Exhibit
      10.2

     

    REGISTRATION
      RIGHTS AGREEMENT

     

    This
      REGISTRATION RIGHTS AGREEMENT (this “Agreement”)
      is
      made as of January 8, 2007, by and among (i) Targeted Genetics Corporation,
      a
      Washington corporation (the “Company”),
      (ii)
      each person listed on Exhibit A
      attached
      hereto (collectively, the “Initial
      Investors”
and
      each individually, an “Initial
      Investor”),
      and
      (iii) each person or entity that subsequently becomes a party to this Agreement
      pursuant to, and in accordance with, the provisions of Section 13 hereof
      (collectively, the “Investor
      Permitted Transferees”
and
      each individually an “Investor
      Permitted Transferee”).

     

    WHEREAS,
      the Company has agreed to issue and sell to the Initial Investors, and the
      Initial Investors have agreed to purchase from the Company, an aggregate of
      approximately 2,180,000 shares (the “Purchased
      Shares”)
      of the
      Company’s common stock, $0.01 par value per share (the “Common
      Stock”),
      and
      warrants to purchase an aggregate of approximately 763,000 shares of Common
      Stock (each a “Warrant”
and
      together the “Warrants”),
      all
      upon the terms and conditions set forth in that certain Securities Purchase
      Agreement, dated of even date herewith, between the Company and the Initial
      Investors (the “Securities
      Purchase Agreement”);
      and

     

    WHEREAS,
      the terms of the Securities Purchase Agreement provide that it shall be a
      condition precedent to the closing of the transactions thereunder, for the
      Company and the Initial Investors to execute and deliver this
      Agreement.

     

    NOW,
      THEREFORE, in consideration of the premises and mutual covenants contained
      herein, the parties hereto hereby agree as follows:

     

    1.  DEFINITIONS.
      The
      following terms shall have the meanings provided therefor below or elsewhere
      in
      this Agreement as described below:

     

    “Board”
shall
      mean the board of directors of the Company.

     

    “Closing”
and
      “Closing
      Date”
shall
      have the meanings ascribed to such terms in the Securities Purchase
      Agreement.

     

    “Exchange
      Act”
shall
      mean the Securities Exchange Act of 1934, as amended, and all of the rules
      and
      regulations promulgated thereunder.

     

    “Investors”
shall
      mean, collectively, the Initial Investors and the Investor Permitted
      Transferees; provided,
      however,
      that
      the term “Investors”
shall
      not include any of the Initial Investors or any of the Investor Permitted
      Transferees that does not own or hold any Registrable Shares.

     

    “Supermajority
      Holders”
shall
      mean, at the relevant time of reference thereto, those Investors holding more
      than sixty-six and two-thirds percent (66 2/3%) of the Registrable Shares held
      by all of the Investors.

     

    “Qualifying
      Holder”
shall
      have the meaning ascribed thereto in Section 12 hereof. 

     

    
      
        
        

      

      
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    “Registrable
      Shares”
shall
      mean the Purchased Shares and the Underlying Shares, provided,
      however,
      such
      term shall not, after the Mandatory Registration Termination Date, include
      any
      of the Purchased Shares or Underlying Shares that become or have become eligible
      for resale without restrictions or volume limitations pursuant to Rule 144
      or
      pursuant to Regulation S.

     

    “Rule
      144”
shall
      mean Rule 144 promulgated under the Securities Act and any successor or
      substitute rule, law or provision.

     

    “SEC”
shall
      mean the Securities and Exchange Commission.

     

    “Securities
      Act”
shall
      mean the Securities Act of 1933, as amended, and all of the rules and
      regulations promulgated thereunder.

     

    “Underlying
      Shares”
shall
      mean the shares of Common Stock issuable upon exercise of the
      Warrants.

     

    2.  EFFECTIVENESS;
      TERMINATION.
      This
      Agreement shall become effective and legally binding only if the Closing occurs.
      This Agreement shall terminate and be of no further force or effect,
      automatically and without any action being required of any party hereto, upon
      the termination of the Securities Purchase Agreement pursuant to Section 7
      thereof.

     

    3.  MANDATORY
      REGISTRATION.

     

    (a)  Within
      ten (10) business days after the Closing Date, the Company will prepare and
      file
      with the SEC a registration statement on Form S-3 for the purpose of registering
      under the Securities Act all of the Registrable Shares for resale by, and for
      the account of, the Investors as selling shareholders thereunder (the
“Registration
      Statement”).
      The
      Registration Statement shall permit the Investors to offer and sell, on a
      delayed or continuous basis pursuant to Rule 415 under the Securities Act,
      any
      or all of the Registrable Shares. The Company agrees to use best efforts to
      cause the Registration Statement to become effective as soon as
      practicable.

     

    (b)  The
      Company shall be required to keep the Registration Statement effective until
      such date that is the earlier of (i) the date as of which all of the Purchasers
      may sell all of the Registrable Securities without restriction pursuant to
      Rule
      144(k) (or the successor rule thereto) promulgated under the Securities Act
      (assuming net exercise of the Warrants) or (ii) the date when all of the
      Registrable Shares registered thereunder shall have been sold, subject to
      extension as set forth below (such date is referred to herein as the
“Mandatory
      Registration Termination Date”).
      Thereafter, the Company shall be entitled to withdraw the Registration Statement
      and the Investors shall have no further right to offer or sell any of the
      Registrable Shares pursuant to the Registration Statement (or any prospectus
      relating thereto). In the event the right of the selling Investors to use the
      Registration Statement (and the prospectus relating thereto) is delayed or
      suspended pursuant to Sections 5(c) or 11 hereof, the Company shall be required
      to extend the Mandatory Registration Termination Date beyond the second
      anniversary of the Closing Date by the same number of days as such delay or
      Suspension Period (as defined in Section 11 hereof).

     

    
      
        
        

      

      
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    (c)  The
      offer
      and sale of the Registrable Shares pursuant to the Registration Statement shall
      not be underwritten.

     

    4.  PENALTIES/SUSPENSION
      OF THE REGISTRATION STATEMENT

     

    (a)  If
      a
      Registration Statement covering the Registrable Shares is not filed with the
      Commission on or prior to ten (10) business days after the Closing Date, the
      Company will make pro rata payments to each Investor, as liquidated damages
      and
      not as a penalty, in an amount equal to 1.5% of the aggregate amount invested
      by
      such Investor for each 30-day period or pro rata for any portion thereof
      following the date by which such Registration Statement should have been filed
      for which no Registration Statement is filed with respect to the Registrable
      Shares. The amounts payable as liquidated damages pursuant to this paragraph
      shall be paid, in cash in lawful money of the United States, within three (3)
      business days of the last day of each such 30-day period during which the
      Registration Statement should have been filed for which no Registration
      Statement was filed with respect to the Registrable Shares and shall not exceed
      in the aggregate 15% of the aggregate amount invested under the Securities
      Purchase Agreement. 

     

    (b)  The
      Company shall notify the Investors by facsimile or e-mail as promptly as
      practicable, and in any event, within twenty-four (24) hours, after the
      Registration Statement is declared effective and shall simultaneously provide
      the Investors with copies of any related prospectus to be used in connection
      with the sale or other disposition of the securities covered thereby. If (A)
      a
      Registration Statement covering the Registrable Shares is not declared effective
      by the SEC within ninety (90) days after the Closing Date (or one hundred twenty
      (120) days if reviewed by the SEC), or (B) after a Registration Statement has
      been declared effective by the SEC, sales cannot be made pursuant to
      such
      Registration Statement for any reason (including without limitation by reason
      of
      a stop order, or the Company’s
      failure
      to update the Registration Statement), but excluding the inability of any
      Investor to sell the Registrable Shares covered thereby due to market conditions
      and except as excused pursuant to Section 11 below, then
      the
      Company will make pro rata payments to each Investor, as liquidated damages
      and
      not as a penalty, in an amount equal to 1.5% of the aggregate amount invested
      by
      such Investor for each 30-day period or pro rata for any portion thereof
      following the date by which such Registration Statement should have been
      effective, but was not so effective or available (the “Blackout
      Period”).
      The
      amounts payable as liquidated damages pursuant to this paragraph shall be paid,
      in cash in lawful money of the United States, monthly within three (3) business
      days of the last day of each month following the commencement of the Blackout
      Period until the termination of the Blackout Period and shall not exceed in
      the
      aggregate 15% of the aggregate amount invested under the Securities Purchase
      Agreement. 

     

    (c)  No
      Investor shall be entitled to a payment pursuant to this Section 4 if
      effectiveness of a registration statement has been delayed or a prospectus
      has
      been unavailable as a result of (i) a failure by such Investor to promptly
      provide on request by the Company the information required under the Securities
      Purchase Agreement or this Agreement or requested by the SEC as a condition
      to
      effectiveness of the Registration Statement; (ii) the provision of inaccurate
      or
      incomplete information by such Investor; or (iii) a statement or determination
      of the SEC that any provision of the rights of the Investor under this Agreement
      are contrary to the provisions of the Securities Act. 

     

    
      
        
        

      

      
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    5.  OBLIGATIONS
      OF THE COMPANY.
      In
      connection with the Company’s obligation under Section 3 hereof to file the
      Registration Statement with the SEC and to use best efforts to cause the
      Registration Statement to become effective as soon as practicable, the Company
      shall, as expeditiously as reasonably possible:

     

    (a)  Prepare
      and file with the SEC such amendments and supplements to the Registration
      Statement and the prospectus used in connection therewith as may be necessary
      to
      keep the Registration Statement effective until the Mandatory Registration
      Termination Date, including without limitation such amendments and supplements
      as may be necessary to include any Investor Permitted Transferees in the
      Registration Statement and related prospectus;

     

    (b)  Furnish
      to the selling Investors such number of copies of a prospectus, including a
      preliminary prospectus, in conformity with the requirements of the Securities
      Act, and such other documents (including, without limitation, prospectus
      amendments and supplements as are prepared by the Company in accordance with
      Section 5(a) above) as the selling Investors may reasonably request in order
      to
      facilitate the disposition of such selling Investors’ Registrable
      Shares;

     

    (c)  Notify
      the selling Investors, at any time when a prospectus relating to the
      Registration Statement is required to be delivered under the Securities Act,
      of
      the happening of any event as a result of which the prospectus included in
      or
      relating to the Registration Statement contains an untrue statement of a
      material fact or omits any fact necessary to make the statements therein not
      misleading; and, thereafter, the Company will, subject to Section 11,
      promptly prepare (and, when completed, furnish an adequate number of copies
      to
      each selling Investor) a supplement or amendment to such prospectus so that,
      as
      furnished to the purchasers of such Registrable Shares, such prospectus will
      not
      contain an untrue statement of a material fact or omit to state any fact
      necessary to make the statements therein not misleading; provided that upon
      such
      notification by the Company, the selling Investors will not offer or sell
      Registrable Shares until the Company has notified the selling Investors that
      it
      has prepared a supplement or amendment to such prospectus and delivered copies
      of such supplement or amendment to the selling Investors (it being understood
      and agreed by the Company that the foregoing proviso shall in no way diminish
      or
      otherwise impair the Company’s obligation, subject to Section 11, to
      promptly prepare a prospectus amendment or supplement as above provided in
      this
      Section 5(c) and deliver copies of same as above provided in Section 5(b)
      hereof); and

     

    (d)  Use
      best
      efforts to register and qualify the Registrable Shares covered by the
      Registration Statement under such other securities or blue sky laws of such
      jurisdictions as shall be reasonably appropriate in the opinion of the Company,
      provided
      that the
      Company shall not be required in connection therewith or as a condition thereto
      to qualify to do business or to file a general consent to service of process
      in
      any such states or jurisdictions, and provided
      further
      that
      (notwithstanding anything in this Agreement to the contrary with respect to
      the
      bearing of expenses) if any jurisdiction in which any of such Registrable Shares
      shall be qualified shall require that expenses incurred in connection with
      the
      qualification therein of any such Registrable Shares be borne by the selling
      Investors, then the selling Investors shall, to the extent required by such
      jurisdiction, pay their pro rata share of such qualification
      expenses.

     

    
      
        
        

      

      
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    (e)  Subject
      to the terms and conditions of this Agreement, the Company shall use best
      efforts to (i) prevent the issuance of any stop order or other suspension of
      effectiveness of a Registration Statement, or the suspension of the
      qualification of any of the Registrable Shares for sale in any jurisdiction
      in
      the United States, and (ii) if such an order or suspension is issued, obtain
      the
      withdrawal of such order or suspension at the earliest practicable moment and
      notify each holder of Registrable Shares of the issuance of such order and
      the
      resolution thereof or its receipt of notice of the initiation or threat of
      any
      proceeding such purpose. In addition, the Company shall promptly notify each
      holder of Registrable Shares of a pending proceeding against the Company under
      Section 8A of the Securities Act in connection with the offering of the
      Registrable Shares.

     

    (f)  The
      Company shall (i) timely notify the Nasdaq Capital Market of the issuance
      of the Registrable Shares and (ii) engage a transfer agent and registrar to
      maintain the Company’s stock ledger for all Registrable Shares covered by the
      Registration Statement not later than the effective date of the Registration
      Statement.

     

    (g)  The
      Company shall file the Registration Statement and all amendments and supplements
      thereto electronically on EDGAR.

     

    6.  FURNISH
      INFORMATION.
      It
      shall be a condition precedent to the obligations of the Company to take any
      action pursuant to this Agreement that the selling Investors shall furnish
      to
      the Company such information regarding them and the securities held by them
      as
      the Company shall reasonably request and as shall be required in order to effect
      any registration by the Company pursuant to this Agreement. Each Investor shall
      promptly notify the Company of any changes in the information furnished to
      the
      Company. 

     

    7.  EXPENSES
      OF REGISTRATION.
      All
      expenses incurred in connection with the registration of the Registrable Shares
      pursuant to this Agreement (excluding underwriting, brokerage and other selling
      commissions and discounts), including without limitation all registration and
      qualification and filing fees, printing, and fees and disbursements of counsel
      for the Company, shall be borne by the Company.

     

    8.  DELAY
      OF REGISTRATION.
      The
      Investors shall not take any action to restrain, enjoin or otherwise delay
      any
      registration as the result of any controversy which might arise with respect
      to
      the interpretation or implementation of this Agreement.

     

    9.  INDEMNIFICATION.

     

    (a)  To
      the
      extent permitted by law, the Company will indemnify and hold harmless each
      selling Investor, any investment banking firm acting as a placement agent for
      the selling Investors, any broker/dealer acting on behalf of any selling
      Investors and each officer and director of such selling Investor, such placement
      agent, such broker/dealer and each person, if any, who controls such selling
      Investor, such placement agent or broker/dealer within the meaning of the
      Securities Act, against any losses, claims, damages or liabilities, joint or
      several, to which they may become subject under the Securities Act or otherwise,
      insofar as such losses, claims, damages or liabilities (or actions in respect
      thereof) arise out of or are based upon any untrue or alleged untrue statement
      of any material fact contained in the Registration Statement, in any preliminary
      prospectus or final prospectus relating thereto or in any amendments or
      supplements to the Registration Statement or any such preliminary prospectus
      or
      final prospectus, or arise out of or are based upon the omission or alleged
      omission to state therein a material fact required to be stated therein, or
      necessary to make the statements therein not misleading; and will reimburse
      such
      selling Investor, such placement agent, broker/dealer or any such officer,
      director or controlling person, for any legal or other expenses reasonably
      incurred by them in connection with investigating or defending any such loss,
      claim, damage, liability or action; provided,
      however,
      that
      the indemnity agreement contained in this Section 9(a) shall not apply to
      amounts paid in settlement of any such loss, claim, damage, liability or action
      if such settlement is effected without the consent of the Company (which consent
      shall not be unreasonably withheld), nor shall the Company be liable in any
      such
      case for any such loss, damage, liability or action to the extent that it arises
      out of or is based upon (i) an untrue statement or alleged untrue statement
      or
      omission made in connection with the Registration Statement, any preliminary
      prospectus or final prospectus relating thereto or any amendments or supplements
      to the Registration Statement or any such preliminary prospectus or final
      prospectus, in reliance upon and in conformity with written information
      furnished expressly for use in connection with the Registration Statement or
      any
      such preliminary prospectus or final prospectus by such Investors or (ii) an
      untrue statement or alleged untrue statement or omission in the Registration
      Statement or any prospectus that is corrected in any subsequent amendment or
      supplement to the Registration Statement or prospectus that was delivered to
      the
      selling Investor before the pertinent sale or sales by the selling
      Investor.

     

    
      
        
        

      

      
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    (b)  To
      the
      extent permitted by law, each selling Investor will severally and not jointly
      indemnify and hold harmless the Company, each of its directors, each of its
      officers who have signed the Registration Statement, each person, if any, who
      controls the Company within the meaning of the Securities Act, any investment
      banking firm acting as placement agent for the Company or the selling Investors,
      or any broker/dealer acting on behalf of the Company or any selling Investors
      and all other selling Investors against any losses, claims, damages or
      liabilities to which the Company or any such director, officer, controlling
      person, underwriter, or broker/dealer or such other selling Investor may become
      subject to, under the Securities Act or otherwise, insofar as such losses,
      claims, damages or liabilities (or actions in respect thereto) arise out of
      or
      are based upon any untrue or alleged untrue statement of any material fact
      contained in the Registration Statement or any preliminary prospectus or final
      prospectus, relating thereto or in any amendments or supplements to the
      Registration Statement or any such preliminary prospectus or final prospectus,
      or arise out of or are based upon the omission or alleged omission to state
      therein a material fact required to be stated therein or necessary to make
      the
      statements therein not misleading, in each case to the extent and only to the
      extent that such untrue statement or alleged untrue statement or omission or
      alleged omission (i) was made in the Registration Statement, in any preliminary
      prospectus or final prospectus relating thereto or in any amendments or
      supplements to the Registration Statement or any such preliminary prospectus
      or
      final prospectus, in reliance upon and in conformity with written information
      furnished by such selling Investor expressly for use in connection with the
      Registration Statement, or any preliminary prospectus or final prospectus or
      (ii) was corrected in any subsequent amendment or supplement to the Registration
      Statement or prospectus that was delivered to the selling Investor before the
      pertinent sale or sales by the selling Investor and such corrected amendment
      or
      supplement to the Registration Statement or prospectus was not delivered to
      the
      purchaser; and such selling Investor will reimburse any legal or other expenses
      reasonably incurred by the Company or any such director, officer, controlling
      person, placement agent, broker/dealer or other selling Investor in connection
      with investigating or defending any such loss, claim, damage, liability or
      action, provided,
      however,
      that
      the liability of each selling Investor hereunder shall be limited to the
      proceeds received by such selling Investor from the sale of Registrable Shares
      covered by the Registration Statement, and provided further,
      that
      the indemnity agreement contained in this Section 9(b) shall not apply to
      amounts paid in settlement of any such loss, claim, damage, liability or action
      if such settlement is effected without the consent of those selling Investor(s)
      against which the request for indemnity is being made (which consent shall
      not
      be unreasonably withheld).

     

    
      
        
        

      

      
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    (c)  Promptly
      after receipt by an indemnified party under this Section 9 of notice of the
      commencement of any action, such indemnified party will, if a claim in respect
      thereof is to be made against any indemnifying party under this Section 9,
      notify the indemnifying party in writing of the commencement thereof and the
      indemnifying party shall have the right to participate in and, to the extent
      the
      indemnifying party desires, jointly with any other indemnifying party similarly
      noticed, to assume at its expense the defense thereof with counsel mutually
      satisfactory to the indemnifying parties. In the event that the indemnifying
      party assumes any such defense, the indemnified party may participate in such
      defense with its own counsel and at its own expense, provided,
      however,
      that
      the counsel for the indemnifying party shall act as lead counsel in all matters
      pertaining to such defense or settlement of such claim and the indemnifying
      party shall only pay for such indemnified party’s expenses for the period prior
      to the date of its participation on such defense. The failure to notify an
      indemnifying party promptly of the commencement of any such action, if
      prejudicial to his ability to defend such action, shall relieve such
      indemnifying party of any liability to the indemnified party under this Section
      9, but the omission so to notify the indemnifying party will not relieve him
      of
      any liability which he may have to any indemnified party otherwise other than
      under this Section 9.

     

    (d)  Notwithstanding
      anything to the contrary herein, the indemnifying party shall not be entitled
      to
      settle any claim, suit or proceeding arising out of or based upon any untrue
      or
      alleged untrue statement of any material fact contained in the Registration
      Statement or any preliminary prospectus or final prospectus, relating thereto
      or
      in any amendments or supplements to the Registration Statement or any such
      preliminary prospectus or final prospectus, or arising out of or based upon
      the
      omission or alleged omission to state therein a material fact required to be
      stated therein or necessary to make the statements therein not misleading,
      unless in connection with such settlement the indemnified party receives an
      unconditional release with respect to the subject matter of such claim, suit
      or
      proceeding and such settlement does not contain any admission of fault by the
      indemnified party.

     

    (e)  If
      the
      indemnification provided for in this Section 9 is unavailable to or insufficient
      to hold harmless an indemnified party under subsection (a) or (b) above in
      respect of any losses, claims, damages or liabilities (or actions or proceedings
      in respect thereof) referred to therein, then each indemnifying party shall
      contribute to the amount paid or payable by such indemnified party as a result
      of such losses, claims, damages or liabilities (or actions in respect thereof)
      in such proportion as is appropriate to reflect the relative fault of the
      Company on the one hand and the Investors on the other in connection with the
      statements or omissions or other matters which resulted in such losses, claims,
      damages or liabilities (or actions in respect thereof), as well as any other
      relevant equitable considerations. The relative fault shall be determined by
      reference to, among other things, in the case of an untrue statement, whether
      the untrue statement relates to information supplied by the Company on the
      one
      hand or an Investor on the other and the parties’ relative intent, knowledge,
      access to information and opportunity to correct or prevent such untrue
      statement. The Company and the Investors agree that it would not be just and
      equitable if contribution pursuant to this subsection (e) were determined by
      pro
      rata allocation (even if the Investors were treated as one entity for such
      purpose) or by any other method of allocation which does not take into account
      the equitable considerations referred to above in this subsection (e). The
      amount paid or payable by an indemnified party as a result of the losses,
      claims, damages or liabilities (or actions in respect thereof) referred to
      above
      in this subsection (e) shall be deemed to include any legal or other expenses
      reasonably incurred by such indemnified party in connection with investigating
      or defending any such action or claim. No person guilty of fraudulent
      misrepresentation (within the meaning of Section 11(f) of the Securities Act)
      shall be entitled to contribution from any person who was not guilty of such
      fraudulent misrepresentation. The Investors’ obligations in this subsection to
      contribute are several in proportion to their sales of Registrable Shares to
      which such loss relates and not joint and the liability of each Investor shall
      be limited to the proceeds received by such Investor from the sale of
      Registrable Shares covered by the Registration Statement.

     

    
      
        
        

      

      
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    (f)  The
      parties to this Agreement hereby acknowledge that they are sophisticated
      business persons who were represented by counsel during the negotiations
      regarding the provisions hereof including, without limitation, the provisions
      of
      this Section 9, and are fully informed regarding said provisions. They further
      acknowledge that the provisions of this Section 9 fairly allocate the risks
      in
      light of the ability of the parties to investigate the Company and its business
      in order to assure that adequate disclosure is made in the Registration
      Statement as required by the Securities Act and the Exchange Act. 

     

    10.  REPORTS
      UNDER THE EXCHANGE ACT.
      With a
      view to making available to the Investors the benefits of Rule 144 and any
      other
      rule or regulation of the SEC that may at any time permit the Investors to
      sell
      the Purchased Shares to the public without registration, the Company agrees
      to
      use best efforts: (i) to make and keep public information available as those
      terms are understood in Rule 144, (ii) to file with the SEC in a timely manner
      all reports and other documents required to be filed by an issuer of securities
      registered under the Securities Act or the Exchange Act, (iii) as long as any
      Investor owns any Purchased Shares, to furnish in writing upon such Investor’s
      request a written statement by the Company that it has complied with the
      reporting requirements of Rule 144 and of the Securities Act and the Exchange
      Act, and to furnish to such Investor a copy of the most recent annual or
      quarterly report of the Company, and such other reports and documents so filed
      by the Company as may be reasonably requested in availing such Investor of
      any
      rule or regulation of the SEC permitting the selling of any such Purchased
      Shares without registration and (iv) undertake any additional actions reasonably
      necessary to maintain the availability of the Registration Statement or the
      use
      of Rule 144.

     

    11.  SUSPENSION.
      Notwithstanding anything in this Agreement to the contrary, in the event (i)
      of
      any request by the SEC or any other federal or state governmental authority
      during the period of effectiveness of the Registration Statement for amendments
      or supplements to a Registration Statement or related prospectus or for
      additional information; (ii) of the issuance by the SEC or any other federal
      or
      state governmental authority of any stop order suspending the effectiveness
      of a
      Registration Statement or the initiation of any proceedings for that purpose;
      (iii) of the receipt by the Company of any notification with respect to the
      suspension of the qualification or exemption from qualification of any of the
      Registrable Shares for sale in any jurisdiction or the initiation of any
      proceeding for such purpose; (iv) of any event or circumstance which
      necessitates the making of any changes in the Registration Statement or related
      prospectus, or any document incorporated or deemed to be incorporated therein
      by
      reference, so that, in the case of the Registration Statement, it will not
      contain any untrue statement of a material fact or any omission to state a
      material fact required to be stated therein or necessary to make the statements
      therein not misleading, and that in the case of the prospectus, it will not
      contain any untrue statement of a material fact or any omission to state a
      material fact required to be stated therein or necessary to make the statements
      therein, in the light of the circumstances under which they were made, not
      misleading; or (v) that the Board has made the good faith determination (A)
      that
      continued use by the selling Investors of the Registration Statement for
      purposes of effecting offers or sales of Registrable Shares pursuant thereto
      would require, under the Securities Act, premature disclosure in the
      Registration Statement (or the prospectus relating thereto) of material,
      nonpublic information concerning the Company, its business or prospects or
      any
      proposed material transaction involving the Company, (B) that such premature
      disclosure would be materially adverse to the Company, its business or prospects
      or any such proposed material transaction or would make the successful
      consummation by the Company of any such material transaction significantly
      less
      likely and (C) that it is therefore essential to suspend the use by the
      Investors of such Registration Statement (and the prospectus relating thereto)
      for purposes of effecting offers or sales of Registrable Shares pursuant
      thereto, then the Company shall furnish to the selling Investors a certificate
      signed by the President or Chief Executive Officer of the Company setting forth
      one or more of the above described circumstances, and the right of the selling
      Investors to use the Registration Statement (and the prospectus relating
      thereto) shall be suspended for a period (the “Suspension
      Period”)
      of not
      more than thirty (30) days after delivery by the Company of the certificate
      referred to above in this Section 11; provided that
      the
      Company shall be entitled to no more than two such Suspension Periods during
      the
      twelve (12) month period commencing on the Closing Date and during each
      subsequent twelve (12) month period until the Mandatory Registration Termination
      Date (including any extension thereto). During the Suspension Period, none
      of
      the Investors shall offer or sell any Registrable Shares pursuant to or in
      reliance upon the Registration Statement (or the prospectus relating thereto)
      and each of the Investors shall keep the fact of the above described certificate
      and its contents confidential. The Company shall use best efforts to terminate
      any Suspension Period as promptly as practicable. 

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    12.  TRANSFER
      OF REGISTRATION RIGHTS.
      None of
      the rights of any Investor under this Agreement shall be transferred or assigned
      to any person unless (i) such person is a Qualifying Holder (as defined below),
      and (ii) such person agrees to become a party to, and bound by, all of the
      terms
      and conditions of, this Agreement by duly executing and delivering to the
      Company an Instrument of Adherence in the form attached as Exhibit B
      hereto.
      For purposes of this Section 12, the term “Qualifying
      Holder”
shall
      mean, with respect to any Investor, (i) any partner or member thereof, (ii)
      any
      corporation, partnership or limited liability company controlling, controlled
      by, or under common control with, such Investor or any partner or member
      thereof, or (iii) any other direct transferee from such Investor of at least
      50%
      of those Registrable Shares held by such Investor or issuable upon exercise
      of
      Warrants held by such Investor. None of the rights of any Investor under this
      Agreement shall be transferred or assigned to any person (including, without
      limitation, a Qualifying Holder) that acquires Registrable Shares in the event
      that and to the extent that such person is eligible to resell such Registrable
      Shares pursuant to Rule 144(k) of the Securities Act or may otherwise resell
      such Registrable Shares pursuant to an exemption from the registration
      provisions of the Securities Act. After any transfer in accordance with this
      Section 12, the rights and obligations of an Investor as to any transferred
      Registrable Shares shall be the rights and obligations of the Investor Permitted
      Transferee holding such Registrable Shares.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    13.  ENTIRE
      AGREEMENT.
      This
      Agreement, the Warrant and the Securities Purchase Agreement constitute and
      contain the entire agreement and understanding of the parties with respect
      to
      the subject matter hereof, and supersede any and all prior negotiations,
      correspondence, agreements or understandings with respect to the subject matter
      hereof.

     

    14.  MISCELLANEOUS.

     

    (a)  This
      Agreement may not be amended, modified or terminated, and no rights or
      provisions may be waived, except with the written consent of the Supermajority
      Holders and the Company.

     

    (b)  This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York and without regard to any conflicts of laws concepts which
      would apply the substantive law of some other jurisdiction, and shall be binding
      upon and inure to the benefit of the parties hereto and their respective heirs,
      personal representatives, successors or assigns, provided
      that the
      terms and conditions of Section 14 hereof are satisfied. This Agreement shall
      also be binding upon and inure to the benefit of any transferee of any of the
      Purchased Shares provided
      that the
      terms and conditions of Section 14 hereof are satisfied. Notwithstanding
      anything in this Agreement to the contrary, if at any time any Investor shall
      cease to own any Purchased Shares, all of such Investor’s rights under this
      Agreement shall immediately terminate.

     

    (c)  Any
      notice required or permitted by this Agreement shall be in writing and shall
      be
      sufficient upon receipt, when delivered personally or by courier, overnight
      delivery service or confirmed facsimile, or three (3) business days after being
      deposited in the regular mail as certified or registered mail (airmail if sent
      internationally) with postage prepaid, if such notice is addressed to the party
      to be notified at such party’s address or facsimile number as set forth
      below:

     

    (i)
      All
      correspondence to the Company shall be addressed as follows:

     

    1100
      Olive Way, Suite 100

    Seattle,
      WA 98101

    Attention:
       H.
      Stewart Parker

     Chief
      Executive Officer & President

    Facsimile: (206)
      623-7064

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

       

    

    with
      a
      copy to:

     

    Orrick,
      Herrington & Sutcliffe LLP

    719
      Second Avenue, Suite 900

    Seattle,
      WA 98104

    Attention:
       Stephen
      M. Graham, Esq.

    Facsimile: (206)
      839-4301

     

    (ii)
      All
      correspondence to any Investor shall be sent to such Investor at the address
      set
      forth in Exhibit A.

     

    (iii)
      Any
      entity may change the address to which correspondence to it is to be addressed
      by written notification as provided for herein.

     

    (d)  The
      parties acknowledge and agree that in the event of any breach of this Agreement,
      remedies at law may be inadequate, and each of the parties hereto shall be
      entitled to seek specific performance of the obligations of the other parties
      hereto and such appropriate injunctive relief as may be granted by a court
      of
      competent jurisdiction.

     

    (e)  Should
      any part or provision of this Agreement be held unenforceable or in conflict
      with the applicable laws or regulations of any jurisdiction, the invalid or
      unenforceable part or provisions shall be replaced with a provision which
      accomplishes, to the extent possible, the original business purpose of such
      part
      or provision in a valid and enforceable manner, and the remainder of this
      Agreement shall remain binding upon the parties hereto.

     

    (f)  This
      Agreement may be executed in a number of counterparts, each of which shall
      be
      deemed an original and all of which together shall constitute one
      instrument.

     

    [Signature
      Page to Follow]

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the parties hereto have executed this Registration Rights
      Agreement as of the date and year first above written.

    
      	 	 	 
	 	
              TARGETED
                GENETICS CORPORATION

            
	 
 	 
 	 
 
	
            	By:  	/s/
              H.
              Stewart Parker
	 	
              

              Name:
                H. Stewart Parker

              Title:
                Chief Executive Officer & President

            
	 	
            


    

    
       

    

    THE
      INITIAL INVESTOR’S SIGNATURE TO THE INVESTOR QUESTIONNAIRE DATED OF EVEN DATE
      HEREWITH SHALL CONSTITUTE THE INITIAL INVESTOR’S SIGNATURE TO THIS REGISTRATION
      RIGHTS AGREEMENT.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    Investor
      Names and Addresses

     

     

      
        	
                SRB
                  Greenway Capital, L.P. 

              	 
	
                Attn:
                  Steve Becker

              	 
	
                300
                  Crescent Court, Suite 1111 

              	 
	
                Dallas,
                  TX 75201

              	 
	 	 
	
                SRB
                  Greenway Capital, Q.P.,
                  L.P.

              	 
	
                Attn:
                  Steve Becker 

              	 
	
                300
                  Crescent Court, Suite
                  1111

              	 
	
                Dallas,
                  TX 75201

              	 
	 	 
	
                SRB
                  Greenway Capital International 

              	 
	
                Attn:
                  Steve Becker

              	 
	
                300
                  Crescent Court, Suite 1111 

              	 
	
                Dallas,
                  TX 75201

              	 
	 	 
	
                Millennium
                  Partners, L.P.

              	 
	
                c/o
                  Millennium Management, L.L.C. 

              	 
	
                666
                  Fifth Avenue, 8th Floor 

              	 
	
                New
                  York, NY 10103 

              	 
	
                Attention:
                  Terry Feeney 

              	 
	
                Fax:
                  (212) 841-4141

              	 
	 	 
	
                Pacific
                  Growth Equity Management, LLC 

              	 
	
                One
                  Bush Street, Suite 1700 

              	 
	
                San
                  Francisco, CA 94104 

              	 
	
                Attn:
                  Howard Bernstein

              	 
	 	 
	
                Special
                  Situations Fund III, Q.P.,
                  L.P.

              	 
	
                Attn:
                  Austin Marxe

              	 
	
                527
                  Madison Avenue 

              	 
	
                Suite
                  2600

              	 
	
                New
                  York, NY 10022

              	 
	 	 
	
                Special
                  Situations Life Sciences Fund, L.P.

              	 
	
                Attn:
                  Austin Marxe

              	 
	
                527
                  Madison Avenue

              	 
	
                Suite
                  2600

              	 
	
                New
                  York, NY 10022

              	 
	 	 
	
                Tang
                  Capital Partners, L.P.

              	 
	
                Attn:
                  Kevin Tang 

              	 
	
                4401
                  Eastgate Mall 

              	 
	
                San
                  Diego, CA 92121

              	 


      

    

    


    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    


    EXHIBIT
      B

     

    Instrument
      of Adherence

     

    Reference
      is hereby made to that certain Registration Rights Agreement, dated as of
      January 8, 2007, among Targeted Genetics Corporation, a Washington corporation
      (the “Company”),
      the
      Initial Investors and the Investor Permitted Transferees, as amended and in
      effect from time to time (the “Registration
      Rights Agreement”).
      Capitalized terms used herein without definition shall have the respective
      meanings ascribed thereto in the Registration Rights Agreement.

     

    The
      undersigned, in order to become the owner or holder of [___________] shares
      of
      common stock, par value $0.01 per share (the “Common
      Stock”),
      of
      the Company, hereby agrees that, from and after the date hereof, the undersigned
      has become a party to the Registration Rights Agreement in the capacity of
      an
      Investor Permitted Transferee, and is entitled to all of the benefits under,
      and
      is subject to all of the obligations, restrictions and limitations set forth
      in,
      the Registration Rights Agreement that are applicable to Investor Permitted
      Transferees. This Instrument of Adherence shall take effect and shall become
      a
      part of the Registration Rights Agreement immediately upon
      execution.

     

    Executed
      as of the date set forth below under the laws of New York.

    
      	 	 	 
	 	
            
	 
 	 
 	 
 
	
            	Signature: 
              	
            
	 	
              

              Name:

              Title:

            
	 	
            
	
              Accepted:

            	 
	 	 
	
              [                                                           
                ]

            	 
	 	 
	 	 
	By:	 
	
              
                

              

              Name:

              Title:

            	 
	 	 
	
              Date:
                _________, 200__

            	 


    

    


    
      
        
        

      

      
        B-1