.
|
|
|
800,000
|
|
|
|
400,000*
|
|
|
$
|
4,000,000
|
|
|
Radius Venture Partners
III, L.P.
|
|
|
103,766
|
|
|
|
51,883*
|
|
|
$
|
518,830
|
|
|
Radius Venture Partners
III QP, L.P.
|
|
|
696,234
|
|
|
|
348,117*
|
|
|
$
|
3,481,170
|
|
|
Dilip J. Mehta
|
|
|
10,000
|
|
|
|
5,000*
|
|
|
$
|
50,000
|
|
|
George M. Milne, Jr.
|
|
|
10,000
|
|
|
|
5,000*
|
|
|
$
|
50,000
|
|
|
Sigma Capital Corp.
|
|
|
400,000
|
|
|
|
167,500**
|
|
|
$
|
2,000,000
|
|
|
Biakum Trading, Inc
|
|
|
10,000
|
|
|
|
5,000*
|
|
|
$
|
50,000
|
|
|
Silver Investments
Holdings Corp.
|
|
|
151,000
|
|
|
|
62,750***
|
|
|
$
|
755,000
|
|
|
Kevin O’Connell
|
|
|
20,000
|
|
|
|
5,000
|
|
|
$
|
100,000
|
|
|
Meythaler Investment
Partners LC
|
|
|
20,000
|
|
|
|
5,000
|
|
|
$
|
100,000
|
|
-9-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor
|
|
Common Shares
|
|
Warrant Shares
|
|
Purchase Price
|
|
Frantz Medical Ventures
Fund I, L.P.
|
|
|
20,000
|
|
|
|
5,000
|
|
|
$
|
100,000
|
|
|
Barry and Lisa Bergman,
JTWROS
|
|
|
20,000
|
|
|
|
5,000
|
|
|
$
|
100,000
|
|
|
Philip Halpern
|
|
|
8,000
|
|
|
|
2,000
|
|
|
$
|
40,000
|
|
|
William O. Lehmann, Jr.
|
|
|
5,000
|
|
|
|
1,250
|
|
|
$
|
25,000
|
|
|
FIRST CLOSING TOTAL
|
|
|
12,990,000
|
|
|
|
3,747,500
|
|
|
$
|
64,950,000
|
|
|
|
|
|
|
*
|
|
50% of these warrants are in the modified form for lead investors (“
Lead Investor Warrants
”),
which includes a cashless exercise provision, as described in the Private Placement Memorandum
|
|
|
|
**
|
|
67,500 of these warrants are Lead Investor Warrants
|
|
|
|
***
|
|
25,000 of these warrants are Lead Investor Warrants
|
-10-
Exhibit A-2
Schedule of Investors
Second Closing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor
|
|
Common Shares
|
|
Warrant Shares
|
|
Purchase Price
|
|
Christian Tonsberg
|
|
|
10,000
|
|
|
|
2,500
|
|
|
$
|
50,000
|
|
Exhibit B
INSTRUCTION SHEET FOR INVESTORS
(to be read in conjunction with the entire Securities Purchase Agreement)
|
A.
|
|
Complete the following items in the Securities Purchase Agreement
:
|
|
|
1.
|
|
Complete and execute the Investor Signature Page. The Agreement must be
executed by an individual authorized to bind the Investor.
|
|
|
|
|
2.
|
|
Exhibit B-1 — Stock Certificate Questionnaire:
|
|
|
|
Provide the information requested by the Stock Certificate Questionnaire
;
|
|
|
3.
|
|
Exhibit B-2 — Registration Statement Questionnaire:
|
|
|
|
Provide the information requested by the Registration Statement Questionnaire
.
|
|
|
4.
|
|
Exhibit B-3/B-4 — Investor Certificate:
|
|
|
|
Provide the information requested by the Certificate for Individual Investors (B-3) or the
Certificate for Corporate, Partnership, Trust, Foundation and Joint Investors (B-4), as
applicable.
|
|
|
5.
|
|
Return, via facsimile, the signed Securities Purchase Agreement including the
properly completed Exhibits B-1 through B-4, to either:
|
Cowen and Company, LLC
Attn: Gregg Smith
Facsimile: (646) 562-1269
-or-
National Securities Corporation
Attn: Matt Portes
Facsimile: (312) 751-0769
|
|
6.
|
|
After completing instruction number five (5) above, deliver the original signed
Securities Purchase Agreement including the properly completed Exhibits B-1 through
B-4 to either:
|
COWEN AND COMPANY, LLC
1221 Avenue of the Americas
New York, NY 10020
Phone: (646) 562-1000
Fax: (646) 562-1269
Attn: Gregg Smith
Or
NATIONAL SECURITIES CORPORATION
875 N. Michigan Ave., Suite 1560
Chicago, IL 60611
Phone: (312) 867-3447
Fax: (312) 751-0769
Attn: Matt Portes
|
B.
|
|
Instructions regarding the wire transfer of funds for the purchase of Units are as follows:
|
Signature Bank as Escrow Agent for Athersys Inc.
ABA Number: 026013576
Acct Number: 1500892524
-2-
Exhibit B-1
STOCK CERTIFICATE QUESTIONNAIRE
|
|
|
|
|
|
|
|
|
Please provide us with the following information:
|
|
|
|
|
|
|
|
|
|
1.
|
|
The exact name that the Securities are to be registered in
(this is the name that will appear on the stock
certificate(s)). You may use a nominee name if appropriate:
|
|
|
|
|
|
|
|
|
|
2.
|
|
The relationship between the Investor of the Securities and
the Registered Holder listed in response to item 1 above:
|
|
|
|
|
|
|
|
|
|
3.
|
|
The mailing address, telephone and telecopy number and email
address of the Registered Holder listed in response to item 1
above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
|
The Tax Identification Number of the Registered Holder listed
in response to item 1 above:
|
|
|
Exhibit B-2
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the Registration Statement, please provide us with the following
information regarding the Investor.
1. Please state your or your organization’s name exactly as it should appear in the
Registration Statement:
|
|
|
Except as set forth below, you or your organization does not hold any equity securities of the
Company on behalf of another person or entity.
|
|
|
|
|
|
State any exceptions here:
|
2. Your address or the address of your organization:
Telephone:
Fax:
Contact Person:
3. If your organization is not, and is not a wholly-owned subsidiary of an entity that is,
required to file periodic and other reports with the SEC pursuant to Section 13(a) or Section 15(d)
of the Exchange Act, identify any natural person(s) who exercise voting and investment power over
any equity securities of the Company:
4. Have you or your organization had any position, office or other material relationship within
the past three years with the Company or its affiliates? (Include any relationships involving you
or your affiliates, officers, directors, or principal equity holders (5% or more) that has held any
position or office or has had any other material relationship with the Company (or its predecessors
or affiliates) during the past three years.)
o
Yes
o
No
If yes, please indicate the nature of any such relationship below:
5. Are you the beneficial owner of any other securities of the Company? (Include any equity
securities that you beneficially own or have a right to acquire within 60 days after the date
hereof, and as to which you have sole voting power, shared voting power, sole investment power or
shared investment power.)
o
Yes
o
No
If yes, please describe the nature and amount of such ownership as of a recent date.
6. Please provide details regarding the beneficial ownership of any equity securities of the
Company:
7. Have you made or are you aware of any arrangements relating to the distribution of the
shares of the Company pursuant to the Registration Statement?
o
Yes
o
No
If yes, please describe the nature and amount of such arrangements.
-2-
8. NASD Matters
(a) State below whether (i) you or any
associate
or
affiliate
of yours are a
member
of the
NASD, a
controlling
shareholder of an NASD
member
, a
person assoc
i
ated with a member
, a direct or
indirect
affiliate
of a
member
, or an
underwriter or related person
with respect to the proposed
offering; (ii) you or any
associate
or
affiliate
of yours owns any stock or other securities of any
NASD
member
not purchased in the open market; or (iii) you or any
associate
or
affiliate
of yours
has made any outstanding subordinated loans to any NASD
member
. If you are a general or limited
partnership, a no answer asserts that no such relationship exists for you as well as for each of
your general or limited partners.
Yes: No:
o
o
|
|
|
If “yes,” please identify the NASD
member
and describe your relationship, including, in the
case of a general or limited partner, the name of the partner:
|
|
|
|
If you answer “no” to Question 7(a), you need not respond to Question 7(b).
|
(b) State below whether you or any
associate
or
affiliate
of yours has been an underwriter,
or a
controlling
person or member of any investment banking or brokerage firm which has been or
might be an underwriter for securities of the Corporation or any
affiliate
thereof including,
but not limited to, the common stock now being registered.
Yes: No:
o
o
|
|
|
If “yes,” please identify the NASD
member
and describe your relationship, including, in the
case of a general or limited partner, the name of the partner.
|
-3-
ACKNOWLEDGEMENT
The undersigned hereby agrees to notify the Company promptly of any changes in the foregoing
information which should be made as a result of any developments, including the passage of time.
The undersigned also agrees to provide the Company and the Company’s counsel any and all such
further information regarding the undersigned promptly upon request in connection with the
preparation, filing, amending, and supplementing of the Registration Statement (or any prospectus
contained therein). The undersigned hereby consents to the use of all such information in the
Registration Statement.
The undersigned understands and acknowledges that the Company will rely on the information set
forth herein for purposes of the preparation and filing of the Registration Statement.
The undersigned understands that the undersigned may be subject to serious civil and criminal
liabilities if the Registration Statement, when it becomes effective, either contains an untrue
statement of a material fact or omits to state a material fact required to be stated in the
Registration Statement or necessary to make the statements in the Registration Statement not
misleading. The undersigned represents and warrants that all information it provides to the
Company and its counsel is currently accurate and complete and will be accurate and complete at the
time the Registration Statement becomes effective and at all times subsequent thereto, and agrees
during the Effectiveness Period and any additional period in which the undersigned is making sales
of Shares under and pursuant to the Registration Statement, and agrees during such periods to
notify the Company immediately of any misstatement of a material fact in the Registration
Statement, and of the omission of any material fact necessary to make the statements contained
therein not misleading.
Dated:
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
|
|
|
|
|
Signature
|
|
|
|
|
|
|
|
|
Name and Title of Signatory
|
|
|
-4-
Exhibit B-3
CERTIFICATE FOR INDIVIDUAL INVESTORS
If the investor is an individual, including married couples and IRA accounts of individual
investors, pleased complete, date and sign this Certificate.
CERTIFICATE
The undersigned certifies that the representations and responses below are true and accurate:
(a) The investor has full power and authority to invest in the Company. If the investment is
to be held jointly, each investor must execute and deliver the Securities Purchase Agreement and
initial their investor status as requested in section (c) below.
(b) Indicate the form of ownership:
o
Individual
o
IRA
o
Joint Tenants
o
Tenants in Common
o
Tenants in the Entirety
o
Community Property
o
Grantor of a Revocable Trust (identify each grantor and indicate under what circumstances
the trust is revocable by the grantor):
(Continue on a separate piece of paper, if necessary.)
(c) In order for the Company to offer and sell the Units in conformance with state and federal
securities laws, the following information must be obtained regarding your investor status. Please
initial each category
applicable to you as an investor in the Company.
|
|
o
|
|
1. I certify that I have a net worth (including home, furnishings
and automobiles) in excess of $1 million either individually or through aggregating my
individual holdings and those in which I have a joint, community property or other
similar shared ownership interest with my spouse.
|
|
|
|
|
o
|
|
2. I certify that I have had an annual gross income for the past two years of
at least $200,000 (or $300,000 jointly with my spouse) and expect my income (or joint
income, as appropriate) to reach the same level in the current year.
|
|
|
o
|
|
3. I certify that I am a director or executive officer of Athersys, Inc. or Pubco.
|
Please provide the following personal investor information:
Investor Name(s):
Individual executing Profile or Trustee:
Social Security Numbers / Federal I.D.
Number:
Date of Birth:
Marital Status:
Joint Party Date of Birth:
Investment Experience (Years):
Annual Income:
Liquid Net Worth:
Net Worth:
Home Street Address:
Home City, State & Zip Code:
Home Phone:
Home Fax:
Home Email:
Employer:
Employer Street Address:
Employer City, State & Zip Code:
Bus. Phone:
Bus. Fax:
Bus. Email:
Type of Business:
NSC Account Executive / Outside Broker/Dealer:
Form of Payment — Check or Wire Transfer
o
Check payable to “
Signature Bank, As Agent for ATHERSYS, INC.”
o
Wire funds from my outside account according to the wiring instructions on the last page
of this certificate
o
Wire funds from my Brokerage Account
o
The funds for this investment are rolled over, tax deferred from
within
the allowed 60-day window
-2-
|
|
|
|
|
Dated:
, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Print Name of Investor
|
|
Print Name of Investor
|
|
|
|
|
|
|
|
|
|
Signature
|
|
Signature
|
-3-
Exhibit B-4
CERTIFICATE FOR CORPORATE, PARTNERSHIP, LIMITED LIABILITY COMPANY,
TRUST, FOUNDATION AND JOINT INVESTORS
If the investor is a corporation, partnership, limited liability company, trust, pension plan,
foundation, joint Investor (other than a married couple) or other entity, an authorized officer,
partner, or trustee must complete, date and sign this Certificate.
CERTIFICATE
The undersigned certifies that the representations and responses below are true and accurate:
(a) The investor has been duly formed and is validly existing and has full power and authority
to invest in the Company. The person signing on behalf of the undersigned has the authority to
execute and deliver the Securities Purchase Agreement on behalf of the Investor and to take other
actions with respect thereto.
(b) Indicate the form of entity of the undersigned:
o
Limited Partnership
o
General Partnership
o
Limited Liability Company
o
Corporation
o
Revocable Trust (identify each grantor, indicate under what circumstances the trust is
revocable by the grantor and have each grantor complete and deliver Exhibit B-3):
(Continue on a separate piece of paper, if necessary.)
o
Other type of Trust (indicate type of trust and, for trusts other than pension trusts,
name the grantors and beneficiaries):
(Continue on a separate piece of paper, if necessary.)
o
Other form of organization (indicate form of organization (
).
(c) Indicate the approximate date the undersigned entity was formed:
.
(d) In order for the Company to offer and sell the Units in conformance with state and federal
securities laws, the following information must be obtained regarding your investor status. Please
initial each category
applicable to you as an investor in the Company.
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o
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1. A bank as defined in Section 3(a)(2) of the Securities Act, or any savings
and loan association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act whether acting in its individual or fiduciary capacity;
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o
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2. A broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934;
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o
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3. An insurance company as defined in Section 2(13) of the Securities Act;
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o
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4. An investment company registered under the Investment Company Act of 1940 or
a business development company as defined in Section 2(a)(48) of that Act;
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o
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5. A Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act of
1958;
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o
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6. A plan established and maintained by a state, its political subdivisions, or
any agency or instrumentality of a state or its political subdivisions, for the benefit
of its employees, if such plan has total assets in excess of $5,000,000;
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o
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7. An employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment advisor, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors;
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o
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8. A private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940;
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o
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9. Any partnership or corporation or any organization described in Section
501(c)(3) of the Internal Revenue Code or similar business trust, not formed for the
specific purpose of acquiring the Shares and Warrants, with total assets in excess of
$5,000,000;
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o
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10. A trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Shares and Warrants, whose purchase is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) of the Securities Act;
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o
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11. An entity in which all of the equity owners qualify under any of the above
subparagraphs. If the undersigned belongs to this investor category only, list the
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-2-
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equity owners of the undersigned, and have each equity owner complete and deliver
Exhibit B-3:
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(Continue on a separate piece of paper, if necessary.)
Please set forth in the space provided below the (i) states, if any, in the U.S. in which
you maintained your principal office during the past two years and the dates during which you
maintained your office in each state, (ii) state(s), if any, in which you are incorporated or
otherwise organized and (iii) state(s), if any, in which you pay income taxes.
Dated:
, 2007
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Name:
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Title:
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(Signature and title of authorized officer, partner or trustee)
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-3-
SECURITIES DELIVERY INSTRUCTIONS
Please instruct us as to where you would like the Securities delivered to at Closing:
Name:
Company:
Address:
Telephone:
Other Special Instructions:
-4-
Exhibit C
PLAN OF DISTRIBUTION
The selling stockholders may, from time to time, sell any or all of their shares of common stock on
any stock exchange, market or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. The selling stockholders may use
any one or more of the following methods when selling shares:
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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•
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block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction;
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•
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
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•
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an exchange distribution in accordance with the rules of the applicable exchange;
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•
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privately negotiated transactions;
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•
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short sales;
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•
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broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price
per share;
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•
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a combination of any such methods of sale; and
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•
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any other method permitted pursuant to applicable law.
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The selling stockholders may also sell shares under Rule 144 under the Securities Act, if
available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the selling
stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions
and discounts to exceed what is customary in the types of transactions involved. No such
broker-dealer will receive compensation in excess of that permitted by NASD Rule 2440 and IM-2440.
In no event will any broker-dealer receive total compensation in excess of 8%. Any profits on the
resale of shares of common stock by a broker-dealer acting as principal might be deemed to be
underwriting discounts or commissions under the Securities Act. Discounts, concessions,
commissions and similar selling expenses, if any, attributable to the sale of shares will be borne
by a selling stockholder. The selling stockholders may agree to
indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the shares if liabilities are
imposed on that person under the Securities Act.
The selling stockholders may from time to time pledge or grant a security interest in some or
all of the shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the shares of common stock
from time to time under this prospectus after we have filed a supplement to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 supplementing or
amending the list of selling stockholders to include the pledgee, transferee or other successors in
interest as selling stockholders under this prospectus.
The selling stockholders also may transfer the shares of common stock in other circumstances,
in which case the transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus and may sell the shares of common stock from time
to time under this prospectus after we have filed a supplement to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 supplementing or amending the
list of selling stockholders to include the pledgee, transferee or other successors in interest as
selling stockholders under this prospectus.
The selling stockholders and any broker-dealers or agents that are involved in selling the
shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act
in connection with such sales. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares of common stock purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the registration of the shares of
common stock (other than underwriting discounts and commissions). We have agreed to indemnify the
selling stockholders against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
The selling stockholders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding the sale of their
shares of common stock, nor is there an underwriter or coordinating broker acting in connection
with a proposed sale of shares of common stock by any selling stockholder. If we are notified by
any selling stockholder that any material arrangement has been entered into with a broker-dealer
for the sale of shares of common stock, if required, we will file a supplement to this prospectus.
If the selling stockholders use this prospectus for any sale of the shares of common stock, they
will be subject to the prospectus delivery requirements of the Securities Act.
The anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934 may
apply to sales of our common stock and activities of the selling stockholders.
-2-
Exhibit D
COMPANY TRANSFER AGENT INSTRUCTIONS
[TRANSFER AGENT NAME AND ADDRESS]
Attention:
Ladies and Gentlemen:
Reference is made to that certain Securities Purchase Agreement, dated as of [
XX], 2007
(the “
Agreement”
), by and among BTHC VI, Inc., a Delaware corporation (the “
Company
”), Athersys,
Inc., a Delaware corporation (“
Athersys
”), and the investors named on the Schedule of Investors
attached thereto (collectively, the “
Holders”
), pursuant to which the Company is issuing to the
Holders shares (the “
Common Shares
”) of Common Stock of the Company, par value $0.001 per share
(the “
Common Stock
”), and Warrants (the “
Warrants
”), which are exercisable for shares of Common
Stock.
This letter shall serve as our irrevocable authorization and direction to you (provided that
you are the transfer agent of the Company at such time):
(i) to issue shares of Common Stock upon transfer or resale of the Common Shares; and
(ii) to issue shares of Common Stock upon the exercise of the Warrants (the “
Warrant Shares
”)
to or upon the order of a Holder from time to time upon delivery to you of a properly completed and
duly executed Exercise Notice, in the form attached hereto as
Exhibit I
, which has been
acknowledged by the Company as indicated by the signature of a duly authorized officer of the
Company thereon.
You acknowledge and agree that so long as you have previously received (a) written
confirmation from the Company that either (i) a registration statement covering resales of the
Common Shares and the Warrant Shares has been declared effective by the Securities and Exchange
Commission (the “
SEC
”) under the Securities Act of 1933, as amended (the “
1933 Act
”) and that
resales of the Common Shares and the Warrant Shares may be made thereunder, or (ii) sales of the
Common Shares and the Warrant Shares may be made in conformity with Rule 144 under the 1933 Act
(“
Rule 144
”), (b) if applicable, a copy of such registration statement, and (c) notice from the
Company or any Holder that a transfer of Common Shares and/or Warrant Shares has been effected
either pursuant to the registration statement (and a prospectus delivered to the transferee) or
pursuant to Rule 144, then, unless otherwise required by law, within three (3) business days of
your receipt of the notice referred to in (c), you shall issue the certificates representing the
Common Shares and the Warrant Shares so sold to the transferees registered in the names of such
transferees, and such
certificates shall not bear any legend restricting transfer of the Common
Shares and the Warrant Shares thereby and should not be subject to any stop-transfer restriction.
Please be advised that the Holders are relying upon this letter as an inducement to enter into
the Agreement and, accordingly, each Holder is a third party beneficiary to these instructions.
Please execute this letter in the space indicated to acknowledge your agreement to act in
accordance with these instructions. Should you have any questions concerning this matter, please
contact me at 216-431-9900.
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Very truly yours,
BTHC VI, INC.
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By:
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Name:
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Title:
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THE FOREGOING INSTRUCTIONS ARE
ACKNOWLEDGED AND AGREED TO
this day of ___, 2007
NATIONAL CITY BANK
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By:
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Name:
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Title:
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Enclosures
-2-
Exhibit E
FORM OF WARRANT
[Provided
See Exhibit 4.2 to Current Report on Form 8-K filed on June 14, 2007]
Schedules
Schedule 3.1(a)
SUBSIDIARIES
BTHC VI has the following direct or indirect Subsidiaries:
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1.
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B-VI Acquisition Corp.
Subsidiary formed to merge with and into Athersys, with Athersys
being the surviving corporation and a wholly-owned subsidiary of BTHC VI
.
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Athersys has the following direct or indirect Subsidiaries:
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1.
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Advanced Biotherapeutics, Inc.
Operating subsidiary of Athersys, owned 100% by
Athersys. Formed in March 2000.
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2.
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Athersys Limited.
Subsidiary formed in UK related to clinical trial of ATHX 105.
Owned 100% by Athersys. Formed in June 2006.
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3.
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ReGenesys LLC.
Merger subsidiary formed for acquisition of MAPC technology. Owned
100% by Athersys. Formed in September 2003.
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4.
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ReGenesys BVBA.
Subsidiary formed in Belgium related to potential collaboration.
Owned 100% by Athersys indirectly. Formed in October 2005.
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5.
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Athersys-Singapore PTE, LTD.
Inactive subsidiary currently in dissolution. Owned 100%
by Athersys. Formed in January 2003.
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6.
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Oculus Pharmaceuticals, Inc.
Inactive joint venture, owned 50% by Athersys. Formed in
September 2001.
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Schedule 3.1(d)
No Conflicts
The following obligations of Athersys will be incurred as a result of the Merger or the
transactions contemplated by this Agreement:
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1.
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Employee bonuses in the amount of approximately $455,000 (including routine payroll
taxes), pursuant to Incentive Agreements between Athersys and its employees.
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2.
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Officer retroactive salary adjustments in the amount of approximately $255,000
(including routine payroll taxes), pursuant to resolutions of the Athersys Board of
Directors. The new salaries will take effect upon the First Closing.
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3.
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Employee bonus in the amount of $50,000 for William Lehmann, pursuant to the Employment
Agreement, dated January 1, 2004, by and between Athersys and William Lehmann.
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4.
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One employee with an incentive agreement has not waived any potential right to M&A
Bonus under Incentive Agreement because he is out of the country, but he is expected to
execute a waiver after consummation of the Offering; any bonus that employee would
otherwise be eligible for would be equal to one month of salary; employee’s current monthly
salary is $8,242.
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Milestone payment related to the MultiStem technology payable to the former holders of the MAPC
technology in the amount of $500,000 in cash and 38,462 shares of common stock (1,378 shares as
adjusted for merger exchange).
-2-
Schedule 3.1(f)
CAPITALIZATION
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Prior to Merger
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Authorized
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Issued and Outstanding
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PubCo:
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Common Stock
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100,000,000
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300,000
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Preferred Stock
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10,000,000
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0
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Long-Term Incentive Plan (shares
of Common Stock reserved for
future issuance)
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3,035,000
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0
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-3-
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Prior to Merger
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Authorized
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Issued and Outstanding
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Athersys:
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Common Stock
(1)
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90,000,000
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89,522,842
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Stock Option Plans
(2)
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6,740,053
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2,842,918
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Convertible Notes, convertible upon
First Closing
(3)
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—
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—
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Common Stock Warrants, issuable to
lenders upon First
Closing
(4)
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—
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—
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(1)
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Assumes the conversion of all series of Athersys preferred stock into common
stock. Also assumes the exercise of all existing warrants by Athersys’ bridge investors,
which are issuable upon the conversion of the preferred stock. Excludes 38,462 shares of
common stock issuable upon the First Closing related to a milestone regarding the
MultiStem technology. Also excludes shares of common stock that may be issuable to
Athersys’ senior secured lenders upon the achievement of a milestone. Also excludes
shares of common stock that may be issuable to Angiotech Pharmaceuticals, Inc. upon the
achievement of certain milestones related to a strategic alliance.
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(2)
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Stock options granted to current employees, directors and consultants of Athersys will
be terminated in connection with the merger. BTHC will assume certain stock option
agreements with former employees and consultants of Athersys, which will amount to 5,052
option shares after taking the Merger Exchange Rate into consideration.
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(3)
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Athersys has secured notes issued to bridge investors ($2.5 million principal) and
unsecured notes issued to Angiotech Pharmaceuticals, Inc. ($10 million principal) that will
convert along with accrued interest upon the First Closing.
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(4)
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Athersys’ senior secured lenders are entitled to warrants with a nominal value of
approximately $745,000, which are issuable upon the First Closing.
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Prior to the First Closing
(5)
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Authorized
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Issued and Outstanding
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Common Stock
(6)
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100,000,000
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3,510,523
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Preferred Stock
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10,000,000
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0
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Long-Term Incentive Plan (shares of Common
Stock reserved for future issuance)
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3,035,000
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0
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Common Stock Warrants, issuable to lenders
upon First Closing (shares of Common Stock
reserved for future issuance)
(7)
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—
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—
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(5)
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After the First Closing, Radius and other new investors may
be beneficial
owners of in excess of 5% of Common Stock, and upon the conversion of its note, Angiotech
Pharmaceuticals, Inc. would be a beneficial owner of in excess of 5% of Common Stock.
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(6)
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Includes 1,378 shares of Common Stock issuable upon the First Closing related to a
milestone regarding the MultiStem technology. Excludes the conversion of Athersys
convertible notes. Excludes shares that may be issuable to Athersys’ senior lenders upon
achievement of a milestone. Also excludes shares of Common Stock that may be issuable to
Angiotech Pharmaceuticals, Inc. upon the achievement of certain milestones related to a
strategic alliance.
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(7)
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Athersys’ senior secured lenders are entitled to warrants with a nominal value of
approximately $745,000, which are issuable upon the First Closing. Based on the $5.00
offering price, warrants will be issued to the lenders for 149,026 shares of Common Stock.
|
Schedule 3.1(j)
MATERIAL AGREEMENTS
|
1.
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Research Collaboration and License Agreement, dated as of December 8, 2000, by and between
the Company and Bristol-Myers Squibb Company.
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2.
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Cell Line Collaboration and License Agreement, dated as of July 1, 2002, by and between the
Company and Bristol-Myers Squibb Company, as amended as of January 1, 2006.
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3.
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Extended Collaboration and License Agreement, dated as of January 1, 2006, by and between the
Company and Bristol-Myers Squibb Company.
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4.
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Exclusive License Agreement, dated as of May 17, 2002, by and between Regents of the
University of Minnesota and MCL LLC, assumed by ReGenesys, LLC through operation of merger on
November 4, 2003.
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5.
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Ownership Agreement, dated as of May 17, 2002, by and between Regents of the University of
Minnesota and MCL LLC, assumed by ReGenesys, LLC through operation of merger on November 4,
2003.
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6.
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Strategic Alliance Agreement, by and between Athersys, Inc. and Angiotech Pharmaceuticals,
Inc., dated as of May 5, 2006.
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7.
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License Agreement, by and between Athersys, Inc. and Angiotech Pharmaceuticals, Inc., dated
as of May 5, 2006.
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8.
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Sublicense Agreement, by and between Athersys, Inc. and Angiotech Pharmaceuticals, Inc.,
dated as of May 5, 2006.
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9.
|
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Convertible Promissory Note in the amount of $5,000,000 from Athersys, Inc. to Angiotech
Pharmaceuticals, Inc., dated as of May 5, 2006.
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10.
|
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Convertible Promissory Note in the amount of $5,000,000 from Athersys, Inc. to Angiotech
Pharmaceuticals, Inc., dated as of January 16, 2007.
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11.
|
|
Amended and Restated Registration Rights Agreement, dated as of April 28, 2000, as amended as
of January 29, 2002, as of November 19, 2002, and as of May 31, 2007, by and
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-2-
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among the Company and certain of its stockholders.
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12.
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Secured Convertible Promissory Notes in the aggregate amount of $2,500,000 from Athersys,
Inc. to Investors, dated as of October 19, 2006.
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13.
|
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Warrants to Investors, dated as of October 19, 2006.
|
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14.
|
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1995 Incentive Plan of Athersys, Inc., as amended.
|
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|
15.
|
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2000 Stock Incentive Plan of Athersys, Inc.
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16.
|
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BTHC VI, Inc. Long-Term Incentive Plan .
|
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|
17.
|
|
Loan and Security Agreement, and Supplement, dated as of November 2, 2004, by and among the
Company, Advanced Biotherapeutics, Inc., Venture Lending & Leasing IV, Inc., and Costella
Kirsch IV, L.P.
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18.
|
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Promissory Notes made by the Company and Advanced Biotherapeutics, Inc., on behalf of Venture
Lending & Leasing IV, Inc., and Costella Kirsch IV, L.P., dated November 12, 2004 (numbers
CK-001 and 4035-001), and dated December 29, 2004 (numbers CK-002 and 4035-002).
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19.
|
|
Amendment to Loan and Security Agreement, dated as of September 29, 2006, by and among the
Company, Advanced Biotherapeutics, Inc., Venture Lending & Leasing IV, Inc., and Costella
Kirsch IV, L.P.
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20.
|
|
Intellectual Property Security Agreement, dated as of February 14, 2006, by and between
Athersys, Inc. and Venture Lending & Leasing IV, Inc.
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|
21.
|
|
Security Agreement, by and between Athersys, Inc. and Investors, dated as of October 19,
2006.
|
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|
22.
|
|
Amended and Restated Employment agreement dated April 1, 1998 by and between Athersys, Inc.
and Gil Van Bokkelen.
|
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|
|
23.
|
|
Amended and Restated Employment agreement dated April 1, 1998 by and between Athersys, Inc.
and John Harrington.
|
-3-
|
24.
|
|
Employment agreement dated May 22, 1998 by and between Athersys, Inc. and Laura Campbell.
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25.
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Employment agreement dated September 25, 2000 by and between Athersys, Inc., Advanced
Biotherapeutics, Inc. and Kurt Brunden.
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26.
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Employment agreement dated October 3, 2003 by and between Athersys, Inc., Advanced
Biotherapeutics, Inc. and Robert Deans, Ph.D.
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27.
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Employment agreement dated January 1, 2004 by and between Athersys, Inc., Advanced
Biotherapeutics, Inc. and William Lehmann.
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28.
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Form Incentive agreement — entered into with named executives.
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29.
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Non-competition agreements and D&O indemnification agreements with key members of management.
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30.
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D&O indemnification agreements with board members
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31.
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Separation and General Release Agreements with terminated employees, 2005, 2003, 2002.
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32.
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Engagement Letter, dated as of October 31, 2005, by and between the Company and Merrill Lynch
& Co.
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33.
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Summary of Principle Terms, dated as of February 21, 2007, by and between the Company and
Radius Ventures, as amended on March 19, 2007.
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34.
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Engagement Agreement, dated as of February 28, 2007, by and between the Company and National
Securities Corporation.
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35.
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Amendment to Engagement Agreement, dated as of April 16, 2007, by and among the Company,
National Securities Corporation, and Cowen and Company, LLC.
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36.
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Asset Purchase and License Agreement, dated as of May 22, 2007, by and between Athersys and
Wyeth Pharmaceuticals, Inc.
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37.
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Merger Agreement, dated as of May 24, 2007, by and among Athersys, BTHC VI, Inc. and
B-VI-Acquisition Corp.
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-4-
Schedule 3.1(n)
Liens
Athersys has granted a security interest in substantially all of its assets, including without
limitation, the capital stock or other equity interests of its subsidiaries, pursuant to the
agreements and instruments set forth below.
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1.
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Loan and Security Agreement, and Supplement, dated as of November 2, 2004, by and among
the Company, Advanced Biotherapeutics, Inc., Venture Lending & Leasing IV, Inc., and
Costella Kirsch IV, L.P.
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2.
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Promissory Notes made by the Company and Advanced Biotherapeutics, Inc., on behalf of
Venture Lending & Leasing IV, Inc., and Costella Kirsch IV, L.P., dated November 12, 2004
(numbers CK-001 and 4035-001), and dated December 29, 2004 (numbers CK-002 and 4035-002).
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3.
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Amendment to Loan and Security Agreement, dated as of September 29, 2006, by and among
the Company, Advanced Biotherapeutics, Inc., Venture Lending & Leasing IV, Inc., and
Costella Kirsch IV, L.P.
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4.
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UCC Financing Statements of the Company and Advanced Biotherapeutics, Inc. naming
Venture Lending & Leasing IV, Inc., as agent, as secured party.
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5.
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Intellectual Property Security Agreement, dated as of February 14, 2006, by and between
Athersys, Inc. and Venture Lending & Leasing IV, Inc.
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6.
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Control Agreement Concerning Deposit Accounts, dated as of November 2, 2004, by and
among the Company, Advanced Biotherapeutics, Inc., Venture Lending & Leasing IV, Inc.,
Costella Kirsch IV, L.P., and National City Bank.
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7.
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Account Control Agreement, dated as of November 2, 2004, by and among the Company,
Advanced Biotherapeutics, Inc., Venture Lending & Leasing IV, Inc., Costella Kirsch IV,
L.P., and NatCity Investments.
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8.
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Secured Convertible Promissory Notes in the aggregate amount of $2,500,000 from
Athersys, Inc. to Investors, dated as of October 19, 2006.
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-5-
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9.
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Security Agreement, by and between Athersys, Inc. and Investors, dated as of October
19, 2006.
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-6-
Schedule 3.1(v)
PATENTS AND TRADEMARKS
In April 2007, Athersys received a letter from REGENESIS BIOMEDICAL regarding Athersys’
application to register the mark REGENESYS. The letter was a request for Athersys to abandon
its application and to cease from using the REGENESYS mark. The REGENESYS mark is not necessary
to conduct Athersys’ business. Athersys believes that REGENESIS does not operate in the same
field as REGENESYS. However, Athersys is considering its options in this matter.
-7-
Schedule 3.1(cc)
INDEBTEDNESS
Athersys has the following debt outstanding under the agreements listed below, with balances as of
May 31, 2007, including accrued interest, of:
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Senior secured loan with Venture Lending/Costella Kirsch ($3,527,715)
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Secured promissory notes with Bridge Investors ($2,658,219), which will convert into common
stock of BTHC upon Closing of the Offering.
Unsecured promissory notes with Angiotech ($10,370,993), which will convert into common
stock of BTHC upon Closing of the Offering.
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|
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1.
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Loan and Security Agreement, and Supplement, dated as of November 2, 2004, by and among the
Company, Advanced Biotherapeutics, Inc., Venture Lending & Leasing IV, Inc., and Costella
Kirsch IV, L.P.
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2.
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Promissory Notes made by the Company and Advanced Biotherapeutics, Inc., on behalf of Venture
Lending & Leasing IV, Inc., and Costella Kirsch IV, L.P., dated November 12, 2004 (numbers
CK-001 and 4035-001), and dated December 29, 2004 (numbers CK-002 and 4035-002).
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3.
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Amendment to Loan and Security Agreement, dated as of September 29, 2006, by and among the
Company, Advanced Biotherapeutics, Inc., Venture Lending & Leasing IV, Inc., and Costella
Kirsch IV, L.P.
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4.
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Secured Convertible Promissory Notes in the aggregate amount of $2,500,000 from Athersys,
Inc. to Investors, dated as of October 19, 2006.
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5.
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Convertible Promissory Note in the amount of $5,000,000 from Athersys, Inc. to Angiotech
Pharmaceuticals, Inc., dated as of May 5, 2006.
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6.
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Convertible Promissory Note in the amount of $5,000,000 from Athersys, Inc. to Angiotech
Pharmaceuticals, Inc., dated as of January 16, 2007.
|
-8-
Schedule 5.1(h)
CONSENTS AND WAIVERS
|
1.
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Stockholder consent to amend the Athersys Stockholders’ Agreement to provide for its
termination upon the closing of the Offering and the Merger, and waiver of preemptive rights
relating to the Offering.
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2.
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Stockholder consent to amend the Athersys Registration Rights Agreement to approve the
registration rights being provided in this Offering and to waive certain registration rights.
|
-9-
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 (7
th
) 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
|
|
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(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,
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*
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Confidential treatment has been requested for
the redacted portions of this exhibit, and such confidential portions have been
omitted and filed separately with the Securities and Exchange Commission.
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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
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*
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Confidential treatment has been requested for
the redacted portions of this exhibit, and such confidential portions have been
omitted and filed separately with the Securities and Exchange Commission.
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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:
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(i)
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if royalties due the University are unpaid and
overdue pursuant to this Agreement; or
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(ii)
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if the Company fails to perform a material term of this Agreement.
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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:
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(i)
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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;
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(ii)
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concerning the validity or scope of any
Licensed Patent that may be issued; or
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(iii)
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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.
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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:
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If to the University:
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Patent and Technology Marketing
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University of Minnesota
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Attention:
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University Gateway Center, Suite 450
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200 Oak Street S. E.
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Minneapolis, MN 55455
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Facsimile No.: (612) 624-6554
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If to the Company:
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MCL, LLC
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Attention: Leo T. Furcht, MD, and President
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2100 West 21
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St.
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Minneapolis, MN 55405
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Facsimile No.:
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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.
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REGENTS OF THE UNIVERSITY OF MINNESOTA
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By:
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Anthony L. Strauss
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Acting Assistant Vice President for
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Patent & Technology Marketing
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MCL, LLC
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By:
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Leo Furcht
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President
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EXHIBIT A TO EXCLUSIVE LICENSE AGREEMENT
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Application Number
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Filing Date
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60/147,324
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8/5/99
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60/164,650
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11/10/99
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PCT/US00/21387
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8/4/00
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AU 66218/00
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2/14/02
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CA national phase
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2/4/02
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EP national phase
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3/5/02
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IL 147990
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2/4/02
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IN national phase
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2/28/02
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JP 2001-515800
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2/5/02
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NZ 517002
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2/4/02
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SG 200200649-2
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2/4/02
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US 10/048,757
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2/1/02
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ZA 2002/1125
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2/8/02
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60/268,786
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2/14/01
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60/269,062
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2/15/01
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60/310,625
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8/7/01
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60/343,386
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10/25/01
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PCT/US02/
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2/14/02
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A-1
Exhibit B to Exclusive License Agreement
University of Minnesota
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Patents and Technology Marketing
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450 University Gateway
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200 Oak Street SE
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Minneapolis, MN 55455-2070
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Royalty Report
Date
Company Name & Address
License Number
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Reporting Period:
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Report Due Date:
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This report must be submitted regardless of whether royalties are owed.
Please do not leave any column blank. State all information requested below.
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U of M
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Quantity/
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Docket #
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Product Description
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Royalty Rate
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Net Sales
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Royalty Due
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Report Completed by:
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Total Royalties Due:
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If you have questions please contact:
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Julie Hodder
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612-625-4537
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hodde001@ptm.umn.edu
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Please make check payable to: Regents of the University of Minnesota
EXHIBIT C TO EXCLUSIVE LICENSE AGREEMENT
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For Internal University Use Only
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PTM Docket Number(s):
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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
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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
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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
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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
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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.
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REGENTS OF THE UNIVERSITY OF MINNESOTA
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By:
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Michael F. Moore
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Director, Health Technologies Marketing
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Date:
, 20____
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INSTITUTION
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By:
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Its:
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Date:
, 20____
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RESEARCHER
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By:
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Date:
, 20____
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C-8
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For Internal University Use Only
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PTM Docket Number(s):
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Schedule A
Material Transfer Agreement Worksheet
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1.
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Name of Institution and Researcher:
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2.
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Shipping Address:
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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:
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(a)
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Has had an opportunity to review and ask questions of the executive managers
of the Company concerning its business and desires no further information.
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(b)
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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.
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(c)
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Realizes that a purchase of the Units represents a speculative investment
involving a high degree of risk.
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(d)
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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.
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(e)
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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.
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(f)
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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.
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(g)
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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.
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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
.
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(a)
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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.
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(b)
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This Agreement shall be construed and interpreted in accordance with
Minnesota law.
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D-4
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Dated: May
, 2002
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Regents of the University of Minnesota
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By:
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Anthony L. Strauss
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Acting Assistant Vice President, PTM
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Address to Which Correspondence
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Should be Directed:
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200 Oak Street SE, Suite 450
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Minneapolis, MN 55405
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Tax Identification or Social Security Number
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ACCEPTANCE:
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MCL LLC hereby accepts this subscription
for
Units On ** day of **, 19**.
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By:
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Title: *
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D-5
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
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Page
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ARTICLE I. DEFINITIONS
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2
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ARTICLE II. CERTAIN TRANSACTION COMPONENTS
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11
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2.1 Concurrent Execution.
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11
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2.2 Right of First Negotiation for Non-Licensed Cardiovascular Indications.
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11
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2.3 Additional Investment.
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13
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2.4 Phase I Milestone Fee.
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13
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2.5 Exclusivity.
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14
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2.6 Retained Rights.
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14
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2.7 Costs Borne by Each Party.
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15
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2.8 Certain Restrictions on Athersys’ Activities Outside of Cardiovascular Indications.
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15
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ARTICLE III. JOINT STEERING COMMITTEE
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15
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3.1 Joint Steering Committee.
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15
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3.2 Subcommittees.
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15
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3.3 Chairperson.
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15
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3.4 JSC Meetings.
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15
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3.5 Responsibilities of the Joint Steering Committee.
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16
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3.6 Voting; Decision-Making.
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19
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3.7 JSC Disputes.
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19
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ARTICLE IV. PRE-CLINICAL DEVELOPMENT
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20
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4.1 Existing Pre–Clinical Development Programs.
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20
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4.2 Costs for Existing Pre-Clinical Development Programs.
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21
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4.3 New Pre-Clinical Development Programs.
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21
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ARTICLE V. CLINICAL DEVELOPMENT
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21
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5.1 Proposed Clinical Plans; Clinical Development Plans.
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21
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5.2 Athersys Responsibilities.
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21
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5.3 Angiotech Responsibilities.
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22
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5.4 Subcontracting.
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22
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- i -
TABLE OF CONTENTS
(continued)
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Page
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ARTICLE VI. OPT-OUT RIGHTS
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23
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6.1 Opt-Out Rights.
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23
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6.2 Development Updates.
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25
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6.3 Failure to Exercise Sole Development Option.
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25
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6.4 Diligence Requirement.
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25
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ARTICLE VII. COSTS, PAYMENTS AND FINANCIAL RECORD KEEPING
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26
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7.1 Clinical Development Costs.
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26
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7.2 Development Costs Quarterly Reconciliation.
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26
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7.3 Milestone Payments.
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27
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7.4 Profit Sharing.
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27
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7.5 Royalties on Sole Development Products.
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27
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7.6 Calculation and Payment of Royalties.
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29
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7.7 Sharing of Sole Development Income.
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30
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7.8 Financial Record Keeping.
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31
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7.9 Audits.
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31
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7.10 Late Payments.
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31
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ARTICLE VIII. COMMERCIALIZATION
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32
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8.1 Commercialization of Cell Therapy Products.
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32
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ARTICLE IX. MANUFACTURE AND SUPPLY OF CLINICAL DEVELOPMENT CANDIDATES AND CELL THERAPY
PRODUCTS
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32
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9.1 Athersys’ Manufacturing Obligation.
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32
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9.2 Manufacturing Costs.
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33
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9.3 Manufacturing Compliance.
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33
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9.4 Product Conformity.
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33
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9.5 Ordering; Forecasting; Acceptance and Rejection.
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33
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9.6 Inspection.
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34
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9.7 Supply Disruption.
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34
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9.8 Back-Up Supplier.
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34
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- ii -
TABLE OF CONTENTS
(continued)
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Page
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ARTICLE X. REGULATORY MATTERS
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35
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10.1 Ownership of Regulatory Documentation and Reference Rights; Regulatory Strategy.
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35
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10.2 Regulatory Communications.
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35
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10.3 Other Regulatory Responsibilities.
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36
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10.4 Cell Therapy Product Complaints and Recalls.
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36
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10.5 Compliance With All Applicable Laws and Regulations; Cooperation.
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36
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ARTICLE XI. INTELLECTUAL PROPERTY
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37
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11.1 Existing Intellectual Property Rights Retained.
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37
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11.2 Ownership Of New Intellectual Property.
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37
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ARTICLE XII. CLINICAL PROGRAM RECORD KEEPING
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37
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12.1 Scientific, Patent and Regulatory Records.
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37
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12.2 Review of Records.
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37
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12.3 Policies For Records.
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38
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ARTICLE XIII. CONFIDENTIAL INFORMATION
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38
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13.1 Confidential Information.
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38
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13.2 Confidentiality Obligations.
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38
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13.3 Permitted Disclosures.
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39
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13.4 Publication.
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41
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ARTICLE XIV. REPRESENTATIONS AND WARRANTIES
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41
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14.1 Authority.
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41
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14.2 No Conflicts.
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41
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14.3 Additional Representations and Warranties of Athersys.
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42
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14.4 Additional Covenants of Athersys.
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44
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14.5 Additional Covenants of Angiotech.
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46
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14.6 Disclaimer Of Warranties.
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47
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ARTICLE XV. INDEMNIFICATION AND INSURANCE
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47
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15.1 Indemnification By Athersys.
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47
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15.2 Indemnification By Angiotech.
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48
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15.3 Insurance.
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49
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- iii -
TABLE OF CONTENTS
(continued)
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Page
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ARTICLE XVI. TERM AND TERMINATION
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49
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16.1 Term.
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49
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16.2 Termination.
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49
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16.3 Effects of Termination.
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52
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16.4 Survival Of Obligations.
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53
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ARTICLE XVII. DISPUTE RESOLUTION
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53
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17.1 Dispute Resolution Process.
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53
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17.2 Injunctive Relief.
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54
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ARTICLE XVIII. MISCELLANEOUS PROVISIONS
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55
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18.1 Governing Law.
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55
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18.2 Assignment.
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55
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18.3 Compliance With Laws.
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55
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18.4 Further Assurances.
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55
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18.5 Severability.
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55
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18.6 Waivers And Amendments; Preservation Of Remedies.
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56
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18.7 Headings.
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56
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18.8 Counterparts.
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56
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18.9 Successors.
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56
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18.10 Notices.
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56
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18.11 No Consequential Damages.
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57
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18.12 Independent Contractor.
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57
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18.13 Complete Agreement.
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57
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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)
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Page
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Schedule 14.3(l)
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EXHIBITS
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Exhibit A – Note Purchase Agreement
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Exhibit B – License Agreement
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Exhibit C – Sublicense Agreement
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- 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,
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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,
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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
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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.
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requested for the redacted portions of this exhibit, and such confidential
portions have been omitted and filed separately with the Securities and
Exchange Commission.
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(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
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Exchange Commission.
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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)
.
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(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.
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(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).
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portions have been omitted and filed separately with the Securities and
Exchange Commission.
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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.
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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
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(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
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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
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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.
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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 (5
th
) 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
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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.
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[Signature page follows]
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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.
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ATHERSYS, INC.
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By:
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Name:
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Title:
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ANGIOTECH PHARMACEUTICALS, INC.
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By:
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Name:
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Title:
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[Signature page to Strategic Alliance Agreement]
Schedule 1.13
Cost Definitions
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1.
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“
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):
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(a)
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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
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(b)
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A reasonable allocation of indirect costs associated with the foregoing.
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2.
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“
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:
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(a)
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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);
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(b)
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All Third Party Payments; and
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(c)
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A reasonable allocation of indirect costs associated with the foregoing;
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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”.
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3.
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“
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:
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(a)
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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
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(b)
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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).
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- 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
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1.
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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:
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(a)
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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.
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(b)
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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.
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2.
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For purposes of this Schedule, the following terms shall have the meanings indicated below:
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(a)
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“
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.
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(b)
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“
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.
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Schedule 4.1
Existing Third Party Agreement
[attached]
Schedule 7.3
Milestone Payments
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1.
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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:
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(a)
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If both Athersys and Angiotech agree that such Clinical Development Candidate
should proceed to a Phase III Study, then the following shall apply:
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(i)
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Angiotech shall pay to Athersys a one-time milestone payment in
cash equal to $[*]; and
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(ii)
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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.
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(b)
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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:
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(i)
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Angiotech shall pay to Athersys a one-time milestone payment in
cash equal to $[*]; and
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(ii)
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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.
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(c)
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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:
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Confidential treatment has been requested for the redacted portions of
this exhibit, and such confidential portions have been omitted and filed separately with the
Securities and Exchange Commission.
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(i)
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Angiotech shall pay to Athersys a one-time milestone payment in cash equal
to $[*];
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(ii)
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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
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(iii)
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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.
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(d)
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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:
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(i)
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No milestone payment shall be paid by Angiotech to Athersys
with respect to such Phase II Study;
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(ii)
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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
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(iii)
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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:
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(A)
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Angiotech shall pay to Athersys a one-time
milestone payment in cash equal to $[*]; and
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(B)
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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.
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Confidential treatment has been requested for the redacted portions of
this exhibit, and such confidential portions have been omitted and filed separately with the
Securities and Exchange Commission.
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(e)
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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:
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(i)
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No milestone payment shall be paid by Angiotech to Athersys
with respect to such Phase II Study; and
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(ii)
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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.
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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.
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2.
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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 $[*].
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3.
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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 $[*].
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4.
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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
$[*].
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5.
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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 $[*].
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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)
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Confidential treatment has been requested for the redacted portions
of this exhibit, and such confidential portions have been omitted and filed separately with the
Securities and Exchange Commission
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- 3 -
Schedule 7.4
Profit Sharing
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1.
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“
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.
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2.
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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:
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(a)
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Within forty-five (45) following the end of each calendar quarter, Angiotech
shall submit to Athersys a written report setting forth in reasonable detail:
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(i)
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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
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(ii)
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all Commercialization Costs in the immediately preceding
calendar quarter and the basis for such calculation.
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(b)
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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.
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(c)
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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.
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Confidential treatment has been requested for the redacted portions
of this exhibit, and such confidential portions have been omitted and filed separately with the
Securities and Exchange Commission
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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