AMENDED
      AND RESTATED SENIOR MANAGEMENT EMPLOYMENT AGREEMENT

     

    AMENDED
      AND RESTATED SENIOR MANAGEMENT EMPLOYMENT AGREEMENT, dated as of the 11th
      day of March, 2008, between TARGETED GENETICS CORPORATION, a Washington
      corporation (the “Company”), and Barrie J. Carter (“Executive”).

     

    RECITALS

     

    A. Executive
      is currently employed by the Company or one of its Subsidiaries.

     

    B. The
      Board
      of Directors of the Company (the “Board”) has determined that it is appropriate
      to reinforce the continued attention and dedication of certain members of the
      Company’s management, including Executive, to their assigned duties without
      distraction in potentially disturbing circumstances arising from the possibility
      of a Change in Control of the Company, as defined in Schedule A attached
      hereto.

     

    AGREEMENTS

     

    NOW,
      THEREFORE, in consideration of the covenants and agreements hereinafter set
      forth, the Company and Executive agree as follows:

     

    1.  DEFINITIONS

     

    Terms
      capitalized in this Agreement which are not otherwise defined shall have the
      meanings assigned to such terms in Schedule A attached hereto.

     

    2.  EFFECTIVENESS;
      PRIOR AGREEMENT

     

    Except
      with respect to Sections 6 through 9 of this Agreement which shall be
      effective immediately, this Agreement shall become effective immediately upon
      the occurrence of a Change in Control, provided that Executive is employed
      by
      the Company immediately prior to such Change in Control. This Agreement revokes
      and supersedes the Senior Management Employment Agreement between Executive
      and
      Company dated October 18, 1996 which shall be of no further force and
      effect.

     

    3.  TERM

     

    Unless
      earlier terminated as provided herein, the initial term of this Agreement shall
      be from the date hereof until the second anniversary date of this Agreement;
      provided, however, that, unless terminated as provided herein or there shall
      have occurred a Change in Control, on each annual anniversary date of this
      Agreement this Agreement shall automatically be renewed for successive two-year
      terms. In the event of a Change in Control, unless earlier terminated as
      provided herein, this Agreement shall continue in effect until the second
      anniversary date of the Change in Control at which time this Agreement shall
      expire.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.  BENEFITS
      UPON CHANGE IN CONTROL

     

    Executive
      shall be entitled to the following payments and benefits following a Change
      in
      Control, whether or not a Termination occurs:

     

    (A)  SALARY
      AND BENEFITS.
      While
      employed by the Company or any Subsidiary, Executive shall (i) receive an
      annual base salary no less than the Executive’s annual base salary in effect
      immediately prior to the date that the Change in Control occurs, including
      any
      salary which has been earned but deferred, and an annual bonus equal to at
      least
      the average of the three annual bonuses paid to Executive in the three years
      prior to the Change in Control (which bonus shall vest on the last day of the
      applicable bonus year and be paid no later than the 15th day of the third month
      following the later of the end of the calendar year or the Company’s taxable
      year in which the bonus vests), and (ii) be entitled to participate in all
      employee expense reimbursement, incentive, savings and retirement plans,
      practices, policies and programs (including any Company plan qualified under
      Section 401(a) of the Code) available to other peer executives of the
      Company and its Subsidiaries, but in no event shall the benefits provided to
      Executive under this item (ii) be less favorable, in the aggregate, than the
      most favorable of those plans, practices, policies or programs in effect
      immediately prior to the date that the Change in Control occurs.

     

    (B)  WELFARE
      PLAN BENEFITS.
      While
      employed by the Company or any Subsidiary, the Company shall at the Company’s
      expense (except for the amount, if any, of any required employee contribution
      which would have been necessary for Executive to contribute as an active
      employee under the plan or program as in effect on the date of the Change in
      Control) continue to cover Executive (and his or her dependents) under, or
      provide Executive (and his or her dependents) with insurance coverage no less
      favorable than, the Company’s life, disability, health, dental and any other
      employee welfare benefit plans or programs, as in effect on the date of the
      Change in Control (such benefits, the “Welfare Benefits”).

     

    (C)  DEATH
      OF EXECUTIVE.
      In the
      event of Executive’s death prior to Termination, but while employed by the
      Company or any Subsidiary, his or her spouse, if any, or otherwise the personal
      representative of his or her estate shall be entitled to receive
      (i) Executive’s salary at the rate then in effect through the date of
      death, as provided under the Company’s pay policy, (ii) any Accrued
      Benefits for the periods of service prior to the date of death, and
      (iii)  payment of the applicable COBRA premiums, if any, for
      Executive’s dependents, provided the Company receives adequate substantiation of
      such COBRA coverage.

     

    (D)  DISABILITY
      OF EXECUTIVE.
      In the
      event of Executive’s Disability prior to Termination, but while employed by the
      Company or any Subsidiary, Executive shall be entitled to receive (i) his
      or her salary at the rate then in effect through the date of the determination
      of Disability, as provided under the Company’s pay policy, (ii) any Accrued
      Benefits for the periods of service prior to the date of the determination
      of
      Disability, (iii) payments under the Company’s short and long term
      disability plans following the determination of Disability, and
      (iv) payment of the applicable COBRA premiums, if any, for Executive
      and Executive’s dependents, provided the Company receives adequate
      substantiation of such COBRA coverage. 

     

    
      
        
        

      

      
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    (E)  CAUSE;
      UPON EXPIRATION OF THIS AGREEMENT; OTHER THAN FOR GOOD
      REASON.
      If,
      prior to Termination, Executive’s employment shall be terminated by the Company
      for Cause or upon expiration of this Agreement or by Executive other than for
      Good Reason, Executive shall be entitled to receive (i) his or her salary
      at the rate then in effect through the date of such termination, as provided
      under the Company’s pay policy, and (ii) any Accrued Benefits for the
      periods of service prior to the date of such termination.

     

    (F)  WITHHOLDING.
      All
      payments under this Section 4 are subject to applicable federal and state
      payroll withholding or other applicable taxes.

     

    5.  PAYMENTS
      AND BENEFITS UPON TERMINATION

     

    Executive
      shall be entitled to the following payments and benefits following
      Termination:

     

    (A)  TERMINATION
      PAYMENT.
      In
      recognition of past services to the Company by Executive, the Company shall
      make
      a lump sum payment in cash to Executive as severance pay equal to 1.5 times
      the
      sum of: (i) Executive’s annual base salary in effect immediately prior to
      the date that either a Change in Control shall occur or such date of
      Termination, whichever salary is higher, provided that if Executive is a
      part-time employee on the date of Termination then Executive’s base salary in
      effect immediately prior to the date of Termination shall be used in calculating
      the payment to which Executive may be entitled under this Section 5(a);
      plus (ii) a percentage of Executive’s annual base salary specified in
      subparagraph (i) above, which percentage is equal to the percentage bonus paid
      to Executive for the fiscal year ended immediately prior to the Change in
      Control; provided, however, that if Termination occurs prior to the
      determination of such percentage for a fiscal year that has ended or if
      Executive has not received a percentage bonus in the previous year, such
      percentage shall be ten percent (10%). All payments under this Section 5(a)
      (the “Termination Payments”) shall be paid within ten (10) business days
      following the date of Executive’s separation from service (within the meaning of
      Section 409A of the Internal Revenue Code (the “Code”)).

     

    (B)  CERTAIN
      ADDITIONAL PAYMENTS BY THE COMPANY.
      Notwithstanding the foregoing, if all or any portion of the Termination Payments
      either alone or together with all other payments and benefits which Executive
      receives or is then entitled to receive (pursuant to this Agreement or
      otherwise) from the Company or any Subsidiary (all such payments and benefits,
      including the Termination Payments, the “Termination Benefits”), would
      constitute a Parachute Payment, then the Payments to Executive under
      Section 5(a) shall be increased (such increase, a “Gross-Up Payment”), but
      only to the extent necessary to ensure that, after payment by Executive of
      all
      taxes (including any interest or penalties imposed with respect to such taxes),
      including, without limitation, any income taxes and Excise Tax imposed upon
      the
      Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal
      to
      the Excise Tax imposed upon the Termination Benefits. The foregoing calculations
      shall be made, at the Company’s expense, by the Company and Executive. If no
      agreement on the calculations is reached within thirty (30) business days after
      the date of Termination, then the accounting firm which regularly audits the
      financial statements of the Company (the “Auditors”) shall review the
      calculations. The determination of such firm shall be conclusive and binding
      on
      all parties and the expense for such accountants shall be paid by the Company.
      Pending such determination, the Company shall continue to make all other
      required payments to Executive at the time and in the manner provided herein.
      The Gross-Up Payment shall be made as soon as reasonably practicable and shall
      in no event be made later than the end of the calendar year next following
      the
      calendar year in which Executive remits the related taxes.

     

    
      
        
        

      

      
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    As
      a
      result of the uncertainty in the application of Section 4999 of the Code,
      it is possible that Gross-Up Payments will have been made by the Company which
      should not have been made (an “Overpayment”) or that additional Gross-Up
      Payments which will not have been made by the Company should have been made
      (an
“Underpayment”). If it is determined by the Company and Executive, or, if no
      agreement is reached by the Company and Executive, the Auditors, that an
      Overpayment has been made, such Overpayment shall be treated for all purposes
      as
      a loan to Executive which Executive shall repay to the Company, together with
      interest at the applicable federal rate provided for in section 7872(f)(2)
      of
      the Code. In the event that the Company and Executive, or, if no agreement
      is
      reached by the Company and Executive, the Auditors, determine that an
      Underpayment has occurred, such Underpayment shall promptly be paid by the
      Company to or for the benefit of Executive, together with interest at the
      applicable federal rate provided for in section 7872(f)(2)(A) of the Code.
      The
      Company and Executive shall give each other prompt written notice of any
      information that could reasonable result in the determination that an
      Overpayment or Underpayment has been made. Any Underpayment shall be made as
      soon as reasonably practicable and shall in no event be made later than the
      end
      of the calendar year next following the calendar year in which Executive remits
      the related taxes.

     

    (C)  ACCRUED
      BENEFITS.
      The
      Company shall make a lump sum payment in cash to Executive in the amount of
      any
      Accrued Benefits for the periods of service prior to the date of
      Termination.

     

    (D)  WELFARE
      PLAN BENEFITS.
      For a
      period of one year following the date of Termination, the Company shall pay
      a
      portion of  the applicable COBRA premiums, if any, for Executive and
      Executive’s dependents equal to the Company-paid portion of comparable active
      employee coverage as in effect on the date of Termination,
      provided the Company receives adequate substantiation of
      such COBRA coverage. Notwithstanding the foregoing, if Executive is
      provided by another employer during such one-year period with health benefits
      that are substantially comparable to the active employee coverage as
      in effect on the date of Termination (including with respect to the
      amount of employer premium subsidy), the Company’s obligation under this
      paragraph shall cease. 

     

    (E)  DEATH
      OF EXECUTIVE.
      In the
      event of Executive’s death subsequent to Termination and prior to receiving all
      benefits and payments provided for by this Section 5, such benefits shall be
      paid to his or her spouse, if any, or otherwise to the personal representative
      of his or her estate, in accordance with the payment terms described above,
      unless Executive has otherwise directed the Company in writing prior to his
      or
      her death.

     

    (F)  EXCLUSIVE
      SOURCE OF SEVERANCE PAY.
      Benefits
      provided hereunder shall replace the amount of any severance payments to which
      Executive would otherwise be entitled under any severance plan or policy
      generally available to employees of the Company.

     

    
      
        
        

      

      
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    (G)  NONSEGREGATION.
      No
      assets of the Company need be segregated or earmarked to represent the liability
      for benefits payable hereunder. The rights of any person to receive benefits
      hereunder shall be only those of a general unsecured creditor.

     

    (H)  WITHHOLDING.
      All
      payments under this Section 5 are subject to applicable federal and state
      payroll withholding or other applicable taxes.

     

    6.  ARBITRATION

     

    Any
      dispute or controversy arising under or in connection with this Agreement shall
      be settled exclusively by arbitration in Seattle, Washington, in accordance
      with
      the Rules of the American Arbitration Association then in effect. Judgment
      may
      be entered on the arbitrator’s award in any jurisdiction.

     

    7.  CONFLICT
      IN BENEFITS

     

    Except
      for the amount of any severance payments to which Executive would otherwise
      be
      entitled under any severance plan or policy generally available to employees
      of
      the Company, this Agreement is not intended to and shall not adversely affect,
      limit or terminate any other agreement or arrangement between Executive and
      the
      Company presently in effect or hereafter entered into, including any employee
      benefit plan under which Executive is entitled to benefits.

     

    8.  TERMINATION

     

    (A)  TERMINATION
      PRIOR TO A CHANGE IN CONTROL.

     

    (i)  At
      any
      time prior to a Change in Control, the Company may terminate this Agreement
      upon
      nine (9) months’ prior written notice in the form of a Notice of Termination,
      and this Agreement shall terminate upon the effective date specified in such
      Notice of Termination; provided, however, such Notice of Termination shall
      have
      no force or effect in the event of the occurrence of a Change in Control prior
      to such effective date.

     

    (ii)  At
      any
      time prior to a Change in Control, Executive may terminate this Agreement upon
      thirty (30) days’ prior written notice in the form of a Notice of Termination,
      and this Agreement shall terminate upon the effective date specified in such
      Notice of Termination notwithstanding the occurrence of a Change in Control
      prior to such effective date.

     

    (B)  TERMINATION
      AFTER A CHANGE IN CONTROL.
      After a
      Change in Control, either party may terminate this Agreement upon thirty (30)
      days’ prior written notice in the form of a Notice of Termination.

     

    (C)  EFFECT
      OF TERMINATION.
      Notwithstanding the termination or expiration of this Agreement, the Company
      shall remain liable for any rights or payments arising prior to such termination
      to which Executive is entitled under this Agreement.

     

     

    
      
        
        

      

      
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    9.  MISCELLANEOUS

     

    (A)  AMENDMENT.
      This
      Agreement may not be amended except by written agreement between Executive
      and
      the Company.

     

    (B)  NO
      MITIGATION.
      All
      payments and benefits to which Executive is entitled under this Agreement shall
      be made and provided without offset, deduction or mitigation on account of
      income Executive could or may receive from other employment or otherwise, except
      as provided in Section 5(d) hereof.

     

    (C)  EMPLOYMENT
      NOT GUARANTEED.
      Nothing
      contained in this Agreement, and no decision as to the eligibility for benefits
      or the determination of the amount of any benefits hereunder, shall give
      Executive any right to be retained in the employ of the Company or rehired,
      and
      the right and power of the Company to dismiss or discharge any employee for
      any
      reason is specifically reserved. Except as expressly provided herein, no
      employee or any person claiming under or through him or her shall have any
      right
      or interest herein, or in any benefit hereunder.

     

    (D)  LEGAL
      EXPENSES.
      In
      connection with any litigation, arbitration or similar proceeding, whether
      or
      not instituted by the Company or Executive, with respect to the interpretation
      or enforcement of any provision of this Agreement, the prevailing party shall
      be
      entitled to recover from the other party all costs and expenses, including
      reasonable attorneys’ fees and disbursements, in connection with such
      litigation, arbitration or similar proceeding. The Company shall pay prejudgment
      interest on any money judgment obtained by Executive as a result of such
      proceedings, calculated at the published commercial interest rate of Seafirst
      Bank for its best customers, as in effect from time to time from the date that
      payment should have been made to Executive under this Agreement.

     

    (E)  NOTICES.
      Any
      notices required under the terms of this Agreement shall be effective when
      mailed, postage prepaid, by certified mail and addressed to, in the case of
      the
      Company:

     

    Targeted
      Genetics Corporation

    1100
      Olive Way, Suite 100

    Seattle,
      WA 98101

    Attention:
      Chief Financial Officer

     

    and
      to,
      in the case of Executive:

     

    Barrie
      J.
      Carter

    1218
      -
      3rd
      Avenue
      N.

    Seattle,
      WA 98109

    


    Either
      party may designate a different address by giving written notice of change
      of
      address in the manner provided above.

     

    (F)  WAIVER;
      CURE.
      No
      waiver or modification in whole or in part of this Agreement, or any term or
      condition hereof, shall be effective against any party unless in writing and
      duly signed by the party sought to be bound. Any waiver of any breach of any
      provision hereof or any right or power by any party on one occasion shall not
      be
      construed as a waiver of, or a bar to, the exercise of such right or power
      on
      any other occasion or as a waiver of any subsequent breach. Any breach of this
      Agreement may be cured by the breaching party within ten (10) days of the date
      that such breaching party shall have received written notice of such breach
      from
      the party asserting such breach.

     

    
      
        
        

      

      
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    (G)  BINDING
      EFFECT; SUCCESSORS.
      Subject
      to the provisions hereof, nothing in this Agreement shall prevent the
      consolidation of the Company with, or its merger into, any other corporation,
      or
      the sale by the Company of all or substantially all of its properties and
      assets, or the assignment of this Agreement by the Company in connection with
      any of the foregoing actions. This Agreement shall be binding upon, inure to
      the
      benefit of and be enforceable by the Company and Executive and their respective
      heirs, legal representatives, successors and assigns. If the Company shall
      be
      merged into or consolidated with another entity, the provisions of this
      Agreement shall be binding upon and inure to the benefit of the entity surviving
      such merger or resulting from such consolidation. The Company shall require
      any
      successor (whether direct or indirect, by purchase, merger, consolidation or
      otherwise) to all or substantially all of the business or assets of the Company,
      including the successor to all or substantially all of the business or assets
      of
      any Subsidiary, division or profit center of the Company, to expressly assume
      and agree to perform this Agreement in the same manner and to the same extent
      that the Company would be required to perform it if no such succession had
      taken
      place. The provisions of this Section 10(g) shall continue to apply to each
      subsequent employer of Executive hereunder in the event of any subsequent
      merger, consolidation or transfer of assets of such subsequent
      employer.

     

    (H)  SEPARABILITY.
      Any
      provision of this Agreement which is held to be unenforceable or invalid in
      any
      respect in any jurisdiction shall be ineffective in such jurisdiction to the
      extent that it is unenforceable or invalid without affecting the remaining
      provisions hereof, which shall continue in full force and effect. The
      enforceability or invalidity of any provision of this Agreement in one
      jurisdiction shall not invalidate or render unenforceable such provision in
      any
      other jurisdiction.

     

    (I)  SECTION
      409A. This
      Agreement is not intended to constitute a “nonqualified deferred compensation
      plan” within the meaning of Section 409A of the Code. Notwithstanding the
      foregoing, in the event this Agreement or any compensation or benefit paid
      to
      Executive hereunder is deemed to be subject to Section 409A of the Code,
      Executive and the Company agree to negotiate in good faith to adopt such
      amendments that are necessary to comply with Section 409A of the Code or to
      exempt such compensation or benefits from Section 409A of the Code. In
      addition, to the extent (i) any compensation or benefits to which Executive
      becomes entitled under this agreement, or any agreement or plan referenced
      herein, in connection with Executive’s termination of employment with the
      Company constitute deferred compensation subject to Section 409A of the
      Code and (ii) Executive is deemed at the time of such termination of
      employment to be a “specified employee” under Section 409A of the Code,
      then such compensation or benefits shall not be made or commence until the
      date
      that is six months after the date of Executive’s “separation from service” (or,
      if earlier, the date of the Executive’s death); provided, however, that such
      deferral shall only be effected to the extent required to avoid adverse tax
      treatment to Executive, including (without limitation) the additional twenty
      percent (20%) tax for which Executive would otherwise be liable under
      Section 409A(a)(1)(B) of the Code in the absence of such deferral. During
      any period compensation or benefits to Executive are deferred pursuant to the
      foregoing, Executive shall be entitled to interest on such deferral at a per
      annum rate equal to the highest rate of interest applicable to six (6)-month
      money market accounts offered by the following institutions: Citibank N.A.,
      Wells Fargo Bank, N.A. or Bank of America, on the date of such “separation from
      service.” Upon the expiration of the applicable deferral period, any
      compensation or benefits which would have otherwise been paid during that period
      (whether in a single sum or in installments) in the absence of this section
      shall be paid to Executive or Executive’s beneficiary, if applicable, in one
      lump sum.

     

    (J)  GOVERNING
      LAW.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      state of Washington applicable to contracts made and to be performed
      therein.

     

     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the Company and Executive have executed this Agreement as
      of
      the day and year first above written.

     

    
      	 	 	 
	 	TARGETED
              GENETICS CORPORATION
	 
 	 
 	 
 
	 	By:  	/s/ Jeremy
              L.
              Curnock Cook
	 	
              
Jeremy
              L. Curnock Cook
	 	Title:
              Chairman of the Board  


    

     

    
      	 	 	 
	 	EXECUTIVE:
	 
 	 
 	 
 
	 	By:  	/s/ Barrie
              J.
              Carter
	 	
              
Barrie
              J. Carter
	 	Title:
              Executive Vice President and Chief  Scientific
              Officer 


    

     

     

     

               

     

     

    
      
        
        

      

      
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    Schedule
      A

     

    CERTAIN
      DEFINITIONS

     

    As
      used
      in this Agreement, and unless the context requires a different meaning, the
      following terms have the meanings indicated:

     

    “Accrued
      Benefits” means the aggregate of any compensation previously deferred by
      Executive (together with any accrued interest or earnings thereon), any accrued
      vacation pay and, in the case of Termination, if the date of Termination occurs
      after the end of a Fiscal Year for which a bonus is payable to Executive, such
      bonus, in each case to the extent previously earned and not paid, plus an amount
      equal to the product of the bonus paid to Executive the prior Fiscal Year and
      a
      fraction, the numerator of which is the number of days since the end of the
      prior Fiscal Year, and the denominator of which is 365. Accrued Benefits payable
      under this Agreement shall be paid within ten (10) business days following
      the
      Executive’s separation from service, provided that any compensation previously
      deferred by Executive (together with any accrued interest or earnings thereon)
      shall be paid in accordance with the terms of such deferred compensation.


     

    “Beneficial
      Owner” and “Beneficial Ownership” have the meanings set forth in Rules 13d-3 and
      13d-5 of the General Rules and Regulations promulgated under the Exchange
      Act.

     

    “Board
      Change” means that a majority of the seats (other than vacant seats) on the
      Board have been occupied by individuals who were neither (a) nominated or
      appointed by a majority of the Incumbent Directors nor (b) nominated or
      appointed by directors so nominated or appointed.

     

    “Business
      Combination” means a reorganization, merger or consolidation or sale of
      substantially all of the assets of the Company.

     

    “Cause”
      means (a) willful misconduct on the part of Executive that has a materially
      adverse effect on the Company and its Subsidiaries, taken as a whole,
      (b) Executive’s engaging in conduct which could reasonably result in his or
      her conviction of a felony or a crime against the Company or involving substance
      abuse, fraud or moral turpitude, or which would materially compromise the
      Company’s reputation, as determined in good faith by a written resolution duly
      adopted by the affirmative vote of not less than two-thirds of all of the
      directors who are not employees or officers of the Company, or
      (c) unreasonable refusal by Executive to perform the duties and
      responsibilities of his or her position in any material respect. No action,
      or
      failure to act, shall be considered willful or unreasonable if it is done by
      Executive in good faith and with reasonable belief that his or her action or
      omission was in the best interests of the Company.

     

    “Change
      in Control” means, and shall be deemed to occur upon the happening of, any one
      of the following:

     

    (a)  A
      Board
      Change; or

     

    (b)  The
      acquisition (whether directly or indirectly, beneficially or of record) by
      any
      Person of (i) fifteen percent (15%) or more of the combined voting power of
      the then outstanding voting securities of the Company entitled to vote generally
      in the election of directors, which acquisition is not approved in advance
      by a
      majority of the Incumbent Directors; or (ii) thirty-three percent (33%) or
      more of the combined voting power of the then outstanding voting securities
      of
      the Company entitled to vote generally in the election of directors, which
      acquisition has been approved in advance by a majority of the Incumbent
      Directors; provided, however, that the following acquisitions shall not
      constitute a Change in Control: (x) any acquisition by the Company,
      (y) any acquisition by any employee benefit plan (or related trust)
      sponsored or maintained by the Company or any company controlled by the Company,
      or (z) any acquisition by any company pursuant to a reorganization, merger
      or consolidation, if, following such reorganization, merger or consolidation,
      the conditions described in clauses (i), (ii) and (iii) of the following
      subsection (c) are satisfied; or

     

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

     

    (c)  Approval
      by the shareholders of the Company of a reorganization, merger or consolidation
      in which the Company is not the continuing or surviving corporation, or pursuant
      to which shares of the Company’s Common Stock are converted into cash,
      securities or other property, unless following such reorganization, merger
      or
      consolidation (i) at least sixty-six and two-thirds percent (66-2/3%) of
      the then outstanding shares of common stock of the company resulting from such
      reorganization, merger or consolidation and the combined voting power of the
      then outstanding voting securities of such company entitled to vote generally
      in
      the election of directors is then beneficially owned, directly or indirectly,
      by
      all or substantially all of the individuals and entities who were the beneficial
      owners of the Company’s voting securities immediately prior to such
      reorganization, merger or consolidation, (ii) no Person (excluding the
      Company, any employee benefit plan (or related trust) of the Company or such
      company resulting from such reorganization, merger or consolidation and any
      Person beneficially owning, immediately prior to such reorganization, merger
      or
      consolidation, directly or indirectly, thirty-three percent (33%) or more of
      the
      Company’s voting securities) beneficially owns, directly or indirectly,
      thirty-three percent (33%) or more of, respectively, the then outstanding shares
      of common stock of the company resulting from such reorganization, merger or
      consolidation or the combined voting power of the then outstanding voting
      securities of such company entitled to vote generally in the election of
      directors, and (iii) at least a majority of the members of the board of
      directors of the company resulting from such reorganization, merger or
      consolidation were members of the Incumbent Board at the time of the execution
      of the initial agreement providing for such reorganization, merger or
      consolidation; or

     

    (d)  Approval
      by the shareholders of the Company of (i) any plan or proposal for
      liquidation or dissolution of the Company or (ii) any sale, lease, exchange
      or other transfer in one transaction or a series of transactions of all or
      substantially all of the assets of the Company other than to a company with
      respect to which following such sale or other disposition (A) at least
      sixty-six and two-thirds percent (66-2/3%) of the then outstanding shares of
      common stock of such company and the combined voting power of the then
      outstanding voting securities of such company entitled to vote generally in
      the
      election of directors is then beneficially owned, directly or indirectly, by
      all
      or substantially all of the individuals and entities who were the beneficial
      owners of the Company’s voting securities immediately prior to such sale or
      other disposition, (B) no Person (excluding the Company and any employee
      benefit plan (or related trust) of the Company or such company and any Person
      beneficially owning, immediately prior to such sale or other disposition,
      directly or indirectly, thirty-three percent (33%) or more of the Company’s
      voting securities) beneficially owns, directly or indirectly, thirty-three
      percent (33%) or more of, respectively, the then outstanding shares of common
      stock of such company and the combined voting power of the then outstanding
      voting securities of such company entitled to vote generally in the election
      of
      directors, and (C) at least a majority of the members of the board of
      directors of such company were approved by a majority of the Incumbent Board
      at
      the time of the execution of the initial agreement or action of the Board
      providing for such sale or other disposition of assets of the
      Company.

     

     

    
      
        
        

      

      
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    “Code”
      means the Internal Revenue Code of 1986, as amended.

     

    “Disability”
      means that (a) a person has been incapacitated by bodily injury or physical
      or mental disease so as to be prevented thereby from performance of his or
      her
      duties with the Company for one hundred twenty (120) days in any twelve (12)
      month period, and (b) such person is disabled for purposes of any and all
      of the plans or programs of the Company or any Subsidiary that employs Executive
      under which benefits, compensation or awards are contingent upon a finding
      of
      disability. The determination with respect to whether Executive is suffering
      from such a Disability will be determined by a mutually acceptable physician
      or,
      if there is no physician mutually acceptable to the Company and Executive,
      by a
      physician selected by the then Dean of the University of Washington Medical
      School.

     

    “Exchange
      Act” means the Securities Exchange Act of 1934, as amended.

     

    “Excise
      Tax” means the excise tax, including any interest or penalties thereon, imposed
      by Section 4999 of the Code.

     

    “Fiscal
      Year” means the twelve (12) month period ending on December 31 in each year
      (or such other fiscal year period established by the Board).

     

    “Good
      Reason” means, without Executive’s express written consent:

     

    (a)  the
      assignment to Executive of duties, or limitation of Executive’s
      responsibilities, materially inconsistent with Executive’s duties and
      responsibilities with the Company or any Subsidiary that employs Executive
      as
      such duties and responsibilities existed immediately prior to the date of the
      Change in Control, or

     

    (b)  failure
      by the Company to pay in any material respect, or material reduction by the
      Company of, Executive’s annual base salary, as reflected in the Company’s
      payroll records for Executive’s last pay period immediately prior to the Change
      in Control;

     

    (c)  the
      Company materially reduces Executive’s bonus described in Section 4(A)(i);


     

    (d)  the
      Company requires that Executive relocate to a distance more than thirty (30)
      miles from the Company’s present location in Seattle, Washington or such other
      location where Executive is employed by the Company prior to being asked to
      relocate; or

     

    (e)  the
      material breach of any material provision of this Agreement by the Company,
      including, without limitation, failure by the Company to bind any successor
      to
      the Company to the terms and provisions of this Agreement in accordance with
      Section 9(g) of this Agreement.

     

    
      
        
        

      

      
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    To
      have
      Good Reason to resign, Executive must first notify the Company in writing of
      the
      reason(s) Executive believes Good Reason exists within 90 days of the initial
      existence thereof and provide (30) days for the Company to cure. The parties
      intend that this “Good Reason” trigger qualify as an involuntary trigger under
      Treasury Regulation Section 1.409A-1(n)(2)(i).

     

    “Incumbent
      Director” means a member of the Board who has been either (a) nominated by
      a majority of the directors of the Company then in office or (b) appointed
      by directors so nominated, but excluding, for this purpose, any such individual
      whose initial assumption of office occurs as a result of either an actual or
      threatened election contest (as such terms are used in Rule 14a-11 of Regulation
      14A promulgated under the Exchange Act) or other actual or threatened
      solicitation of proxies or consents by or on behalf of a Person other than
      the
      Board.

     

    “Notice
      of Termination” means a written notice to Executive or to the Company, as the
      case may be, which shall indicate those specific provisions in this Agreement
      relied upon and which sets forth in reasonable detail the facts and
      circumstances claimed to provide a basis for the termination of Executive’s
      employment constituting a Termination, if any, under the provision so
      indicated.

     

    “Parachute
      Payment” means any payment deemed to constitute a “parachute payment” as defined
      in Section 280G of the Code.

     

    “Person”
      means any individual, entity or group within the meaning of Section 3(a)(9)
      or
      of Section 13(d)(3) (as in effect on the date of this Agreement) of the Exchange
      Act.

     

    “Subsidiary”
      with respect to the Company has the meaning set forth in Rule 12b-2 of the
      General Rules and Regulations promulgated under the Exchange Act.

     

    “Termination”
      means, following the occurrence of any Change in Control by the Company,
      (a) the involuntary termination of the employment of Executive for any
      reason other than death, Disability or for Cause or (b) the termination of
      employment by Executive for Good Reason.

     

    “Voting
      Securities” means the voting securities of the Company entitled to vote
      generally in the election of directors.

     

    


    
      
        
        

      

      
        A-4