Exhibit 10.1

 

[*] Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission
(“SEC”). The omitted portions of this exhibit have been filed separately with
the SEC.

 

BIOLOGICAL PROCESSING SERVICES AGREEMENT

 

This BIOLOGICAL PROCESSING SERVICES AGREEMENT (“Agreement”) is made effective as
of March 28, 2003 (“Effective Date”) by and between GenVec, Inc. (“GenVec”),
having its principal place of business at 65 West Watkins Mill Road,
Gaithersburg, Maryland 20878, and Targeted Genetics Corporation (“Targeted
Genetics”), having its principal place of business at 1100 Olive Way, Suite 100,
Seattle, Washington 98101.

 

WHEREAS, Targeted Genetics has agreed to be a provider of contract
pharmaceutical development, biopharmaceutical development, and manufacturing
services to the pharmaceutical and biopharmaceutical industry; and

 

WHEREAS, GenVec has certain technology relating to certain biopharmaceutical
products and wants Targeted Genetics to assist in bio-chemical manufacturing of
such products as provided in this Agreement and the attachments hereto.

 

NOW, THEREFORE, in consideration of the mutual covenants, terms and conditions
set forth below, the parties agree as follows:

 

ARTICLE I: DEFINITIONS

 

The following terms have the following meanings in this Agreement:

 

1.1   “Accept” shall have the meaning set forth in Section 2(a) with respect to
Feasibility Batches [*], and in Section 6.2 with respect to all other Batches.

 

1.2   “Affiliate(s)” means any corporation, firm, partnership or other entity
which controls, is controlled by or is under common control with a party. For
purposes of this definition, “control” shall mean the ownership of at least
fifty percent (50%) of the voting share capital of such entity or any other
comparable equity or ownership interest.

 

1.3   “Applicable Laws” means all laws, ordinances, rules and regulations of
jurisdictions within the Territory governing drug products to the extent
applicable to bulk drug substances, and all laws, ordinances, rules and
regulations of jurisdictions within the Territory directly applicable bulk drug
substances, including, without limitation, (i) all applicable federal, state and
local laws and regulations of each jurisdiction within the Territory, (ii) the
U.S. Federal Food, Drug and Cosmetic Act, (iii) the current Good Manufacturing
Practices promulgated by the Regulatory Authorities, as amended from time to
time (“cGMPs”), and (iv) applicable guidance documents issued by Regulatory
Authorities (in each case, as such obligations are generally interpreted and
enforced by the applicable Regulatory Authority, and prevailing industry
standards). Applicable Laws shall also include all laws, ordinances, rules and
regulations applicable in jurisdictions added to the Territory in an amendment
to this Agreement.

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1.4   “Batch” means each unit of Bulk Drug Substance or other substance to be
Processed pursuant to this Agreement, the Statement of Work or a Change Order.

 

1.5   “Bulk Drug Substance” means the active pharmaceutical ingredient
manufactured through Processing.

 

1.6   “Change Order” shall have the meaning set forth in Section 2.3.

 

1.7   “Claim” shall mean any suits, claims, losses, demands, liabilities,
damages, costs and expenses (including costs, reasonable attorney’s fees and
reasonable investigative costs) incurred by a party in connection with any suit,
demand or action by any third party.

 

1.8   “Commercial Facility Modification Project” shall have the meaning set
forth in Article V.

 

1.9   “Criteria” means those items in the Specifications (Exhibit C) that are
identified as Targeted Genetics’ “Responsibility for pass/fail.”

 

1.10   “Deliverables” means all Batches and any work product, item or other
deliverable to be provided to GenVec pursuant to this Agreement, or with respect
to a Change Order or Additional Statement of Work, any such work product, item
or other deliverable to be provided thereunder.

 

1.11   “Early Termination Fee” means that amount which equals $500,000 minus any
payments made (including the $335,000 payment, set forth as Milestone 1 in
Exhibit G, made to Targeted Genetics upon execution) or that have become due and
payable, by GenVec in connection with this Agreement (which such Early
Termination Fee shall be zero dollars ($0) in the event that such equation
yields zero or a negative dollar amount).

 

1.12   “Facility” means Targeted Genetics’ facility located at 1100 Olive Way,
Suite 100, Seattle, Washington 98101 or such other facility as agreed by the
parties in writing.

 

1.13   “FDA” means the United States Food and Drug Administration.

 

1.14   “Feasibility Study” shall have the meaning set forth in Section 2.1(a).

 

1.15   “GenVec Equipment” shall have the meaning set forth in Section 4.1(b).

 

1.16   “GenVec Materials” means [*] that GenVec agrees in writing to provide to
Targeted Genetics pursuant to a change in the Procedures or Specifications, a
Change Order or otherwise.

 

1.17   “GenVec SOPs” means GenVec’s Standard Operating Procedures and other
methods, protocols and controls generally used by GenVec to carry out its
operations, as modified by and in compliance with this Agreement.

 

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1.18   “Intellectual Property” means all manner of U.S. and foreign legal
protection of rights in inventions, biological materials, data, databases,
information, know-how, works of authorship, designations of origin and other
intellectual property, that are now or later come into effect, including but not
limited to patents, trade secrets, copyrights, trademarks, service marks, trade
dress and any other intellectual property rights.

 

1.19   “Manufacturing Core” means those portions of the Facility that are
designated in Exhibit I as the “Manufacturing Core.”

 

1.20   “Marketing Application” shall have the meaning set forth in Section 9.8.

 

1.21   “Materials” shall mean collectively, the Targeted Genetics Materials and
GenVec Materials.

 

1.22   “Parameters” means those items in the Specifications (Exhibit C) that are
identified as GenVec’s “Responsibility for pass/fail”.

 

1.23   “Procedures” means those methods, protocols, controls and procedures to
be documented and agreed upon by the parties in connection with the transfer of
GenVec’s manufacturing process to Targeted Genetics and the provision of
Services hereunder, pursuant to which Targeted Genetics shall perform its
obligations with respect to Processing of the Bulk Drug Substance, as well as
any other manufacturing, testing, storage, distribution, shipment or other
process of or related to the Bulk Drug Substance, along with any valid
amendments or modifications thereto, subject to the terms set forth below in
Section 2.3.

 

1.24   “Processing” or “Process” means the manufacturing or processing of Bulk
Drug Substance or any other drug products or substances in accordance with the
Statement of Work, Procedures and Specifications, and any Change Order.

 

1.25   “Processing Date” means the day on which Targeted Genetics is due to
begin Processing of a Batch.

 

1.26   “Processing Fees” shall have the meaning set forth in Section 8.1.

 

1.27   “Production Batch” means a Batch Processed in accordance with this
Agreement after the Feasibility Batch [*].

 

1.28   “Proprietary Information” shall have the meaning set forth in Section
12.1.

 

1.29   “Remaining Processing Fees” shall mean those fees set forth in Milestones
3 and 4 of Exhibit G, as applicable according to the description set forth
therein.

 

1.30   “Regulatory Authority” means any governmental regulatory authority within
a jurisdiction in the Territory involved in regulating any aspect of the
development, manufacture, market approval, sale, shipping, distribution,
packaging or use of the Bulk Drug Substance.

 

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1.31   “Statement of Work” means the written description of the Services to be
performed and Batches to be Processed pursuant to this Agreement, which is
attached as Exhibit B and such other mutually agreed upon written description of
Services to be performed and Batches to be Processed pursuant to this Agreement
which are attached as exhibits to this Agreement.

 

1.32   “Services” means the Processing and other services provided, and to be
provided, pursuant to this Agreement, including, without limitation, the
Statement of Work and any Change Order.

 

1.33   “Shipping Materials” means all pouches, labels, shipping containers and
other materials required under the Procedures to make the Bulk Drug Substance
ready for shipment.

 

1.34   “Specifications” means the items set forth in Exhibit C, with which each
Batch covered by those items must comply, within any analytical, statistical and
other technical limitations set forth in such Specifications, along with any
valid amendments or modifications thereto, subject to the terms set forth below
in Section 2.3.

 

1.35   “Targeted Genetics Equipment” shall have the meaning set forth in Section
4.1(a).

 

1.36   “Targeted Genetics SOPs” means Targeted Genetics’ Standard Operating
Procedures and other methods, protocols and controls generally used by Targeted
Genetics to carry out its operations, as modified by and in compliance with this
Agreement.

 

1.37   “Targeted Genetics Materials” means all raw materials, supplies,
components and bulk packaging necessary for Processing in accordance with the
Procedures and consistent with the Targeted Genetics’ SOPs and Specifications,
except for GenVec Materials.

 

1.38   “Term” shall have the meaning set forth in Section 10.1.

 

1.39   “Territory” means the United States of America, the European Union, Japan
and any other country which the parties agree in writing to add to this
definition of Territory in an amendment to this Agreement.

 

1.40   “Testing Samples” shall have the meaning set forth in Section 6.1.

 

ARTICLE II: PRODUCTION & RELATED SERVICES

 

2.1 Services.

 

(a) Feasibility Study.

 

(i) Promptly following the Effective Date, the parties shall meet and discuss in
good faith the development and implementation of a study pursuant to which
Targeted Genetics shall evaluate the use of the GenVec Materials, GenVec SOPs,
GenVec Procedures and GenVec Specifications for production of Bulk Drug
Substance in accordance with this Agreement (“Feasibility Study”). Exhibit C
sets forth the Criteria and Parameters upon which to assess the results of the
Feasibility Study, and Targeted Genetics shall as soon thereafter as

 

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possible, Process a Batch against which to test the Criteria and Parameters
(“Feasibility Batch”). Targeted Genetics shall complete and provide to GenVec a
written report of the performance of the Feasibility Batch (in relation to the
Criteria and any relevant information regarding the Batch production that could
affect or impact the pass/fail of the Parameters) and a sample of the
Feasibility Batch as soon as possible, but in no event later than three (3)
months following the Effective Date.

 

(ii) Upon receiving the written report and Feasibility Batch in accordance with
Section 2.1(a)(i), GenVec shall thereafter generate data to evaluate the
performance of the Feasibility Study, and the parties shall in good faith,
within the later of [*] after GenVec receives a written report of the
performance of the Feasibility Batch or [*] after GenVec receives a sample of
the Feasibility Batch, unless the parties agree that more time is necessary, [*]
a determination as to whether the Criteria and Parameters after making a
determination as to whether the Criteria and Parameters are satisfied, and [*].
In the event that the parties determine that the Criteria and Parameters are
satisfied, GenVec [*] “Accept” the Batch by providing written notice of
acceptance [*] after making a determination as to whether the Criteria and
Parameters are satisfied, and [*] elect to have Targeted Genetics continue to
perform the Services set forth herein (“Project Continuation”), in which event
Targeted Genetics shall immediately continue with the performance of Services as
set forth herein [*].

 

(iii) If the parties determine that the Criteria are not satisfied or based on
review of any in process documentation that the Parameters are not satisfied due
to Targeted Genetics’ failure to perform Processing in accordance with the
Targeted Genetics SOP’s, the GenVec SOP’s or the Procedures, then GenVec may [*]
reject the Feasibility Batch [*] and terminate this Agreement, effective
immediately, in accordance with Section 10.2(d)(i). [*]

 

(iv) If the parties determine that the Criteria are satisfied but the Parameters
are not, and further determine that Targeted Genetics performed the Processing
in accordance with the Targeted Genetics SOP’s, the GenVec SOP’s or the
Procedures, then such Batch shall be deemed “Accepted” [*].

 

(v) If in assessing the results of a Feasibility Batch [*] pursuant to Sections
2.1(a)(ii)—(iv) the parties disagree as to whether the Feasibility Batch [*]
satisfied the Criteria or Parameters, or whether Targeted Genetics Processed the
Batch in accordance with the Targeted Genetics SOP’s, GenVec SOP’s and the
Procedures, then the dispute shall be escalated to the Executive Committee which
shall review the any in-process documentation. If the Executive Committee cannot
reach agreement as to whether such Criteria or Parameters were satisfied, or
whether Targeted Genetics Processed the Batch in accordance with the Targeted
Genetics SOP’s, the GenVec SOP’s and the Procedures, then the parties shall
retain an Independent Consultant to review the in-process documentation to
determine and report on whether the Criteria and Parameters were satisfied,
and/or whether failure of the Parameters was caused by Targeted Genetics’
failure to Process the Batch in accordance with the Targeted Genetics SOP’s, the
GenVec SOP’s and the Procedures. The Independent Consultant shall be [*], or in
the event that [*] is unable or unwilling to perform such analysis, or the
parties otherwise agree, another equally qualified individual agreed upon in
writing by GenVec and Targeted Genetics. The Feasibility Batch [*] shall be
deemed “Accepted” pursuant to Section 2(a)(ii) if the Independent Consultant
determines that the Criteria and Parameters were satisfied, or pursuant to
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the Independent Consultant determines that the Parameters were not satisfied,
but that such failure was not caused by Targeted Genetics’ failure to Process
the Batch in accordance with the Targeted Genetics SOP’s, the GenVec SOP’s and
the Procedures [*]. If the Independent Consultant determines that the Criteria
were not satisfied, or that the Parameters were not satisfied and that such
failure was caused by Targeted Genetics’ failure to Process the Batch in
accordance with the Targeted Genetics SOP’s, the GenVec SOP’s and the
Procedures, then the Feasibility Batch [*] shall be deemed “rejected” pursuant
to Section 2(a)(iii). Payment to Independent Consultant shall be borne by GenVec
if the Feasibility Batch [*] is deemed Accepted hereunder, and by Targeted
Genetics in the event such Batch is not deemed Accepted.

 

(vi) [*]

 

(b) In General. Subject to Section 2.1(a) and pursuant to this Agreement,
Targeted Genetics shall perform Services according to the Statement of Work and
any Change Order, which shall, among other things, include the Processing of
Bulk Drug Substance and delivery thereof to GenVec or to GenVec’s designee.
Targeted Genetics shall perform all such Services hereunder in accordance with
the Procedures, Applicable Laws, the Targeted Genetics SOPs, the Specifications,
the Quality Requirements (attached hereto as Exhibit D) and the terms and
conditions of this Agreement.

 

2.2 Schedule for Processing Dates. Targeted Genetics shall Process the Batches
in accordance with the Schedule to be mutually agreed to in writing by the
parties as soon as possible following the Effective Date, and which when
executed by both parties shall be attached hereto as Exhibit J (“Schedule”).
GenVec may modify such Schedule for any Batch by providing at least [*] of
modification to the timing of the Schedule [*] for such Batch, in which event
the parties shall reasonably agree upon an alternative Processing Date with
respect to such Batch. [*] In the event of a Change Order, the parties shall
either agree upon a schedule for the Processing Dates of the Batches subject
thereto, or shall include in such Change Order an appropriate mechanism by which
to schedule such Processing Dates.

 

2.3 Changes in Statement of Work, Procedures or Specifications. Any changes to
the Statement of Work, the Procedures or Specifications shall be agreed to by
the parties in a writing dated and signed by the parties (“Change Order”). No
Change Order shall be implemented by Targeted Genetics, whether requested by a
party or requested or required by any Regulatory Authority, until the parties
have agreed in writing to such Change Order, the implementation date of such
Change Order, and any increase or decrease in costs, expenses or fees associated
with such Change Order. Targeted Genetics shall respond promptly to any request
made by GenVec for a Change Order[*]. Both parties shall use commercially
reasonable, good faith efforts to agree to the terms of such Change Order in a
timely manner. [*] after a request is made for any Change Order, Targeted
Genetics shall notify GenVec of the costs associated with such change and shall
provide such supporting documentation as GenVec may reasonably require. If there
is a conflict between the numbered Articles of this Agreement and the Statement
of Work, the Procedures, Specifications or Change Order, the numbered Articles
of this Agreement shall control.

 

2.4 Additional Statement(s) of Work. Targeted Genetics acknowledges that from
time to time during the Term, GenVec may require additional Services not subject
to an attached

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Statement of Work. Targeted Genetics shall use commercially reasonable, good
faith efforts to agree [*] to the terms of any additional Statement of Work.
Each such additional Statement of Work shall include Procedures and
Specifications applicable to the Services to be provided pursuant thereto. All
Services performed pursuant to the additional Statement of Work shall be subject
to the terms and conditions of this Agreement, except as the parties
specifically may agree otherwise in the additional Statement of Work. No
additional Statement of Work shall become effective or be implemented by
Targeted Genetics until the parties have agreed in writing to such additional
Statement of Work, including, without limitation, the implementation date of
such additional Statement of Work, and the costs, expenses or fees associated
with such additional Statement of Work. Targeted Genetics shall respond [*] to
any request made by GenVec regarding an additional Statement of Work; provided
however, Targeted Genetics [*]. Both parties shall use commercially reasonable,
good faith efforts to agree to the terms of such additional Statement of Work
[*]. In addition to the foregoing, [*] after a request is made for any
additional Statement of Work, Targeted Genetics shall notify GenVec of the costs
associated with such additional Statement of Work and shall provide such
supporting documentation as GenVec may reasonably require.

 

2.5 Subcontracting. Targeted Genetics shall not subcontract any of its
obligations under this Agreement without the prior written consent of GenVec. To
the extent any subcontractors are approved by GenVec, unless agreed otherwise,
all such subcontractors shall perform their work in accordance with this
Agreement and Targeted Genetics shall remain fully responsible for the
performance of any obligations subcontracted.

 

2.6 Project Management; Meetings. The parties shall cooperate in the full and
prompt performance of this Agreement, and identify and attempt to resolve any
obstacles or problems affecting such performance. The parties shall hold
periodic progress meetings [*], to discuss the activities related to this
Agreement, in order to identify, discuss and resolve any obstacles to
performance or other issues encountered or anticipated. The parties shall
endeavor to have appropriate technical staff participate in such progress
meetings. The parties shall conduct the periodic progress meetings
telephonically or in person at a location as mutually agreed.

 

2.7 Executive Committee. For the purposes of resolving disputes, controversies
or disagreements arising under this Agreement (“Disputes”), GenVec and Targeted
Genetics shall establish an “Executive Committee” of four (4) members consisting
of two (2) senior executives designated by each Party. Each of GenVec and
Targeted Genetics shall designate its initial representatives to the Executive
Committee promptly after the Effective Date. In the event of a Dispute, the
parties shall first present such dispute to the Executive Committee, the
respective members of which shall in good faith consider and attempt to resolve
the dispute. Either party may initiate such consideration of the Dispute by the
Executive Committee by delivering a written notice to the other party demanding
such consideration. In the event that the Executive Committee is unable to
resolve the Dispute within [*], upon written demand from either party, the
Dispute shall be escalated according to Section 14.7.

 

2.8 Personnel. Targeted Genetics shall provide a sufficient number of properly
trained staff for the performance of all activities under this Agreement
(“Personnel”). The Personnel as of the Effective Date are identified in Exhibit
E. [*] Should it be necessary to make a substitution of any Personnel listed on
Exhibit E or to otherwise assign any Personnel to perform Services

 

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hereunder, Targeted Genetics shall promptly provide resumes for the proposed
individuals and shall promptly provide any additional information reasonably
requested by GenVec. Proposed substitutes shall have substantially equal
abilities and qualifications to those of the person(s) being replaced. All
Personnel shall be and at all times remain employees of Targeted Genetics and
not of GenVec. GenVec shall not directly solicit any such Personnel for
employment by GenVec during the Term and for a period of [*] thereafter;
provided, however, that “directly solicit for employment” shall not include
advertising in newspapers, trade publications, web sites or other media
addressed to the general public, nor shall it be deemed to include solicitation
by any recruiter or similar third party retained by GenVec to recruit employees
so long as GenVec has not instructed the recruiter to solicit such Personnel or
identified such Personnel as potential recruits, and GenVec may employ any such
person who responds to such an advertisement or who is solicited by any such
third party recruiter.

 

2.9 Future Services. The parties acknowledge that they intend to discuss in good
faith the possibility of entering into a subsequent agreement or agreements [*],
and possibly other manufacturing undertakings. [*]

 

ARTICLE III: PRODUCTION SUPPLIES

 

3.1 GenVec Materials. GenVec shall supply the GenVec Materials to Targeted
Genetics for Processing in accordance with the Statement of Work or a Change
Order, in quantities sufficient, according to the Procedures and Specifications,
to meet GenVec’s requirements for Processing of the Batches of Bulk Drug
Substance. The parties acknowledge the Specifications listed in Exhibit C are
anticipated to be modified by the parties in the future in a manner suitable for
determining whether the [*] Batches are acceptable, with any request by a party
for such modification to not be unreasonably withheld by the other party.
Targeted Genetics shall use the GenVec Materials solely and exclusively for
Processing under this Agreement, and shall not distribute any such items to any
person or entity unless first authorized by GenVec in writing. Targeted Genetics
shall use, store, and otherwise handle the GenVec Materials in accordance with
the terms and conditions of this Agreement, including, without limitation the
Procedures, the Quality Requirements, the Targeted Genetics SOPs, and with the
standard of care that Targeted Genetics normally would exercise [*], but in no
event less than a commercially reasonable standard of care. GenVec is and shall
at all times remain the owner of all right, title and interest in the GenVec
Materials, all materials derived therefrom, and all Intellectual Property rights
therein. Upon termination or expiration of this Agreement, Targeted Genetics
shall return to GenVec or dispose of all unused GenVec Materials in accordance
with GenVec’s instructions.

 

3.2 Targeted Genetics Materials. Targeted Genetics shall be responsible for
procuring and inspecting adequate Targeted Genetics Materials as necessary to
Process Batches according to the Statement of Work or a Change Order, unless
otherwise agreed to by the parties in writing. GenVec shall have no liability
under this Agreement for any lost, damaged or defective Targeted Genetics
Materials whether or not such Targeted Genetics Materials are incorporated in
the Bulk Drug Substance.

 

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ARTICLE IV: EQUIPMENT AND FACILITY

 

4.1 Equipment Purchase and Maintenance.

 

(a) Targeted Genetics Equipment. Except to the extent of the GenVec Equipment,
Targeted Genetics shall purchase (to the extent not already owned by Targeted
Genetics), [*], and shall dedicate to the performance of its obligations
hereunder in accordance with Section 4.2, the equipment identified in Exhibit F
as Targeted Genetics Equipment, as well as all other equipment commercially
reasonably necessary to perform the Processing or other Services (“Targeted
Genetics Equipment”). Exhibit F may be modified as agreed to in writing to by
the parties from time to time. Targeted Genetics will be responsible for any and
all taxes, including property taxes, applicable to the Targeted Genetics
Equipment. Targeted Genetics shall bear all risk of loss or damage to the
Targeted Genetics Equipment at all times during the Term, and shall, at its
expense, obtain and maintain property insurance in sufficient amounts to protect
against any such loss or damage to the Targeted Genetics Equipment.

 

(b) GenVec Equipment. GenVec shall purchase (to the extent not already owned by
GenVec) and shall supply to Targeted Genetics that equipment identified as
“GenVec Equipment” in Exhibit F (“GenVec Equipment”). [*] Targeted Genetics
shall provide to GenVec all documentation and other information relating to [*]
as such documentation and information becomes available, and shall provide
GenVec with a reasonable time period within which to [*] prior to the use of the
GenVec Equipment. Targeted Genetics will install and maintain the GenVec
Equipment in the Facility. GenVec will be responsible for any and all taxes,
including property taxes, applicable to the GenVec Equipment. Targeted Genetics
will maintain, use, house, and otherwise handle the GenVec Equipment with the
standard of care that Targeted Genetics would exercise [*], but in no event less
than a commercially reasonable standard of care. Targeted Genetics shall
immediately notify GenVec in the event that any GenVec Equipment is misused,
misappropriated, lost or damaged, and shall provide commercially reasonable
cooperation to GenVec with respect to GenVec’s efforts to obtain and enforce any
warranties given by the manufacturer of such GenVec Equipment, and any other
rights and remedies that GenVec may seek to enforce with respect to such
equipment. GenVec shall hold title to the GenVec Equipment. GenVec Equipment
shall at all times remain personal property, notwithstanding that they may be
attached to real property or any building thereon. Targeted Genetics shall use
its best efforts to obtain a waiver from the lessor of the Facility such that
the lessor shall have no rights in respect of the GenVec Equipment, and in the
event Targeted Genetics is unable to obtain such a waiver in a timely manner or
otherwise prior to delivery of such GenVec Equipment, Targeted Genetics shall
provide GenVec with prompt written notice with respect thereto, and provide any
further cooperation to achieve a satisfactory resolution. Targeted Genetics
shall keep GenVec Equipment free and clear of any liens, claims or encumbrances
arising from the actions or inaction of Targeted Genetics. If GenVec supplies
Targeted Genetics with labels or other markings identifying GenVec as the owner
of such GenVec Equipment, Targeted Genetics shall affix them in a prominent
place on the GenVec Equipment. Except with respect to gross negligence or
willful misconduct by Targeted Genetics, GenVec shall bear all risk of loss or
damage to the GenVec Equipment at all times while the GenVec Equipment is in
Targeted Genetics’ possession, and shall, at its expense, obtain and maintain
property insurance in sufficient amounts to protect against any such loss or
damage to the GenVec Equipment. If GenVec Equipment includes software, such
software shall be subject

 

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to license terms and conditions prescribed by GenVec or the third party vendor
of such software. Upon reasonable notice to Targeted Genetics, GenVec may
inspect the GenVec equipment during normal business hours and in accordance with
Targeted Genetics’ reasonable security procedures.

 

(c) Removal of Equipment. Upon termination or expiration of this Agreement for
any reason, GenVec shall have the right to remove all GenVec Equipment from the
Facility. Within [*] after written request by GenVec, Targeted Genetics shall
provide GenVec with reasonable access and assistance in any such removal of the
GenVec Equipment. A Targeted Genetics representative shall be entitled to be
present during any such removal of the GenVec Equipment.

 

4.2 Dedicated Manufacturing Capabilities. Targeted Genetics shall provide all
Services from its Facility. During the Term, Targeted Genetics shall dedicate
[*] to the extent necessary to provide the Services hereunder; provided however,
that subject to the terms of this Agreement, including, without limitation, the
Quality Requirements attached as Exhibit D, Target Genetics shall be permitted
[*], to manufacture another product [*], that does not interfere with Targeted
Genetics’ ability to complete the Services specified in the Statement of Work or
Change Orders.

 

4.3 [*]

 

4.4 On-Site Employees. GenVec may base two (2) representatives at the Facility
for all or any part of the Term to observe the Processing and other Services.
Subject to approval of Targeted Genetics, which shall not be unreasonably
withheld or delayed, GenVec may base additional representatives at the Facility
upon written request. Targeted Genetics shall provide a workspace outside of,
but within reasonable proximity to, the dedicated processing space for GenVec
representatives, which space shall include reasonable and customary
accommodations to conduct daily business activities, including, without
limitation, such items as telephone service, Internet access and access to fax
machines and photocopiers. GenVec shall reimburse Targeted Genetics for [*]
costs [*] incurred by Targeted Genetics as a result of such workspace and
accommodations[*]. Notwithstanding the foregoing, GenVec shall not be obligated
to reimburse Targeted Genetics for any such costs over [*] unless Targeted
Genetics first obtains GenVec’s prior written approval for such expenditures.

 

ARTICLE V: [*]

 

[*]

 

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ARTICLE VI: DELIVERY; ACCEPTANCE; TITLE

 

6.1 Delivery. Upon completion of the Processing of each Batch, Targeted Genetics
shall deliver each such Batch as directed by GenVec; provided that, at GenVec’s
direction, Targeted Genetics shall store any completed Batch pending delivery or
for some other reasonable time as directed by GenVec, and in such event shall do
so in accordance with the standard of care that Targeted Genetics normally would
exercise with respect to similar materials of its own or its other customers,
but in no event less than a commercially reasonable standard of care. In the
event that GenVec directs Targeted Genetics to either store such Batches, or to
otherwise ship such Batches to some location or entity other than GenVec,
Targeted Genetics shall deliver to GenVec samples of such Batch (the number of
samples of which shall be set forth in the applicable Targeted Genetics SOP
and/or Batch Records) for GenVec’s testing and acceptance in accordance with
Section 6.2 (“Testing Samples”). Targeted Genetics shall segregate and store all
Batches until delivery to GenVec. Targeted Genetics shall deliver each Batch and
Testing Samples thereof for delivery [*] GenVec’s premises (or such other
location as GenVec may provide), in accordance with the Procedures, Applicable
Laws, this Agreement (including, without limitation, the Quality Requirements)
and the Targeted Genetics SOPs.

 

6.2 Acceptance and Rejection of Production Batches.

 

(a) In General. Testing and acceptance of Feasibility Batches [*] shall be
conducted in accordance with Section 2.1(a). Upon receipt of each Batch (or
Testing Samples thereof) other than a Feasibility Batch [*], GenVec may inspect
and test each such Batch and/or Testing Samples and based thereon may accept or
reject each such Batch in accordance with this Section 6.2. GenVec shall notify
Targeted Genetics of any rejection of such Batch within [*] after GenVec’s
receipt thereof. Notwithstanding the foregoing, if GenVec requires more than [*]
to complete its testing, GenVec may notify Targeted Genetics of its need for
additional time to complete the testing, and the parties shall in good faith
agree to [*] extension of time for GenVec to perform such testing. GenVec shall
provide written notice to Targeted Genetics notifying Targeted Genetics of its
acceptance or rejection of such Batch pursuant to this Section 6.2. A Batch
shall be deemed “Accepted” when GenVec provides written notice of such
acceptance to Targeted Genetics, and in the case of Production Batches after the
first Production Batch, to the escrow agent described in Section 8.5. In the
event that, after conducting testing pursuant to this Section 6.2 (or pursuant
to Section 2.1(a) with respect to the Feasibility Batch [*]), GenVec Accepts a
Batch, Targeted Genetics may invoice GenVec, and in the case of Production
Batches after the first Production Batch the escrow agent, for such Batch in
accordance with Section 8.4.

 

(b) Effect of Acceptance or Rejection of Production Batches. In the event that
GenVec notifies Targeted Genetics of the rejection of a Batch, Targeted Genetics
shall have the right to sample and retest the rejected Batch, the cost of which
shall be the responsibility of [*].

 

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In the event that Targeted Genetics and GenVec test results for the rejected
Batch do not agree, an “Independent Contractor” agreed upon in writing in
advance by GenVec and Targeted Genetics shall perform appropriate testing and
analysis of the rejected Batch, according to a [*] GenVec and the results of the
Independent Contractor findings shall be reviewed by an “Independent
Consultant”. In the event that the Independent Contractor test results
demonstrate that such rejected Batch conforms to the Specifications and other
requirements in this Agreement and is otherwise suitable for Phase III human
testing, at Targeted Genetics request, the parties shall retain an Independent
Consultant to perform analysis of the rejected Batch testing results and to
determine and report on whether such rejected Batch conforms to the
Specifications and other requirements in this Agreement and is otherwise
suitable for Phase III human testing. The Independent Consultant shall be [*],
or in the event that [*] is unable or unwilling to perform such analysis,
another equally qualified individual agreed upon in writing by GenVec and
Targeted Genetics. In the event that the Independent Consultant determines that
the rejected Batch conforms to the Specifications and other requirements in this
Agreement and is otherwise suitable for Phase III human testing, then the Batch
shall be deemed Accepted for the purposes hereof. Payment for the Independent
Contractor and Independent Consultant shall be borne by GenVec in the event that
the Batch is deemed Accepted, and by Targeted Genetics in the event the batch is
not deemed Accepted, by the Independent Consultant. In the event that GenVec
notifies Targeted Genetics of the rejection of a Batch, GenVec may elect the
following remedies: (a) GenVec may require [*]; or (b) GenVec may provide notice
to Targeted Genetics [*]. In the event that GenVec elects to have Targeted
Genetics initiate Processing of the replacement Batch immediately, Targeted
Genetics shall do so [*], but in no event later than [*] after GenVec requests
that Targeted Genetics process a replacement Batch. If GenVec elects to have
Targeted Genetics Process a replacement Batch, GenVec again shall have the
period of time specified above to inspect and accept or reject the replacement
Batch. Notwithstanding the foregoing, in the event that GenVec notifies Targeted
Genetics of the rejection of a Batch [*], GenVec may provide notice either (a)
that it elects to have Targeted Genetics initiate Processing of a replacement
Batch [*]; or (b) that [*], in which event Targeted Genetics [*]. The terms and
conditions of this Section 6.2(b) shall not apply with respect to any
Feasibility Batch [*].

 

ARTICLE VII: REMEDIES FOR FAILURE OF PERFORMANCE

 

Targeted Genetics shall use its [*] efforts to ensure that the Processing and
any other Services provided hereunder shall not be interrupted due to Targeted
Genetics’ [*], and shall allocate to the Processing and such other Services all
financial, personnel and other resources necessary for the performance thereof
and, if necessary, shall use its best commercial efforts to, among other things,
[*] fully perform such obligations. In addition, in the event that Targeted
Genetics reasonably believes that for any reason it may be unable to fully
perform its obligations hereunder, it shall [*] notify GenVec, and shall
cooperate in good faith with GenVec to undertake all measures necessary and
desirable to ensure completion of Processing and any other Services.

 

ARTICLE VIII: PRICING AND PAYMENT

 

8.1 Processing Fees. In consideration for Target Genetics’ satisfactory
performance of the Services, GenVec shall pay Targeted Genetics the “Milestone
Payment” applicable to each “Milestone” as set forth in Exhibit G, provided that
Targeted Genetics satisfactorily achieves

 

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such respective Milestone (“Processing Fees”). In the event that a Milestone
requires or involves any Deliverables, then such Milestone shall be “achieved”
only after GenVec has Accepted all such Deliverables. Targeted Genetics shall
invoice GenVec in accordance with Section 8.4 upon achieving each Milestone.

 

8.2 Cost Reimbursement. Targeted Genetics may, as part of an invoice submitted
to GenVec for the Processing Fee in accordance with Section 8.1, also submit to
GenVec an invoice for [*] listed in the bill of materials included with the
Batch record for such Batch, to the extent that such [*] were necessary and used
in Processing of such Batch.

 

8.3 Taxes; Duties. All taxes, duties and other amounts assessed on the GenVec
Materials or Bulk Drug Substance prior to or upon sale to GenVec are the
responsibility of GenVec, and GenVec shall reimburse Targeted Genetics for any
such taxes, duties or other expenses paid by Targeted Genetics; provided,
however, that GenVec shall not be required to pay any taxes based on the net
income of Targeted Genetics.

 

8.4 Payment Terms. For any amounts that become due and payable hereunder,
Targeted Genetics shall provide to GenVec a detailed invoice identifying the
charge and the basis for the invoiced amount. Payment for undisputed invoices
shall be due within [*] after the date of such invoice, except that with respect
to Milestone No. 1 in Exhibit G, [*] shall be paid to Targeted Genetics within
[*] after the Effective Date and the balance of such Milestone [*] shall be paid
within [*] after the date of such invoice. Moreover, in the case of invoices for
Remaining Processing Fees for Production Batches after the first Production
Batch, Targeted Genetics shall provide a duplicate invoice to the escrow agent
described in Section 8.5 and receive its payment in accordance with Section 8.5.

 

8.5 Escrow. If GenVec Accepts the [*] Batch, GenVec shall, within [*] following
GenVec’s notice thereof, deposit with a mutually agreeable escrow agent, and
pursuant to appropriate terms mutually agreeable to GenVec and Targeted
Genetics, the applicable [*] in accordance with Milestone 4 of Exhibit G hereto
[*]. Subject to terms and conditions which the parties shall mutually agree
upon, and provided that the escrow agent has received notice of GenVec’s
Acceptance of a subsequent Production Batch, the escrow agent shall be
instructed to release to Targeted Genetics the Processing Fees applicable to
each subsequent Production Batch within [*] after the date of its receipt from
Targeted Genetics of a proper invoice for that Batch. Targeted Genetics shall
[*] an escrow agent pursuant to this Section 8.5.

 

ARTICLE IX: RECORDS; REGULATORY MATTERS

 

9.1 In-Process Testing. During Processing, Targeted Genetics shall deliver to
GenVec or a designee of GenVec samples of the in-process Batch in accordance
with the Statement of Work or as otherwise directed by GenVec for purposes of
in-process testing. If in-process testing reveals an out-of-Specification
result, Targeted Genetics shall use its [*] efforts to fully investigate such
out-of-Specification result within [*] following such testing, and shall provide
such [*] to GenVec within [*] following the conclusion of such investigation as
to the nature and cause of the out-of Specification result.

 

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9.2 Batch Records. Within [*] following the completion of Processing of each
Batch, Targeted Genetics [*] properly completed Batch records prepared in
accordance with the Procedures and [*] the Specifications.

 

9.3 Recordkeeping. Targeted Genetics shall accurately prepare and maintain true
and accurate books, records, test and laboratory data, reports and all other
information relating to Processing, and the Bulk Drug Substance in compliance
all Applicable Laws, this Agreement and the Targeted Genetics SOPs, and any
other of its obligations under this Agreement, including, without limitation,
all information required to be maintained by Applicable Laws, the Targeted
Genetics SOPs, and any requirements of the Quality Requirements. Such
information shall be maintained in forms, notebooks and records for a period of
at least [*] from the date of shipment of such Batch or longer if required under
Applicable Laws. GenVec shall [*] such data or information.

 

9.4 Regulatory Compliance.

 

(a) GenVec shall be responsible for obtaining the approvals and licenses
required by Regulatory Authorities with respect to the clinical testing of the
drug product manufactured from the Bulk Drug Substance Processed under this
agreement, including the submission of any necessary applications or amendments
thereto. During the Term and until the expiration date of the last drug product
manufactured using the Batch Drug Substance Processed by Targeted Genetics,
Targeted Genetics shall provide all necessary or useful information and
otherwise assist GenVec in all regulatory matters with respect to Bulk Drug
Substance and Processing at GenVec’s request. Each party intends and commits to
cooperate to satisfy all Applicable Laws with respect to Processing under this
Agreement.

 

(b) Except with respect to those approvals and licenses referenced in Section
9.4(a), Targeted Genetics shall obtain and maintain all other federal, state and
local approvals, permits, licenses and registrations required for performance
of, or the absence of which would have material adverse effect on its ability to
perform, its obligations hereunder.

 

9.5 Governmental Inspections and Requests. Targeted Genetics shall permit and
fully cooperate with any inspections conducted by the FDA or any other
Regulatory Authority of its operations or as necessary for GenVec to use, sell,
market, import, or distribute the Bulk Drug Substance or obtain approval of the
Marketing Applications described in Section 9.8. Targeted Genetics shall [*]
advise GenVec if an [*] agent of any Regulatory Authority requests to visit or
visits the Facility, or requests to audit or audits Targeted Genetics’ books or
records, concerning the Processing or the Bulk Drug Substance, and shall, upon
receipt of such request, [*] provide GenVec with a copy of any written document
received from such Regulatory Authority. Targeted Genetics shall furnish to
GenVec a copy of any related report of inspectional observations or findings by
such Regulatory Authority within [*] of Targeted Genetics’ receipt of such
report. Targeted Genetics shall use its best efforts to promptly remedy any [*]
deficiency (and address any disputes regarding deficiencies) in Targeted
Genetics’ operations asserted by such Regulatory Authority that might affect the
Bulk Drug Substance. With respect to any report by a Regulatory Authority,
Targeted Genetics shall provide GenVec a reasonable opportunity to consult with
Targeted Genetics as to a response by Targeted Genetics, if any, and shall
provide GenVec a reasonable opportunity to review a draft of any proposed
response and offer

 

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suggestions or revisions thereto, which suggestions and proposed revisions shall
be reasonably considered and incorporated into such response.

 

9.6 Recall. In the event Targeted Genetics believes a recall, field alert,
product withdrawal or field correction may be necessary with respect to the Bulk
Drug Substance, Targeted Genetics shall immediately notify GenVec in writing.
Targeted Genetics shall not act to initiate a recall, field alert, product
withdrawal or field correction without the express prior written approval of
GenVec, unless otherwise required by Applicable Laws. In the event GenVec
believes a recall, field alert, product withdrawal or field correction may be
necessary with respect to the Bulk Drug Substance, GenVec shall immediately
notify Targeted Genetics in writing and Targeted Genetics shall provide all
necessary cooperation and assistance to GenVec. The cost of any recall, field
alert, product withdrawal or field correction shall be borne by GenVec except to
the extent that such recall, field alert, product withdrawal or field correction
is caused by Targeted Genetics’ breach of its obligations under this Agreement
or violation of Applicable Laws or its negligence or willful misconduct, in
which event such cost shall be borne by Targeted Genetics.

 

9.7 GenVec Audits. GenVec may on reasonable notice perform reasonable audits of
Targeted Genetics’ operations, personnel performance, the Facility, the GenVec
Equipment, Targeted Genetics Equipment and any other equipment used by Targeted
Genetics in Processing, Targeted Genetics SOPs and records that relate to the
activities performed in relation to this Agreement; provided that Targeted
Genetics may require that all GenVec employees, auditors and other contractors
carrying out any such audit to agree to a nondisclosure obligation substantially
similar to Sections 12.1 through 12.4 and abide by all of Targeted Genetics’
security, safety, health, and other generally applicable operations policies
while carrying out such audit at Targeted Genetics’ Facility.

 

9.8 Marketing Applications. Upon GenVec’s request and at GenVec’s expense,
Targeted Genetics shall reasonably assist GenVec in preparing and submitting
information related to Processing and the Bulk Drug Substance to all appropriate
Regulatory Authorities and other governmental authorities, in obtaining
approvals of applications from such Regulatory Authorities or other governmental
authorities necessary for carrying out research or investigational testing of
the Bulk Drug Substance, and in responding to related questions from such
authorities (“Marketing Applications”). Such reasonable assistance shall include
the provision of such information and materials relating to the performance of
the Processing as necessary to support GenVec’s required submissions to such
Regulatory Authority and other governmental authorities. To the extent that any
such Regulatory Documentation, Targeted Genetics SOPs and other documentation
that GenVec deems reasonably necessary in connection with a Statement of Work
for a Marketing Application is Targeted Genetics Proprietary Information,
Targeted Genetics shall permit GenVec to reference such facility information or
other information required by a Regulatory Authority [*], and Targeted Genetics
agrees to maintain all such submitted information in compliance with all
Applicable Laws.

 

ARTICLE X: TERM AND TERMINATION

 

10.1 Term. This Agreement shall commence on the Effective Date and, unless
terminated earlier in accordance with this Agreement, shall continue for a
period continuing until the later of

 

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either (a) six (6) months thereafter or (b) when GenVec has Accepted all Batches
Processed in accordance with the Schedule (“Term”) and Article 6.2.

 

10.2 Termination.

 

(a) Material Breach. If a party materially breaches this Agreement, and the
non-breaching party has provided written notice of the breach to the breaching
party and the breaching party fails to cure its breach within [*] after such
written notice, then the other party shall have the right to immediately
terminate this Agreement upon notice to the breaching party. In addition to any
other rights or remedies that may be available at law or in equity and pursuant
to the terms of this Agreement, if GenVec terminates this Agreement pursuant to
this Section 10.2(a) prior to its election of Project Continuation, then
Targeted Genetics shall [*] upon execution of this Agreement [*] as of the date
of the breach giving rise to GenVec’s notice of termination. For purposes
hereof, the “Period” means the [*] time period beginning on the Effective date.

 

(b) Bankruptcy. Either party may terminate this Agreement effective upon written
notice to the other party, if the other party becomes insolvent or admits in
writing its inability to pay its debts as they become due, files a petition for
bankruptcy, makes an assignment for the benefit of its creditors or has a
receiver, trustee or other court officer appointed for its properties or assets.

 

(c) Force Majeure. If any default or delay occurs which prevents or materially
impairs a party’s performance and is due to a cause beyond the party’s
reasonable control, including but not limited to an act of God, flood, fire,
explosion, earthquake, casualty, accident, war, revolution, civil commotion,
blockade or embargo, injunction, law, proclamation, order, regulation or
governmental demand, and provided that the default or delay is not caused by or
the fault of such party, the affected party shall promptly notify the other
party in writing of such cause and shall exercise diligent efforts to resume
performance under this Agreement as soon as possible. Neither party will be
liable to the other party for any loss or damage due to such cause, and the Term
will not be extended thereby. Neither party may terminate this Agreement because
of such default or delay except upon [*] prior written notice to the other party
if the default or delay has existed for [*] and is continuing at the end of the
[*] notice period.

 

(d) Termination for Convenience.

 

(i) Prior to GenVec’s election of Project Continuation in accordance with
Section 2.1(a)(ii)(A), GenVec may terminate this Agreement immediately, with or
without cause, at any time. Any termination by GenVec pursuant to this Section
10.2(d)(i) [*] (other than for breach by Targeted Genetics in accordance with
Section 10.2(a)) shall be considered “Termination for Convenience.” In the event
GenVec exercises its right of Termination for Convenience pursuant to this
Section 10.2(d)(i), then GenVec shall pay to Targeted Genetics (A) [*], to the
extent that any such amount is due plus (B) [*] in-process at GenVec’s request
as of the date of termination [*], provided that GenVec has already Accepted
pursuant to Section 2(a)(iv) a Feasibility Batch [*].

 

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(ii) At any time after GenVec’s election of Project Continuation in accordance
with Section 2.1(a)(ii)(A), GenVec may terminate this Agreement on written
notice, with or without cause. In the event GenVec exercises its right of
Termination pursuant to this Section 10.2(d)(ii) [*] GenVec Accepts [*], GenVec
shall pay Targeted Genetics [*]. In the event GenVec exercises its right of
Termination pursuant to this Section 10.2(d)(ii) [*] GenVec Accepts [*], GenVec
shall pay Targeted Genetics [*]; there shall be released to Targeted Genetics
from the escrow described in Section 8.5 [*] of the Remaining Processing Fees
not yet paid to Targeted Genetics; and the balance of the escrow [*].

 

(iii) Targeted Genetics shall invoice for payments for Termination in accordance
with this Section 10.2(d) at the earlier of the date Targeted Genetics gives
notice in writing to GenVec that all activities undertaken pursuant to this
Agreement have been concluded or [*] after GenVec’s notice of such Termination.
Such invoice shall be due and payable within [*] of notice to GenVec by Targeted
Genetics.

 

10.3 Effects of Termination. Upon notice of Termination pursuant to Section
10.2, except as GenVec may instruct otherwise, Targeted Genetics shall
immediately cease all manufacturing and production activities and reasonably
attempt to conclude all other activities being undertaken pursuant to this
Agreement as quickly and efficiently as possible, and, in addition to other
requirements of this Article 10 shall cooperate with GenVec in the orderly
organization of any data, information or other materials, and the transition or
delivery of such items to GenVec or any other third party designated by GenVec
to assist it in such respect. Any provision of this Agreement, including but not
limited to Sections 2.8, 4.1, 8.3, 10.3 and Article 9, 11, 12, 13 and 14, that
imposes or contemplate continuing obligations on a party will survive the
termination or expiration of this Agreement. Except as otherwise specifically
provided in Section 10.2(d)(ii), upon any termination of this Agreement, the
escrow agent described in Section 8.5 shall promptly pay to Targeted Genetics
any properly invoiced payments then due to Targeted Genetics and refund any
balance to GenVec.

 

10.4 Technology Transfer. Targeted Genetics shall provide to GenVec all
documentation and information necessary or useful [*], including any [*] used
therein. Such documentation and information shall include, without limitation,
[*] and all documentation and information relating to [*]. To the extent that
such documentation and information, including, without limitation, documentation
and information relating to [*], is Proprietary Information of Targeted
Genetics, it shall not be transferred to any third party without the express
written consent of Targeted Genetics unless otherwise permitted pursuant to the
terms of this Agreement; notwithstanding the foregoing or anything else to the
contrary in this Agreement, but subject to Section 12.7, if such documentation
and information [*]. Targeted Genetics shall provide all such documentation and
information prescribed by this Section 10.4 as it becomes available, and in the
manner and to the location as directed by GenVec. In the event of termination or
expiration of this Agreement or breach of this Agreement [*], GenVec may give
written notice that it has elected to [*]. Within [*] following such notice,
Targeted Genetics shall provide to GenVec [*]. Targeted Genetics shall not in
any way interfere [*] pursuant to this Section 10.4.

 

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ARTICLE XI REPRESENTATIONS AND WARRANTIES;

LIMITATION OF LIABILITY

 

11.1 Existence and Power. Each party hereby represents and warrants to the other
party that such party (a) is duly organized, validly existing and in good
standing under the laws of the state in which it is organized, (b) has the power
and authority and the legal right to own and operate its property and assets,
and to carry on its business as it is now being conducted, and (c) is in
compliance with all requirements of Applicable Laws, except to the extent that
any noncompliance would not materially adversely affect such party’s ability to
perform its obligations under this Agreement.

 

11.2 Authorization and Enforcement of Obligations. Each party hereby represents
and warrants to the other party that it (a) has the power and authority to enter
into this Agreement and to perform its obligations hereunder and thereunder and
(b) has taken all necessary action on its part to authorize the execution and
delivery of this Agreement and the performance of its obligations hereunder.
This Agreement has been duly executed and delivered on behalf of such party, and
constitutes a legal, valid, binding obligation, enforceable against such party
in accordance with its terms, subject to applicable bankruptcy and similar laws
affecting creditors’ rights and remedies generally and to general principles of
equity.

 

11.3 No Consents. Each party hereby represents and warrants to the other party
that all necessary consents, approvals and authorizations of all agencies and
other persons required to be obtained by such party in connection with this
Agreement have been obtained.

 

11.4 No Conflict. Each party hereby represents and warrants to the other party
that the execution and delivery of this Agreement and the performance of such
party’s obligations hereunder (a) do not conflict with or violate any
requirement of Applicable Laws, and (b) do not materially conflict with, or
constitute a material default or require any consent under, any material
contractual obligation of such party.

 

11.5 GenVec Warranty. GenVec represents and warrants to Targeted Genetics that
(a) GenVec’s Materials, GenVec SOPs, GenVec Procedures and GenVec Specifications
for production of Bulk Drug Substance have previously been performed [*] to
produce the Bulk Drug Substance; and (b) to GenVec’s knowledge, GenVec’s
Materials, GenVec SOPs, GenVec Procedures and GenVec Specifications are in
compliance with Applicable Laws.

 

11.6 Targeted Genetics Warranty. Targeted Genetics represents and warrants to
GenVec that (a) the Facility, Targeted Genetics Equipment, and all manufacturing
space and process utilities, will be qualified and validated as necessary and
suitable for the provision of all Processing hereunder in compliance with
Applicable Laws and this Agreement, including, without limitation, the Targeted
Genetics SOPs and the Quality Requirements; (b) all GenVec Material and all Bulk
Drug Substance located at the Facility will be stored in compliance with
Applicable Laws; (c) the Processing will be performed in a workmanlike manner
consistent with the Targeted Genetics SOPs, and in no event less than the
standard of performance of nationally recognized companies performing similar
services; (d) at the time the Bulk Drug Substance is delivered, the Bulk Drug
Substance Processed hereunder will conform to the Specifications, Quality
Requirements and Applicable Laws; (e) it will not in any capacity use in
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any of its obligations any person who has been debarred under the Generic Drug
Enforcement Act, or who is otherwise precluded from the provision of performing
any of Targeted Genetics’ obligations hereunder; and (f) it will not deliver to
GenVec any Batch of Bulk Drug Substance that has not undergone and passed
sterility testing and microplasm testing in accordance with the Specifications.

 

11.7 DISCLAIMER OF WARRANTIES. THE LIMITED WARRANTY SET FORTH IN THIS ARTICLE 11
AND ANY OTHER WARRANTIES PROVIDED BY EITHER PARTY PURSUANT TO THIS AGREEMENT ARE
IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF
MERCHANTABILITY AND ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. MOREOVER,
NEITHER GENVEC NOR TARGETED GENETICS MAKES ANY REPRESENTATION OR WARRANTY
(EXPRESS OR IMPLIED) THAT THE USE OR MANUFACTURE OF THE TARGETED GENETICS
MATERIALS, GENVEC MATERIALS, GENVEC PROPRIETARY INFORMATION, TARGETED GENETICS
PROPRIETARY INFORMATION, OR THE BULK DRUG SUBSTANCE DOES NOT, OR WILL NOT,
INFRINGE ON ANY PATENT, TRADE SECRET OR OTHER INTELLECTUAL PROPERTY RIGHT OF ANY
THIRD PARTY.

 

11.8 Limitation of Liability. EXCEPT WITH RESPECT TO A CLAIM FOR INDEMNIFICATION
UNDER ARTICLE 13 OR A BREACH OF ARTICLE 12 (PROPRIETARY INFORMATION), NEITHER
PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES FOR BREACH OF THIS AGREEMENT, AND NEITHER PARTY’S TOTAL
LIABILITY FOR ANY OTHER DAMAGES FOR BREACH OF THIS AGREEMENT SHALL EXCEED [*].

 

ARTICLE XII: PROPRIETARY INFORMATION

 

12.1 Proprietary Information. For purposes of this Agreement, “Proprietary
Information” of each party means all information owned by suchp party, including
without limitation, to the extent owned by such party, Statements of Procedure,
Batch Records and all documentation and information relating to cleaning
validation and process validation, and which is disclosed by such party to the
other at any time in connection with this Agreement, except for any information
expressly excluded by the Disclosing Party in writing or any information which
the Receiving Party can establish by competent written evidence (a) was known to
the Receiving Party at the time of disclosure by the Disclosing Party, (b) was
generally available to the public at the time of disclosure by the Disclosing
Party, (c) after disclosure by the Disclosing Party, became generally available
to the public other than in breach of this Section 12.1, or (d) after disclosure
by the Disclosing Party, became known to the Receiving Party from a third party
lawfully disclosing such information and was not disclosed to the Receiving
Party under any obligations of confidentiality. The term “Receiving Party” means
a party that has access to Proprietary Information of the other party (the
“Disclosing Party”).

 

12.2 Use of Proprietary Information. Neither party shall (a) disclose, publish
or otherwise make available (orally or in writing) any Proprietary Information
of the other party to any person (including any employee of the Receiving Party
without a need to know or to have access to such Proprietary Information or who
does not agree to be bound by these terms), except as expressly

 

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authorized herein or to its employees and independent contractors who are
subject to a nondisclosure obligation comparable in scope to this Article 12 and
who have a need to know such Proprietary Information for purposes of performing
under this Agreement, and except as required by Applicable Laws; or (b) use any
Proprietary Information of the other party except as contemplated by this
Agreement or upon express prior written consent of the other party. Moreover,
each party shall use commercially reasonable efforts to protect the other
party’s Proprietary Information from unauthorized use or disclosure, using at
least the level of efforts such party uses to protect its own similar
information from unauthorized use or disclosure.

 

12.3 Disclosure of Proprietary Information. Notwithstanding Section 12.2, a
Receiving Party may disclose Proprietary Information to the extent required by a
court or other governmental authority, provided that (i) the Receiving Party
gives the Disclosing Party advance written notice of the disclosure, (ii) the
Receiving Party uses reasonable efforts to resist disclosing the Proprietary
Information, (iii) the Receiving Party cooperates with the Disclosing Party on
request to obtain a protective order or otherwise limit the disclosure, and (iv)
as soon as reasonably possible, the Receiving Party provides a letter from its
counsel confirming that the Proprietary Information is, in fact, required to be
disclosed. Notwithstanding the foregoing, either party may also disclose the
main body of this Agreement (i.e., this Agreement without any exhibits or
attachments), and GenVec may disclose all attachments and exhibits hereto except
for Exhibit I (Manufacturing Core), to the extent useful or necessary to pursue
financing, to pursue relationships relating to corporate joint ventures, or with
respect to asset or stock acquisition transactions,  provided such disclosure is
made to the applicable third party pursuant to a nondisclosure obligation
comparable in scope to this Article 12.

 

12.4 Return or Destruction of Proprietary Information. Upon either party’s
request of the other party at any time or upon expiration or termination of this
Agreement, the other party shall return or destroy, as requested by such party,
all of the other party’s Proprietary Information provided under this Agreement
in accordance with such party’s directions; provided, however, that the other
party shall not be required to return or destroy any such Proprietary
Information if doing so would cause that party to violate any Applicable Law, or
with respect to Targeted Genetics’ Proprietary Information received by GenVec,
if GenVec is entitled to retain such Proprietary Information pursuant to this
Agreement or the Agreement otherwise contemplates continued use of such
Proprietary Information, if it is necessary or desirable to GenVec to retain
such Proprietary Information for purposes of making any submissions to a
Regulatory Authority, or in order to otherwise comply with any requirements of,
or obligations to, a Regulatory Authority.

 

12.5 Intellectual Property.

 

(a) The rights of each party in Intellectual Property owned by or licensed to it
prior to or developed during the Term separately from the performance of its
obligations under this Agreement, shall not be affected by this Agreement.

 

(b) GenVec shall own all Intellectual Property arising from Targeted Genetics’
performance of its obligations (or as a result of any other work performed by
Targeted Genetics for GenVec or in anticipation of this Agreement), arising as a
result of any information provided to Targeted Genetics by GenVec or its
representatives, or relating primarily to the Bulk Drug

 

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Substance, GenVec Materials [*]. Targeted Genetics shall promptly disclose and
communicate full information regarding the same to GenVec.

 

(c) To the extent that any works of authorship result from Targeted Genetics’
obligations under this Agreement, such works of authorship shall be deemed
“works made for hire” within the meaning of the copyright Laws of the United
States and any similar laws of other jurisdictions, and GenVec shall own all
right, title and interest in and to such works of authorship.

 

(d) With respect to all Intellectual Property that GenVec is to own pursuant to
Section 12.5(b), and to the extent, if any, that Targeted Genetics or its
personnel have rights in any works of authorship notwithstanding Section
12.5(c), Targeted Genetics hereby irrevocably assigns to GenVec all right, title
and interest in and to such Intellectual Property or works of authorship. Upon
the request of GenVec, Targeted Genetics shall sign and deliver (or cause its
personnel to sign and deliver) all patent applications, assignments and other
documents and shall otherwise assist GenVec to obtain, maintain, perfect or
enforce any of GenVec’ rights hereunder. Targeted Genetics acknowledges and
agrees that GenVec may use all Intellectual Property and such works of
authorship for any purposes that GenVec deems appropriate, including submission
of such works of authorship to governmental or regulatory authorities, and
Targeted Genetics agrees that it shall not claim that any such Intellectual
Property or works of authorship is not Proprietary Information of GenVec, is
Proprietary Information of Targeted Genetics or that Targeted Genetics otherwise
has rights in or to such Intellectual Property or works of authorship.

 

(e) Targeted Genetics shall have valid and enforceable written agreements with
all of its personnel performing any obligations hereunder containing a
non-disclosure obligation comparable in scope to that set forth in this Article
12 and giving Targeted Genetics all rights and authority necessary to effectuate
the provisions of this Article 12. Targeted Genetics shall provide copies of
such agreements to GenVec upon GenVec’ request.

 

12.6 Injunctive Relief. The parties acknowledge that either party’s breach of
this Article 12 would cause the other party irreparable injury for which it
would not have an adequate remedy at law. In the event of such a breach,
notwithstanding anything to the contrary herein, including the dispute
resolution procedures set forth in Section 2.7 and 14.7, the non-breaching party
shall be entitled to immediate injunctive relief in addition to any other
remedies it may have at law or in equity.

 

12.7 License. Targeted Genetics shall not use or employ any Intellectual
Property owned or controlled by Targeted Genetics in Processing Bulk Drug
Substance or otherwise in performing Services under this Agreement without the
prior written consent of GenVec. In the event that Intellectual Property owned
by Targeted Genetics is useful or required for Processing Bulk Drug Substance or
otherwise in performing Services under this Agreement, Targeted Genetics shall
so notify GenVec and at GenVec’s request negotiate in good faith a Change Order
and the fees associated with such Change Order, but in the absence of such a
Change Order, the first sentence of this Section shall apply. [*].

 

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ARTICLE XIII: INDEMNIFICATION AND INSURANCE

 

13.1 Indemnification by Targeted Genetics. Targeted Genetics shall defend,
indemnify and hold harmless GenVec, its Affiliates, directors, officers,
employees and agents from and against any Claim arising out of or resulting from
any (a) breach of its representations, warranties or obligations set forth in
this Agreement, (b) negligence, willful misconduct or breach of this Agreement
by Targeted Genetics, except to the extent that such breach, negligence or
willful misconduct arises out of or results from the breach of this Agreement by
GenVec or the negligence or willful misconduct of GenVec; (c) incorporation of
Targeted Genetics Materials into a Bulk Drug Substance; and (d) infringement or
violation of any patent, trade secret, copyright, trademark or other proprietary
rights with respect to Targeted Genetics Materials or Targeted Genetics’
performance hereunder, except to the extent such liabilities are those which
GenVec is obligated to indemnify pursuant to Section 13.2(d).

 

13.2 Indemnification by GenVec. GenVec shall defend, indemnify and hold harmless
Targeted Genetics, its Affiliates, directors, officers employees and agents from
and against any Claim arising out of or resulting from (a) any breach of its
representations, warranties or obligations set forth in this Agreement; (b) any
manufacture, sale, promotion, distribution or use of a product manufactured
using the Bulk Drug Substance, including, without limitation, product liability
or strict liability, except to the extent that such liability arises due to the
negligence, willful misconduct or breach of this Agreement by Targeted Genetics;
(c) GenVec’s exercise of control over the Processing under this Agreement, to
the extent that GenVec’s instructions or directions violate Applicable Law or
regulation; (d) infringement or violation of any patent, trade secret,
copyright, trademark or other proprietary rights of such third party in any
jurisdiction in the Territory by Targeted Genetics in manufacturing the Bulk
Drug Substance as the necessary result of Targeted Genetics’ compliance with the
Procedures (except to the extent such infringement relates to any portion of
such Procedures originating from or provided by Targeted Genetics) or use of
GenVec Materials in accordance with the Procedures, GenVec’s SOPs or GenVec’s
Specifications; (e) any negligence or willful misconduct by GenVec, except to
the extent that any of the foregoing arises out of or results from the breach by
Targeted Genetics of this Agreement, or the negligence or willful misconduct of
Targeted Genetics.

 

13.3 Indemnification Procedures.

 

(a) Notice. The indemnification obligations of either party set forth in this
Section 13.3 are conditioned upon the party entitled to indemnification under
this Agreement (the “Indemnified Party”) promptly notifying the other party from
whom the Indemnified Party is seeking indemnification (the “Indemnifying Party”)
in writing of any Claim of which the Indemnified Party becomes aware, except to
the extent the Indemnifying Party is not prejudiced by such failure. Thereafter,
the Indemnified Party will promptly deliver to the Indemnifying Party copies of
all notices and documents received by the Indemnified Party relating to the
Claim.

 

(b) Defense by Indemnifying Party. The Indemnifying Party shall have the right,
within ten (10) days after receipt of notice of the Claim, to assume the defense
of the Claim with counsel reasonably satisfactory to the Indemnified Party.

 

(c) Right to Participate and Retain Separate Counsel. The Indemnified Party will
have the right to participate in any such proceeding and to retain its own
counsel to participate in

 

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its defense in any such proceeding. The Indemnified Party shall pay for its own
counsel except to the extent representation of both parties by the same counsel
would be inappropriate due to an actual or potential conflict of interests
between them. In any such case and to such extent, the Indemnifying Party shall
be responsible to pay for the reasonable costs and expenses of the separate
counsel retained to participate in the defense of the Indemnified Party,
provided that such expenses are attributable to those Claims covered by the
indemnity provided hereunder.

 

(d) Cooperation. The Indemnified Party will cooperate in all reasonable respects
with the Indemnifying Party in connection with any Claims and the defense or
compromise thereof. Such cooperation will include the retention and (upon the
Indemnifying Party’s request) the provision to the Indemnifying Party of records
and information reasonably relevant to the Claim, making employees available on
a mutually convenient basis to provide additional information, and explanation
of any material provided under this Agreement. The Indemnified Part shall not
admit any liability with respect to settlement, compromise or discharge of the
Claim without the Indemnifying Party’s prior written consent; provided however,
that the Indemnified Party may make admissions of facts which it is reasonably
required to make.

 

(e) Settlement. The Indemnifying Party will have the right, in consultation with
the Indemnified Party, to settle those aspects of the Claim dealing only with
the payment of money and/or with other relief not affecting the activities of
the Indemnified Party, provided that the Indemnifying Party pays such money and
such settlement includes a general release of the Indemnified Party from the
Claim. In connection with any such defense or settlement, the Indemnifying Party
will not enter into a consent decree involving any admission, injunctive or
non-monetary relief or consent to an injunction without the Indemnified Party’s
prior written consent, which will not be unreasonably withheld or delayed.

 

13.4 Insurance.

 

(a) Targeted Genetics. Targeted Genetics shall, at its own cost and expense,
obtain and maintain in full force and effect the following insurance during the
Term of this Agreement: (i) Commercial General Liability insurance with
per-occurrence and general aggregate limits of not less than [*]; (ii) Products
and Completed Operations Liability Insurance with per-occurrence and general
aggregate limits of not less than [*]; (iii) Workers’ Compensation and
Employer’s Liability Insurance with statutory limits for Workers’ Compensation
and Employer’s Liability insurance limits of not less than [*]; (iv)
Professional Services Errors & Omissions Liability Insurance with per claim and
aggregate limits of not less than [*] covering sums that Targeted Genetics
becomes legally obligated to pay as damages resulting from claims made by GenVec
for errors or omissions committed in the conduct of the services outlined in
this Agreement. In the event that any of the required policies of insurance are
written on a claims made basis, then such policies shall be maintained during
the entire Term of this Agreement and for a period of not less than [*]
following the termination or expiration of this Agreement. Targeted Genetics
shall obtain a waiver from any insurance carrier with whom Targeted Genetics
carries Workers’ Compensation insurance releasing its subrogation rights against
GenVec. GenVec shall be named as an additional insured under the Commercial
General Liability and Products and Completed Operations Liability insurance
policies as respects the manufacturing services outlined in this Agreement.
Targeted Genetics shall furnish certificates of insurance for all of the above
noted policies and required additional insured status to GenVec

 

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as soon as practicable after the Effective Date of this Agreement and upon
renewal of any such policies. Each insurance policy that is required under this
Section shall be obtained from an insurance carrier with an A.M. Best rating of
at least A- VII.

 

(b) GenVec Insurance. GenVec shall, at its own cost and expense, obtain and
maintain in full force and effect the following insurance during the Term of
this Agreement: (i) Products and Completed Operations Liability Insurance with
per-occurrence and general aggregate limits of not less than [*]; and (ii)
Workers’ Compensation and Employer’s Liability Insurance with statutory limits
for Workers’ Compensation and Employer’s Liability insurance limits of not less
than [*]. In the event that any of the required policies of insurance are
written on a claims made basis, then such policies shall be maintained during
the entire Term of this Agreement and for a period of not less than [*]
following the termination or expiration of this Agreement. GenVec shall obtain a
waiver from any insurance carrier with whom GenVec carries Workers’ Compensation
insurance releasing its subrogation rights against Targeted Genetics. Targeted
Genetics shall be named as an additional insured under the Products and
Completed Operations Liability insurance policies as respects the Bulk Drug
Substance. GenVec shall furnish certificates of insurance for all of the above
noted policies and required additional insured status to Targeted Genetics as
soon as practicable after the Effective Date of this Agreement and upon renewal
of any such policies. Each insurance policy that is required under this Section
shall be obtained from an insurance carrier with an A.M. Best rating of at least
A- VII.

 

ARTICLE XIV: MISCELLANEOUS

 

14.1 Entire Agreement; Amendments. This Agreement is the entire understanding
between the parties and supersedes any prior contracts, agreements or
understanding (oral or written) of the parties with respect to the subject
matter hereof. No term of this Agreement may be amended except upon written
agreement of both parties, unless otherwise provided in this Agreement.

 

14.2 No Waiver. Failure by either party to insist upon strict compliance with
any term of this Agreement in one (1) or more instances will not be deemed to be
a waiver of its rights to insist upon such strict compliance with respect to any
subsequent failure.

 

14.3 Notices. Any notice from either party to the other party will be effective
upon receipt and must be personally delivered to such party or sent to such
party by deposit in the United States mail, first class, postage prepaid or
telecopy transmission (with written confirmation copy to follow via United
States mail), to the address for such party below or such other address as a
party may designate from time to time in accordance with this Section:

 

To GenVec:

  

GenVec, Inc.

    

65 West Watkins Mill Road

    

Gaithersburg, MD 20878

    

Attn: Vice President,

    

          Process Development and Clinical Supply

    

Facsimile: 240-632-0735

 

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With a copy to:

  

GenVec, Inc.

    

65 West Watkins Mill Road

    

Gaithersburg, MD 20878

    

Attn: Senior Vice President, Corporate Development

    

Facsimile: 240-632-0735

 

To Targeted Genetics:

  

Targeted Genetics Corporation

    

1100 Olive Way

    

Suite 100

    

Seattle, Washington 98101

    

Attn:Vice President,

    

          Process Sciences and Manufacturing

    

Facsimile: 206-223-0288

 

With a copy to:

  

Targeted Genetics Corporation

    

1100 Olive Way

    

Suite100

    

Attn: Legal Dept.

    

Facsimile: 206-521-4783

 

14.4 Successors and Assigns. This Agreement will be binding upon and inure to
the benefit of the parties, their successors and permitted assigns. Neither
party may assign this Agreement, in whole or in part, without the prior written
consent of the other party, except that either party may without the other
party’s consent assign this Agreement to a successor of all or substantially all
of the business or assets of the assigning company, and except that GenVec may
assign rights with respect to those products manufactured under this Agreement
to any company which acquires GenVec’s rights to, or the right to distribute,
all or some of such products.

 

14.5 Independent Contractors. The relationship of the parties is that of
independent contractors, and neither party will incur any debts or make any
commitments for the other party except to the extent expressly provided in this
Agreement. Nothing in this Agreement is intended to create or will be construed
as creating between the parties the relationship of joint ventures, co-partners,
employer/employee or principal and agent.

 

14.6 Further Assurances. The parties agree to execute, acknowledge and deliver
such further instruments and of all such other incidental acts as may be
reasonably necessary or appropriate to carry out the purpose and intent of this
Agreement.

 

14.7 Dispute Resolution. In the event of a Dispute that the parties are unable
to resolve through the Executive Committee (as set forth in Section 2.7), the
parties shall next attempt to resolve the Dispute by presenting it to their
respective Presidents, who shall in good faith consider and attempt to resolve
the Dispute (“Dispute Escalation”). Either party may initiate such Dispute
Escalation by delivering written notice to the other party demanding such
Dispute Escalation. If the parties remain unable to resolve such dispute within
thirty (30) days after delivery of such notice of Dispute Escalation, either
party may pursue any remedy it may have at law or in equity. Nothing herein or
in Section 2.7 shall prevent either party from seeking injunctive relief from a
court of competent jurisdiction at any time.

 

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14.8 Severability. If any term of this Agreement is declared invalid or
unenforceable by a court or other body of competent jurisdiction, the remaining
terms of this Agreement will continue in full force and effect.

 

14.9 Governing Law and Venue. This Agreement shall be governed by and construed
under the laws of the State of Maryland, excluding its conflicts of law
provisions. Courts of competent jurisdiction in Maryland shall have exclusive
venue and jurisdiction over any disputes arising under this Agreement.

 

14.10 Captions. The captions in this Agreement are for convenience only and are
not to be interpreted or construed as a substantive part of this Agreement.

 

14.11 Counterparts. This Agreement may be executed in one (1) or more
counterparts, each of which will be deemed an original but all of which together
will constitute one (1) and the same instrument.

 

14.12 Public Announcements. Upon execution of this Agreement, the parties may
publicize and disclose this Agreement through a press release in the form
attached as Exhibit H. Neither party will make any other press release or other
public disclosure regarding this Agreement or the transactions contemplated
hereby without the other party’s express prior written consent, except as
required under Applicable Law or by any governmental agency, in which case the
party required to make the press release or public disclosure shall use
commercially reasonable efforts to obtain the approval of the other party as to
the form, nature and extent of the press release or public disclosure prior to
issuing the press release or making the public disclosure. Once approved, the
language of the press release may be used in other contexts by either party in
any substantially similar form.

 

IN WITNESS WHEREOF, the parties have caused their duly authorized representative
to execute this Agreement effective as of the date first written above.

 

TARGETED GENETICS CORPORATION

    

GENVEC, INC.

By:

  

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By:

  

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Name:

  

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Name:

  

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Its:

  

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Its:

  

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EXHIBIT A

GENVEC MATERIALS

 

[*]

 

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EXHIBIT B

STATEMENT OF WORK

 

[*]

 

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EXHIBIT C

SPECIFICATIONS

 

[*]

 

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EXHIBIT D

QUALITY REQUIREMENTS

 

[*]

 

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EXHIBIT E

PERSONNEL

 

[*]

 

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EXHIBIT F

EQUIPMENT

 

[*]

 

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EXHIBIT G

PROCESSING FEES

 

[*]

 

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EXHIBIT H

PRESS RELEASE

 

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EXHIBIT I

MANUFACTURING CORE

 

[*]

 

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