Research Agreement - CytoTherapeutics Inc., Irving L. Weissman and Fred H. Gage
CYTOTHERAPEUTICS, INC.
Two Richmond Square
Providence, RI 02906
Irving L. Weissman
Pathology B-257
Stanford Medical School
Stanford, CA 94305
Fred H. Gage
Laboratory of Genetics
10010 N. Torrey Pines Road
La Jolla, CA 92037
Re: Conduct of StemCells Research
Dear Irv and Rusty:
In connection with your agreeing to become consultants to
CytoTherapeutics, Inc. ("CTI") pursuant to Consulting Agreements between each of
you and the Company of even date herewith and the award to you pursuant to such
Agreements of certain Options, we have agreed as follows regarding the conduct
of certain research expected to have a material impact on the vesting of such
options and a number of related matters. The provisions of this Agreement shall
become effective on the closing of the acquisition of StemCells, Inc.
("SCI") by CTI.
1. Funding and Control of StemCells Research
a. SCI shall become the stem cells research arm of CTI. All stem
cells research to be conducted or contracted for by CTI or SCI
shall be conducted or contracted for through SCI; development
work may be conducted or contracted for at CTI.
b. The stem cells research program to be conducted by SCI through
June 30, 1999 shall be conducted as provided in the Research
Plan (the "Research Plan") in the form attached hereto as
Exhibit 1. All stem cells research shall be conducted in
accordance with the Research Plan. Any changes in the Research
Plan must be approved by the Research Committee (as defined
below).
c. The Research Committee shall consist of two persons chosen by
the Scientific Founders (initially, Weissman and Gage), two
persons chosen by CTI (initially, Richard Rose and Seth
Rudnick) and a fifth, independent member appointed by
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the Scientific Founders, subject to the reasonable approval of
CTI. The term "Scientific Founders" shall refer to two of you,
provided, however, that if any one of you should resign
without Good Reason or be terminated for Cause (as such terms
are defined in your Consulting Agreements), the term
Scientific Founders shall mean the remaining one of you.
d. The Research Committee shall meet at least quarterly to review
progress under the Research Plan and make any adjustments to
the Research Plan which the Committee deems necessary or
desirable to the Research Plan, provided that there shall be
no reduction in the agreed upon level of expenditures in the
initial Research Plan without the consent of at least four
members of the Committee.
e. The initial Research Plan and any modifications or
continuations of the Research Plan subsequently adopted by the
Research Committee shall have as a priority the achievement of
research goals directly related to CTI's overall product
development efforts and shall provide for CTI to support stem
cell research on a basis that is commercially reasonable.
f. The initial Research Plan allocates resources to specific
research programs and sets objective goals (the "Initial
Goals") for these programs. Prior to June 30, 1999 and each
June 30 thereafter through June 30, 2001, the Research
Committee shall determine the Research Plan for the following
twelve month period, and set objective goals, reasonably based
on the Research Plan, to be achieved during such period. For
so long as the Initial Goals and any subsequently adopted
goals are achieved, the Research Committee shall continue to
control all stem cells research conducted at CTI and SCI and
CTI shall continue to fund such research at the level called
for in the Research Plan adopted by the Committee (provided
such funding shall not increase by more than 25% per year
without the approval of CTI). CTI may, however, at any time
after September 1, 1999
i. cease funding of the neural stem cells research
program or reduce the level of funding for such
program below the level of funding provided for such
program in the Research Plan or exercise control
itself over the neural stem cells research program by
accelerating the vesting of all unvested
Performance-Based Incentive Options related to the
achievement of all milestones, other than milestones
that are, at such time, time-barred and therefore no
longer achievable;
ii. cease funding of the non-neural stem cells research
program or reduce the level of funding for such
program below the level of funding provided for such
program in the Research Plan or exercise control
itself over the non-neural stem cells research
program by transferring to the Scientific Founders or
their assigns all intellectual property created in
the non-neural
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stem cell research program together with all
non-neural Initial Technology (as defined below)
(collectively, the "Non-Neural Technology"), as more
fully provided below; or
iii. so cease or reduce the funding or exercise control
itself in regard to both the neural stem cell
research program and the non-neural stem cell
research program by either (A) transferring the
Non-Neural Technology as provided in (ii) above and
accelerating the options as provided in (i) above or,
at CTI's option, (B) transferring both (x) the
intellectual property created in the neural stem cell
program together with all neural Initial Technology
(collectively, the "Neural Technology," together with
the Non-Neural Technology, the "Stem Cell
Technology") and (y) the Non-Neural Technology to the
Scientific Founders or their assigns as more fully
described below.
Initial Technology shall mean existing in-licensed technology
of StemCells, Inc. on the date of this Agreement. Any transfer
of Technology pursuant to this paragraph shall be provided for
by CTI granting to the Scientific Founders or their assigns an
exclusive license or, in the case of in-licensed technology,
an exclusive sublicense, to the Technology (together with the
benefits of any in-licensed technology and subject to any
prior out-licenses approved by the Research Committee) in
consideration of the payment to CTI of cash equal to the total
funding for all research conducted in the non-neural stem cell
research program (in the case of a transfer of Non-Neural
Technology) or the stem cell research program generally (in
regard to a transfer of Stem Cell Technology). This license
will be provided for in a commercially reasonable license
agreement designed to permit the continued development and
commercialization of the transferred Technology. In the case
of any transfer of in-licensed technology, any such transfer
shall be subject to all applicable terms and conditions of the
in-license. In order to give CTI an on-going interest in the
successful commercialization of such technology, such license
agreement will provide for a royalty to be paid to CTI at a
royalty rate equal to 1% of the net sales of any product whose
manufacture, use or sale would but for the grant of the
license infringe on any claim in any issued patent included in
the licensed Technology (other than the Initial Technology).
If CTI determines to cease or reduce funding or assume control
as provided in (ii) or (iii) above, CTI shall promptly notify
the Scientific Founders and shall give the Scientific Founders
one year from the date of such notice to arrange financing for
the transactions described above. The provisions of this
paragraph shall terminate on the earlier of July 1, 2005 or
such time as the total funding of stem cell research conducted
pursuant to the Research Plan shall have exceed $25 million,
at least $15 million of which shall have been expended for
non-neural stem cell research.
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g. All stem cells research conducted by CTI shall be under the
direction of a Director of Stem Cells Research, who shall be
nominated by the Research Committee, subject to reasonable
approval by CTI.
2. Award of Additional Options
a. CTI shall award Options to acquire 400,000 shares of CTI
Common Stock to persons (including, if the Research Committee
so determines, the Scientific Founders) designated by the
Research Committee, after consultation with CTI to assure (if
applicable) consistency with CTI policies regarding the
granting of options to employees. All persons to whom such
options are granted shall be persons determined by the
Research Committee, after consultation with CTI, to be persons
whom it is critically important to recruit, retain or
otherwise incent for the stem cells research program described
above.
3. Amendment. This Agreement may be amended at any time by a written
agreement executed by CTI and the Scientific Founders.
If you agree that the foregoing represents our understanding regarding the
matters described in this letter agreement, please so indicate by signing the
copy of this agreement (which may be executed in more than one counterpart, each
of which shall constitute a single original) and returning it to us.
Very truly yours,
CYTOTHERAPEUTICS, INC.
By: /s/ Seth Rudnick
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President
READ AND AGREED:
/s/ Irving L. Weissman
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Irving L. Weissman
/s/ Fred H. Gage
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Fred H. Gage
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