Document:

Q2 2003 Exhibit 10.3

NOTE:  Information in this document marked with an "[*]" has been omitted and filed separately
with the Commission.  Confidential treatment has been requested with respect to the omitted portions.

Exhibit 10.3

 

PATENT ASSIGNMENT AND LICENSE AGREEMENT

 

 

by and among

 

NOVARTIS AG

hereinafter "Novartis"

GENETIC THERAPY, INC.

hereinafter "Genetic Therapy"

and

CELL GENESYS, INC.

hereinafter "Cell Genesys"

 

 [*] Certain information on this page has been omitted and filed separately wit the Commission.
Confidential treatment has been requested with respect to the omitted portions.

As used herein, Novartis, Genetic Therapy and Cell Genesys shall be referred
to, collectively, as the "Parties," and, individually, as a "Party." 

 

WITNESSETH

 

WHEREAS, Novartis and Genetic Therapy own and license from Third Parties
certain patents related to oncolytic adenovirus vectors for use in therapies for
cancer treatment;

WHEREAS, the Parties have agreed to enter into this Agreement in connection
with the consummation of the transactions under the Subscription Agreement.

NOW, THEREFORE, the Parties agree as follows:

1.Definitions

All capitalized terms used, but not otherwise defined below or in the
preamble and recitals above, shall have their meanings set forth in the
Definitions Appendix attached hereto as Exhibit F.

"Agreement" shall mean this Patent Assignment and License Agreement, together
with all Exhibits attached hereto.

"Assigned Patents" shall mean the Patents, wholly owned by Novartis or
Genetic Therapy, identified on Exhibit A attached hereto.

"Effective Date" shall mean the Closing of the transactions contemplated
under the Subscription Agreement.

"Improvements" shall mean any and all improvements and inventions, whether
patentable or not, (a) made to the technology claimed by or disclosed in the
Transaction Patents, and (b) related to the development and commercialization of
the Products, including, but not limited to (i) the performance or efficacy of
the Products, (ii) reducing any side effects, drug interactions or other adverse
effects, and (iii) reducing the cost and/or increase the efficiency or
productivity of the manufacturing and production processes.

"[*] Patents" shall mean the Patents, jointly owned by Novartis or Genetic
Therapy and [*] identified on Exhibit C attached hereto.

"Licensed Patents" shall mean the Patents, wholly owned by Novartis or
Genetic Therapy, identified on Exhibit B attached hereto.

"Materials" shall mean the following in the possession or under the control
of Novartis or Genetic Therapy as of the Effective Date: (i) cell lines used to
produce the following adenovirus vectors: [*]; (ii) the following adenovirus
vectors: [*]; (iii) documentation relating to the production and maintenance of
the foregoing cell lines and vectors; (iv) prosecution files and associated
docket list for the Assigned Patents; (v) a docket list for the Licensed Patents
for which Cell Genesys will receive copies of prosecution documents; and (vi)
laboratory notebooks containing invention documentation relevant to any of the
foregoing identified vectors.

"[*] Patents" shall mean the Patents, jointly owned by Novartis or Genetic
Therapy and the [*] or licensed by Novartis or Genetic Therapy from the [*],
identified on Exhibit C attached hereto.

"Sublicensed Patents" shall means the Patents (other than the [*] Patents),
licensed to Novartis or Genetic Therapy by Third Parties, identified on Exhibit
C attached hereto.

"Target Technology IP" shall mean the target technology intellectual property
identified on Exhibits D attached hereto.

 [*] Certain information on this page has been omitted and filed separately wit the Commission.
Confidential treatment has been requested with respect to the omitted portions.

"Transaction Patents" shall mean, collectively, the Assigned Patents,
Licensed Patents, [*] Patents, [*] Patents and the Sublicensed Patents.

2.Assignment of Patents

2.1Conveyance. Novartis and Genetic Therapy hereby assign,
convey and transfer to Cell Genesys all their respective right, title and
interest in and to the Assigned Patents. Novartis and Genetic Therapy hereby
authorize the Commissioner of Patents of the United States and any official of
any state or foreign country whose duty it is to issue patents, to issue patents
from any patent applications included in the Assigned Patents to Cell
Genesys.

2.2License Back. Cell Genesys hereby grants to Novartis: (a) an
exclusive, worldwide, royalty-free, paid-up, perpetual, irrevocable right and
license to make, have made, use, sell, offer for sale, import and export the
technology and products relating to a [*] for any use and exploitation outside
the Field; and (b) a non-exclusive, worldwide, royalty-free, paid-up, perpetual,
irrevocable right and license to use the technology and products relating to a
[*] for internal research and pre-clinical development activities within the
Field for the benefit of Novartis.

2.3Transfer Rights. The right and license granted under Section
2.2(a) may be freely assigned, sublicensed or otherwise transferred by Novartis
to any Person. The right and license granted under Section 2.2(b) may be
sublicensed by Novartis only to its Affiliates, and to its authorized
contractors, subcontractors and other agents in connection with Novartis'
internal research and pre-clinical development activities for the benefit of
Novartis. The right and license granted under Section 2.2(b) may not be assigned
or otherwise transferred by Novartis without the prior written consent of Cell
Genesys; provided, however, Novartis may freely assign or otherwise transfer
such right and license to any Affiliate, or to any Person in connection with a
merger or sale of all or substantially all of its assets to which this right and
license pertains.

2.4Licensing Rights. Cell Genesys shall have the right to license
any of the Assigned Patents to: (i) Novartis under the Development License and
Commercialization Agreement, and (ii) to its authorized licensees, contractors,
subcontractors and agents solely in connection with the development or
commercialization of the Products (including Refused Product Candidates or
Rejected Products) in the Field for Cell Genesys' benefit. Cell Genesys shall
not license any of the Assigned Patents to a Third Party without the prior
written consent of Novartis unless such license is in connection with the
development or commercialization of Products (including Refused Product
Candidates or Rejected Products) on behalf of Cell Genesys. 

3.Patent License of Licensed Patents

3.1Grant of License of Licensed Patents. Subject to the terms
and conditions of this Agreement, Novartis hereby grants to Cell Genesys an
exclusive, worldwide right and license under the Licensed Patents to make, have
made, use, sell, offer to sell, import and export the Products within the Field.
Cell Genesys acknowledges and agrees that: (i) royalties shall be payable for
the right and license granted in this Section 3.1 under the Option Agreement,
and (ii) the exclusivity granted above shall be subject to the rights granted to
Novartis under the Development License and Commercialization Agreement. 

3.2Sublicensing Rights. Cell Genesys shall have the right to
sublicense any of the rights granted in Section 3.1 to: (i) Novartis under the
Development License and Commercialization Agreement, and (ii) to its authorized
licensees, contractors, subcontractors and agents solely in connection with the
development or commercialization of the Products (including Refused Product
Candidates or Rejected Products) in the Field for Cell Genesys' benefit. Cell
Genesys shall not sublicense any of the foregoing right and license to a Third
Party without the prior written consent of Novartis unless such sublicense is in
connection with the development or commercialization of Products (including
Refused Product Candidates or Rejected Products) on behalf of Cell Genesys. Cell
Genesys shall ensure that all of its sublicensees shall abide by the applicable
terms and conditions of this Agreement. Cell Genesys shall identify to Novartis
all of its sublicensees under this Agreement, and shall, upon the request of
Novartis, provide copies of the relevant sublicense agreements.

3.3Retained Rights. Cell Genesys acknowledges and agrees that all
rights not expressly granted to Cell Genesys by Novartis under Sections 3.1, 3.2
and 3.3 are retained exclusively by Novartis. Cell Genesys further acknowledges
and agrees that Novartis shall retain the non-exclusive, worldwide, fully
licensable and transferable rights under the Licensed Patents to use the
technology claimed or disclosed in the Licensed Patents for internal research
and pre-clinical development activities within the Field for the benefit of
Novartis.

 [*] Certain information on this page has been omitted and filed separately wit the Commission.
Confidential treatment has been requested with respect to the omitted portions.

4.Patent License of Third Party Patents

4.1License Grant of [*] Patents. Subject to the terms
and conditions of this Agreement and the acquisition of the necessary consents
and the fulfillment of necessary conditions precedent in accordance with Section
4.3 below, Novartis and Genetic Therapy hereby grant to Cell Genesys a non-
exclusive, worldwide right and license under the [*] Patents to make, have made,
use, sell, offer to sell, import and export the Products within the Field. 

4.2Sublicense Grants. Subject to the terms and conditions of this
Agreement and the acquisition of the necessary consents and the fulfillment of
necessary conditions precedent in accordance with Section 4.3 below, Novartis
and Genetic Therapy hereby grant to Cell Genesys (to the extent permitted under
the agreements identified on Exhibit E attached hereto):

(a)a worldwide right and sublicense under the [*] Patents to make,
have made, use, sell, offer to sell, import and export the Products within the
Field; and

(b)a right and license/sublicense under the applicable Sublicensed
Patents to make, have made, use, sell, offer to sell, import and export the
Products within the Field.

4.3Limitations. Cell Genesys acknowledges and agrees that the
license granted under Section 4.1 and the licenses/sublicenses granted under
Section 4.2 shall be subject to obtaining any necessary consents or fulfilling
other conditions precedent to such a grant as required under the applicable
agreements identified under Exhibit E, and as required under applicable Law.
Each Party shall cooperate with each other to obtain such consents and to
fulfill such conditions precedent as soon as reasonably practicable after the
Effective Date. Novartis or Genetic Therapy shall use commercially reasonable
efforts to maintain the license/sublicenses of the Sublicensed Patents granted
under Section 4.2(b) in effect in the event of a termination, transfer or
assignment of the applicable license agreements as identified in Exhibit E. Each
Party shall cooperate with each other with respect to payment and reporting
obligations under such license agreements. With respect to payment and reports
from Cell Genesys to the Third Party licensor under such license agreements,
Novartis shall forward such payments and reports as required under such license
agreements. Cell Genesys further acknowledge and agrees that, except as provided
above, Novartis shall have no other obligations or responsibilities with respect
to any of the foregoing or that any of the license/sublicenses under Section 4.2
will be or remain effective. Novartis shall provide true and correct copies of
the agreements identified under Exhibit E attached hereto as of the Effective
Date.

4.4Assumed Obligations. Cell Genesys agrees that it shall meet all
of its obligations and other responsibilities to Novartis and applicable Third
Parties with respect to the license granted under Section 4.1 and the
licenses/sublicenses granted under Section 4.2, including, without limitation,
meeting all of Cell Genesys' obligations under the agreements identified under
Exhibit E, and assuming and reimbursing Novartis for all costs, including
royalties and other fees, under the agreements identified under Exhibit E
hereto.

4.5Royalties Payable to Third Parties. With respect to any
royalties and fees payable by Novartis to Third Parties for the sublicenses
granted under Section 4.2, Cell Genesys shall reimburse Novartis for such
royalties and fees.

4.6Retained Rights. Cell Genesys acknowledges and agrees that all
rights not expressly granted to Cell Genesys by Novartis or Genetic Therapy
under Sections 4.1 and 4.2 are retained exclusively by Novartis or Genetic
Therapy. Cell Genesys further acknowledges and agrees that Novartis shall retain
the non-exclusive, worldwide, fully licensable and transferable rights under the
[*] Patents, [*] Patents and the Sublicensed Patents to use the technology
claimed or disclosed in the [*] Patents, [*] Patents and the Sublicensed Patents
for internal research and pre-clinical development activities within the Field
for the benefit of Novartis.

 [*] Certain information on this page has been omitted and filed separately wit the Commission.
Confidential treatment has been requested with respect to the omitted portions.

5.Certain Obligations of the Parties

5.1Delivery of Materials. Except as otherwise mutually agreed
by the Parties, Novartis shall deliver to Cell Genesys the prosecution files and
associated docket list for the Assigned Patents within forty-five (45) Days from
the Effective Date, and Novartis shall deliver to Cell Genesys the remainder of
the Materials as soon as practicable.

5.2Due Diligence. Cell Genesys shall use commercially reasonable
efforts to develop and commercialize the Products, including, without
limitation, under its obligations under the Option Agreement.

5.3Further Assurances. Each Party covenants and agrees that it
will, upon the reasonable request of the other Party, execute and deliver, or
cause to be executed or delivered, any and all documents and take any and all
actions that may be necessary or desirable to perfect the assignment, conveyance
and transfer of the Assigned Patents and the grant of licenses to the Licensed
Patents within thirty (30) Days of such request. In the event that any Patent
wholly owned by Novartis or Genetic Therapy as of the Effective Date that claims
adenovirus vectors [*] is not licensed to Cell Genesys hereunder, such Patents
will be automatically licensed to Cell Genesys under Section 3.1 and the Parties
shall amend Exhibit B to include such Patents.

5.4Confidentiality. Each Party shall hold this Agreement and the
terms and conditions herein strictly confidential and shall not disclose the
existence thereof nor any copy of this Agreement to any Person without the prior
written permission of the other Party, except to the extent required under
Law.

6.Acknowledgments

6.1Consideration. The Parties acknowledge and agree that the
consideration for this Agreement is the mutual promises and covenants set forth
in this Agreement and in the Subscription Agreement.

6.2Ownership. Cell Genesys acknowledges that Novartis owns all
right, title and interest in and to the Licensed Patents, except to the extent
such rights and interests are expressly granted to Cell Genesys by Novartis
hereunder.

7.Improvements

Except to the extent provided in the Development License and
Commercialization Agreement and any limitations, restrictions or obligations to
applicable Third Parties with respect to the Transaction Patents, all right,
title and interest in and to all Improvements made by (or on behalf of) a Party
shall be owned exclusively by such Party.

8.Prosecution and Maintenance 

8.1Assigned Patents. Cell Genesys shall, at its discretion,
maintain all Assigned Patents in full force and effect, and prosecute all
applications included in the Assigned Patents to grant and issuance. At the
request of Cell Genesys, Novartis shall provide reasonable cooperation in
connection with such prosecution or maintenance. Cell Genesys shall reimburse
Novartis for any reasonable out-of-pocket expenses or costs incurred in
connection with such cooperation. Cell Genesys shall keep Novartis informed on
an ongoing basis regarding prosecution of the patent applications and
maintenance of the patents included in the Assigned Patents and any actions
which require to be taken in relation thereto. Cell Genesys shall keep Novartis
informed of all filings related to such prosecution or maintenance reasonably in
advance of any relevant actions and deadlines and shall consider in good faith
the requests and suggestions of Novartis with respect to strategies for filing,
prosecuting, maintaining and extending the Assigned Patents. 

8.2Licensed Patents. Novartis shall, at its discretion, maintain
all Licensed Patents in full force and effect, and prosecute all applications
included in the Licensed Patents to grant and issuance. At the request of
Novartis, Cell Genesys shall provide reasonable cooperation in connection with
such prosecution or maintenance. Novartis shall reimburse Cell Genesys for any
reasonable out-of-pocket expenses or costs incurred in connection with such
cooperation. Novartis shall keep Cell Genesys informed on an ongoing basis and
shall furnish to Cell Genesys copies of relevant documents regarding substantive
matters related to the filing and prosecution of patent applications and
maintenance of patents included in the Licensed Patents in the Core Countries,
and any actions which require to be taken in relation thereto. Novartis shall
keep Cell Genesys informed of all such filings related to such prosecution
reasonably in advance of any relevant actions and deadlines and take reasonable
account of all comments received from Cell Genesys in relation thereto.

 [*] Certain information on this page has been omitted and filed separately wit the Commission.
Confidential treatment has been requested with respect to the omitted portions.

In the event that Novartis elects not to file, prosecute or maintain any
patent application or patent within the Licensed Patents or to pay any fee
related thereto, in any country, Novartis shall promptly notify Cell Genesys of
such election, but in no case later than thirty (30) days prior to any required
action relating to the filing, prosecution or maintenance of such patent
application or patent. If Cell Genesys desires to take over the filing,
prosecution and/or maintenance of one or more patents or applications within the
Licensed Patents, then in any such case upon notice to Novartis, Cell Genesys
shall have the right, at its option, to control the filing, prosecution and/or
maintenance of any such patent applications or patents within the Licensed
Patents at its own expense on behalf of Novartis. All such patents or patents
applications shall remain under the name of and be owned by Novartis. In the
event that Cell Genesys takes over the filing, prosecution and/or maintenance of
such patent or patent application, Cell Genesys shall keep Novartis reasonably
informed on matters regarding such prosecution. Nothing herein shall affect, in
any way, Cell Genesys' obligation to pay royalties to Novartis or its
obligations under the Transaction Documents. 

9.Enforcement

9.1Notification. In the event that either Party obtains
knowledge of any infringement or misappropriation by a Third Party of any of the
Transaction Patents, such Party shall inform the other Party promptly of such
infringement and provide the other Party with any available evidence of such
infringement or misappropriation.

9.2Enforcement Rights of Novartis. Novartis shall have the right,
but not the obligation, to commence, prosecute, and settle or otherwise
compromise any dispute, action, suit, or proceeding involving or against any
Third Party believed to have infringed or misappropriated any Transaction
Patents (i) outside the Field, and (ii) within the Field to the extent permitted
in the Development License and Commercialization Agreement.

9.3Enforcement Rights of Cell Genesys. Cell Genesys shall have the
right, but not the obligation, to commence, prosecute, and settle or otherwise
compromise any dispute, action, suit, or proceeding involving or against any
Third Party believed to have infringed or misappropriated any (i) Assigned
Patent within the Field (except to the extent Novartis has such rights under the
Development License and Commercialization Agreement) and (ii) Licensed Patents
within the Field (except to the extent Novartis has such rights under the
Development License and Commercialization Agreement).

9.4Enforcement. Any dispute, action, suit or proceeding commenced
by a Party (the "Enforcing Party") shall be at its own cost and expense. The
other Party (the "Non-Enforcing Party") agrees to cooperate with the Enforcing
Party in any such dispute, action, suit or proceeding, in any way reasonably
necessary, including being named as a party to such dispute, action, suit or
proceeding commenced by the Enforcing Party if so requested by the Enforcing
Party or required by law, and all reasonable out-of-pocket expenses incurred by
the Non-Enforcing Party in connection therewith shall be reimbursed by the
Enforcing Party. The Non-Enforcing Party shall have the right to participate and
be represented in any such dispute, action, suit or proceeding commenced by the
Enforcing Party by its own counsel at its own expense. The Non-Enforcing Party
shall have no claim of any kind against the Enforcing Party based on or arising
out of the Enforcing Party's handling or settlement of or decisions concerning
any such dispute, action, suit or proceeding (provided, however, any decisions
concerning title to any Transaction Patent in dispute shall not be made without
the prior consent of the owner of such Transaction Patent, which consent shall
not be unreasonably withheld or delayed), and the Non-Enforcing Party hereby
irrevocably releases the Enforcing Party from any such claim. Each Party shall
have the right to subsequently cease to pursue or withdraw from such dispute,
action, suit or proceeding at any time.

9.5Recoveries. All damages or other compensation of any kind
recovered in such dispute, action, suit or proceeding commenced by the Enforcing
Party or from any settlement or compromise thereof shall be for the benefit of
the Enforcing Party. In the event of a withdrawal by a Party hereunder, such
recovery shall be apportioned between the Parties in an amount proportional to
the amount paid by each such Party with respect to its costs and expenses in
bringing such action, suit or proceeding.

 [*] Certain information on this page has been omitted and filed separately wit the Commission.
Confidential treatment has been requested with respect to the omitted portions.

10.Representations, Warranties and Disclaimer

10.1Mutual Representations. Each Party represents and warrants
to the other Party that: (a) it has the right to enter into this Agreement; and
(b) it shall comply with all laws, rules, regulations and requirements of any
governmental body as may be applicable to the operation, advertising and
promotion of its business to which this Agreement pertains.

10.2Disclaimer. EXCEPT AS EXPRESSLY PROVIDED UNDER THIS AGREEMENT,
NONE OF THE PARTIES MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EITHER
EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR ANY OTHER
MATTER WITH RESPECT TO THE TRANSACTION PATENTS AND MATERIALS PROVIDED HEREUNDER
AND THAT THE TRANSACTION PATENTS AND MATERIALS PROVIDED HEREUNDER ARE PROVIDED
"AS-IS". 

10.3Cell Genesys Acknowledgment. Cell Genesys acknowledges and
agrees that Cell Genesys may require additional technologies to which Novartis
or Genetic Therapy has no rights, in order to develop, manufacture and
commercialize the Products. Novartis and Genetic Therapy make no representation
or warranty and specifically disclaim any guarantee that the development of any
PRODUCT will be successful, in whole or in part, or that THE TRANSACTION PATENTS
and THE MATERIALS will be suitable for commercialization.

11.Indemnity and Limitations

11.1Cell Genesys Indemnity. Cell Genesys shall defend,
indemnify and hold harmless Novartis and Genetic Therapy, their respective
agents, directors, officers and employees, at Cell Genesys' cost and expense,
from and against any and all Losses incurred or imposed upon any of the
foregoing indemnified parties in connection with any Third Party claims, suits,
actions, demands or judgments arising out of (i) any products liability claims
regarding the Products, subject to the obligations of Novartis under the
Development License and Commercialization Agreement, and (ii) breach of Section
4.5.

11.2Indemnification Procedure. When seeking indemnity under
Section 11.1 hereof, Novartis (on behalf of itself and/or Genetic Therapy) (the
"Indemnified Party") shall give notice to Cell Genesys (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any
threatened or asserted Third Party claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom; provided that:

(a) the Indemnifying Party may so assume the defense of any such
claim or any litigation resulting therefrom only if it shall give notice to the
Indemnified Party of the Indemnifying Party's decision to so assume such defense
within thirty (30) Days after the date of the notice from the Indemnified Party
of the Third Party claim as to which indemnity is sought and acknowledges in
writing to the Indemnified Party that any Loss in connection with such claim or
any litigation resulting therefrom is a Loss for which the Indemnified Party
shall be entitled to indemnification pursuant to this Agreement;

(b) counsel for the Indemnifying Party, who shall conduct the defense
of such claim or any litigation resulting therefrom (if such defense is assumed
by the Indemnifying Party), shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld) and the Indemnified Party may
participate in such defense with the Indemnified Party's own counsel at the
Indemnified Party's own expense (unless (i) the employment of counsel by such
Indemnified Party has been authorized by the Indemnifying Party; (ii) the
Indemnified Party shall have reasonably concluded that there may be a conflict
of interest between the Indemnifying Party and the Indemnified Party in the
defense of such action; or (iii) the Indemnifying Party shall have failed to
assume the defense as provided herein, in each of which cases the Indemnifying
Party shall pay the reasonable fees and expenses of one law firm serving as
counsel for the Indemnified Party, which law firm shall be subject to approval,
not to be unreasonably withheld, by the Indemnifying Party); 

 [*] Certain information on this page has been omitted and filed separately wit the Commission.
Confidential treatment has been requested with respect to the omitted portions.

(c) the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Agreement to the extent that the failure to give notice did not result in
prejudice to the Indemnifying Party; 

(d) no Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the approval of each Indemnified Party, which
approval shall not be unreasonably withheld, consent to entry of any judgment or
enter into any settlement which (i) would result in injunctive or other relief
being imposed against the Indemnified Party; or (ii) does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation; 

(e) each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom; and

(f) if the Indemnifying Party assumes the defense of the Third Party
claim or litigation, the Indemnified Party shall not settle or agree to a
judgment with respect to such claim or litigation without the consent of the
Indemnifying Party.

11.3Limitations. EXCEPT AS PROVIDED IN THE TRANSACTION DOCUMENTS
FOR LOSSES WHICH ARE SUBJECT TO INDEMNIFICATION OBLIGATIONS OF THE PARTIES WITH
RESPECT TO INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES
RECOVERED BY A THIRD PARTY, UNDER NO CIRCUMSTANCES SHALL ANY PARTY BE LIABLE TO
THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY
DAMAGES (EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES
AND REGARDLESS OF THE THEORY OF LIABILITY), ARISING FROM ANY PROVISION OF THIS
AGREEMENT, INCLUDING, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS
OR LOST BUSINESS.

11.4No Other Indemnities. EXCEPT AS PROVIDED UNDER THE TRANSACTION
DOCUMENTS, NO PARTY SHALL BE LIABLE FOR, OBLIGATED TO OR HAVE ANY DUTY TO
INDEMNIFY THE OTHER PARTIES FOR ANY AND ALL DAMAGES, LOSSES, CLAIMS,
LIABILITIES, OBLIGATIONS, COMMITMENTS, COSTS OR EXPENSES, INCLUDING ATTORNEYS'
FEES AND COSTS, INCURRED BY THE OTHER PARTIES ARISING OUT OF OR RELATED TO ANY
CLAIM ASSERTED BY A THIRD PARTY RELATING IN ANY WAY TO THE SUBJECT MATTER OF
THIS AGREEMENT. 

12. Term and Termination

12.1Term. This Agreement shall commence on the Effective Date
and shall expire upon the expiration of the last to expire Patent included in
the Transaction Patents. 

12.2Termination for Breach. 

(a) In the event that Cell Genesys breaches its obligations under
Sections 4.2, 4.4 or 4.5 hereunder with respect to a particular sublicense
granted under Section 4.2, Novartis may immediately terminate such sublicense
(including any obligations of Novartis with respect to such sublicense) in the
event that Cell Genesys has not remedied such breach within sixty (60) Days
after Novartis sends written notice specifying such breach to Cell Genesys.

(b) In the event that Cell Genesys breaches its payment obligations
under any of the Transaction Documents, Novartis may immediately terminate this
Agreement in the event that Cell Genesys has not remedied such breach within
sixty (60) Days after Novartis sends written notice specifying such breach to
Cell Genesys.

(c) Except as provided above in Sections 12.2(a) and 12.2(b), either
Party may at its sole discretion unilaterally terminate this Agreement in the
event that the other Party is found or adjudged by a court of competent
jurisdiction to be in materially breach any of its obligations under this
Agreement. 

 [*] Certain information on this page has been omitted and filed separately wit the Commission.
Confidential treatment has been requested with respect to the omitted portions.

(d) Termination of this Agreement in accordance with this Section
12.2 shall not affect or impair the non-breaching Party's right to pursue any
legal remedy, including, but not limited to, the right to recover damages, for
any harm suffered or incurred by the non-breaching Party as a result of such
breach or default.

12.3Termination for Bankruptcy. In addition to the termination
rights provided for in Section 12, each Party shall have the right to terminate
this Agreement immediately by giving written notice of termination to the other
Party, if the other Party files a voluntary petition, or if an involuntary
petition is granted and appeal proceedings are not commenced within a period of
seven (7) Days from the date of such petition under the bankruptcy provisions or
bankruptcy protection proceedings have commenced of applicable law in respect of
the other Party, or the other Party is declared insolvent, undergoes voluntary
or involuntary dissolution, or makes an assignment for the benefit of its
creditors or suffers the appointment of a receiver or trustee over all, or
substantially all, of its assets or properties (or analysis proceedings in its
jurisdiction of incorporation). However, the foregoing termination will not be
applicable to Genetic Therapy and any form of dissolution of Genetic Therapy
shall not be applicable as a ground for termination under this Agreement.

12.4Effect of Termination. Immediately upon the termination of
this Agreement, Cell Genesys shall cease all development, manufacture,
production, distribution, marketing and sale of the any product covered by the
Patents included in the Transaction Patents other than the Assigned Patents
(provided, however, Cell Genesys shall continue to be obligated to pay royalties
under the Option Agreement with respect to the manufacture, use or sale of
products covered by the Assigned Patents, to the extent that the Option
Agreement remains in force independent of this Agreement). 

12.5Survival. Sections 1, 2, 5.4, 7, 10, 11 (with respect to
claims for actions occurring prior to termination or expiration of this
Agreement), 12.4, 12.5 and 13 shall survive expiration or termination of this
Agreement for any reason.

13.General Provisions

13.1Assignment. Except as provided in Section 2.3, this
Agreement may not be assigned or otherwise transferred by either Party without
the prior written consent of the other Party; provided, however, that (i) either
Party may assign the benefit of this Agreement, without the consent of the other
party, to any of its Affiliates, if the assigning Party remains obligated on a
primary basis for the full performance of its Affiliates' obligations hereunder,
and (ii) Novartis may assign this Agreement, without the consent of Cell
Genesys, in connection with the transfer or sale of the Transaction Patents or
in connection with the transfer or sale of all or substantially all of its
assets or business to which this Agreement relates or in the event of its merger
or consolidation with another company. In the event Cell Genesys consolidates
with or merges into any other Person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or transfers all
or substantially all of its properties and assets to any Person, then, and in
each such case, proper provision shall be made so that the successors and
assigns of Cell Genesys shall assume the obligations set forth in this
Agreement. Any purported assignment in contravention of this Section 13.1 shall,
at the option of the non-assigning Party, be null and void and of no effect. No
assignment shall release either Party from responsibility for the performance of
any accrued obligation of such Party hereunder. This Agreement shall be binding
upon and enforceable against the successor to or any permitted assignees from
either of the Parties hereto.

13.2 Waiver. No provision of this Agreement may be waived except in
writing by the Parties hereto. No failure or delay by any Party hereto in
exercising any right or remedy hereunder or under applicable law will operate as
a waiver thereof, or a waiver of any right or remedy on any subsequent occasion.

13.3 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any Law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect for so long as the economic or legal substance of the
transactions contemplated by this Agreement is not affected in any manner
materially adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the Parties as closely as possible in an acceptable manner in
order that the transactions contemplated by this Agreement are consummated as
originally contemplated to the greatest extent possible.  

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13.4 Counterparts. This Agreement may be executed in duplicate, each
of which shall be deemed to be original and both of which shall constitute one
and the same Agreement.

13.5 No Agency. Nothing herein contained shall be deemed to create an
agency, joint venture, amalgamation, partnership or similar relationship among
the Parties. 

13.6 Notices. All communications between the Parties with respect to
any of the provisions of this Agreement will be sent to the addresses set out
below, or to such other addresses as may be designated by one Party to the other
by notice pursuant hereto, by personal delivery (which shall be deemed received
when delivered), by reputable international express courier (which shall be
deemed received when delivered), by prepaid, certified mail (which shall be
deemed received by the other Party on the seventh Business Day following deposit
in the mails), or by facsimile transmission, or other electronic means of
communication (which shall be deemed received when transmitted), with
confirmation by prepaid certified mail, given by the close of business on or
before the next following Business Day:

(a)If to Novartis, at:

Novartis AG

   Lichtstrasse 35

   4056 Basel

   Switzerland

   Attention: General Counsel

   Fax: +41 61 324 8001

(b)If to Genetic Therapy, at:

Genetic Therapy, Inc.

   c/o Novartis AG

   Lichtstrasse 35

   4056 Basel

   Switzerland

   Attention: General Counsel

   Fax: +41 61 324 8001

(c)If to Cell Genesys, at:

Cell Genesys, Inc.

   500 Forbes Blvd.

   South San Francisco, CA 94080

   Attention: Stephen A. Sherwin, M.D.

   Fax: (650) 266 3010

13.7 Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.

13.8 Entire Agreement. This Agreement, together with the Transaction
Documents, contain the entire understanding of the Parties relating to the
matters referred to herein, and may only be amended by a written document, duly
executed on behalf of the respective Parties.

13.9Governing Law and Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New York
applicable to contracts executed in and to be performed in that State. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined exclusively in any New York state or federal court sitting
in the Borough of Manhattan of The City of New York. The Parties hereto hereby
(a) submit to the exclusive jurisdiction of any state or federal court sitting
in the Borough of Manhattan of The City of New York for the purpose of any
action arising out of or relating to this Agreement brought by any Party hereto,
and (b) irrevocably waive, and agree not to assert by way of motion, defense, or
otherwise, in any such action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that the action is brought in an
inconvenient forum, that the venue of the action is improper, or that this
Agreement or the transactions contemplated by this Agreement may not be enforced
in or by any of the above-named courts. 

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[Signature Page and Exhibits Follow]

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
this 23rd day of July, 2003, by their duly authorized
representatives.

 

	
Novartis AG
	
Cell Genesys, Inc.

 

	
By: ________________________________
	
By: ________________________________

	
Name:
	
Name:

	
Title:
	
Title:

 

Genetic Therapy, Inc.

By: ________________________________

Name:

Title:

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EXHIBIT A
ASSIGNED PATENTS

 

[*]

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EXHIBIT B

LICENSED PATENTS

 

[*]

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EXHIBIT C

[*] AND SUBLICENSED PATENTS

 

[*]

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EXHIBIT D

TARGETING TECHNOLOGY IP

 

[*]

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Confidential treatment has been requested with respect to the omitted portions.

EXHIBIT E

LICENSE AGREEMENTS 

 

[*]

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EXHIBIT F

DEFINITIONS APPENDIX

1.1.Construction. The terms defined hereinafter, whether used in
singular or plural form, shall have the meaning set forth below. Whenever the
words "include," "includes" or "including" are used in this Definitions
Appendix, they are deemed to be followed by the words "without limitation." The
term "party" or "parties" used herein shall refer to Novartis and Cell Genesys,
individually or collectively.

1.2.References. Exhibits IV (Financial Appendix), VI (Development
Products), and VIII (Confidentiality Appendix) to the Option Agreement shall be
incorporated herein by reference and made part hereof.

1.3. "Additional Products" [*]

1.4. "ADE" shall have the meaning set forth in Section 9.5 of the
Manufacturing and Supply Agreement.

1.5. "Adjusted Net Sales" shall mean, with respect to a Product, the Net
Sales of such Product less any Third Party Obligations in connection with such
Product. 

1.6. "Affiliate", with respect to a party, shall mean any Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such party. A Person shall be
regarded as in control of another Person if it owns or directly or indirectly
controls more than fifty percent (50%) of the voting stock or other ownership
interest of the other Person, or if it possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such
Person. For the purposes of the Transaction Documents, Novartis and Cell Genesys
shall not be deemed Affiliates of each other. 

1.7. "Allocable Overhead" shall have the meaning set forth in the
Financial Appendix.

1.8. "[*] Subcontractors" shall mean subcontractors of Cell Genesys [*]
to manufacture and supply the Bulk Products and/or Devices for the benefit of
Novartis under the Manufacturing and Supply Agreement.

1.9. "Assigned Patents" shall have the meaning set forth in Section 1 of
the Assignment and License Agreement.

1.10. "Assignment and License Agreement" shall mean the Patent Assignment
and License Agreement, dated as of the Closing, among Novartis, Genetic Therapy,
Inc. and Cell Genesys.

1.11. "Bulk Product" shall mean the applicable Option Product in bulk
form, together with Devices, meeting their respective Specifications and having
passed all Processing stages, that are manufactured by Cell Genesys and [*]
Subcontractors. 

1.12. "Business Day" shall mean any day other than Saturday, Sunday or
other Days on which commercial banks in New York, New York or Basel, Switzerland
are authorized or required by law or executive order to close. 

1.13. "Cell Genesys Inventions" shall mean all inventions, discoveries
and/or improvements thereto made by Cell Genesys or a Cell Genesys' Affiliate
that may be subject to a Patent.

1.14. "Cell Genesys Know-How" shall mean all Know-How Controlled by Cell
Genesys relating to an Option Product. 

1.15. "Cell Genesys Patents" shall mean any Patents Controlled by Cell
Genesys, and Cell Genesys' interest in any Joint Patent, having one or more
Valid Claims covering a Development Product (including a Substitute Product, if
applicable) or its manufacture or use.

1.16. "Cell Genesys Technology" shall mean, collectively, the Cell
Genesys Patents and Cell Genesys Know-How.

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1.17. "cGMP" shall mean then-current rules concerning good manufacturing
practices according to the U.S. Code of Federal Regulations, the then-current
EU/PIC GMP Guidelines, and the corresponding national laws and regulations. 

1.18. "Change of Control Event" shall mean (i) a merger, reorganization
or consolidation of Cell Genesys which results in the voting securities of Cell
Genesys, outstanding immediately prior to such transaction, ceasing to represent
at least fifty percent (50%) of the combined voting power of the surviving
entity immediately after such transaction, (ii) any Third Party (other than any
trustee or other fiduciary holding securities under an employee benefit plan of
Cell Genesys), or any corporation or other entity owned directly or indirectly
by the stockholders of Cell Genesys in substantially the same proportion as
their ownership of stock of Cell Genesys), together with its Affiliates,
becoming the beneficial owner of more than fifty percent (50%) of the combined
voting power of the outstanding securities of Cell Genesys, or (iii) a sale of
all or substantially all of the business of Cell Genesys.

1.19. "China" shall mean the People's Republic of China and Taiwan.

1.20. "Clinical Supply" shall mean the quantities of Bulk Product that
are required for Clinical Trials by a party or the parties to conduct
preclinical studies and Clinical Trials Phase I-III in connection with the terms
of the Development License and Commercialization Agreement. 

1.21. "Clinical Trials" shall mean Phase I Clinical Trial, Phase I/II
Clinical Trial, Phase I/IIA Clinical Trial, Phase IIA Clinical Trial, Phase IIB
Clinical Trial, Phase III Clinical Trial, Phase IIIB Clinical Trial, Phase IV
Clinical Trial or a combination thereof.

1.22. "Closing" shall mean the closing date (July 23, 2003) of the
transactions contemplated under the Subscription Agreement.

1.23. "Commercial Use" shall mean, with respect to a particular Product,
any and all activities directed to promoting, marketing, using for commercial
purposes, importing, exporting, distributing, selling or offering to sell
(including pre-marketing), sampling, conducting post-marketing drug surveillance
and conducting Phase IV clinical trials with respect to such Product. 

1.24. "Competing Product" shall mean any product developed by Cell
Genesys that has or is contemplated to be registered for the same Indication(s)
as an Option Product in the Field, excluding any Refused Product Candidates and
Rejected Products. 

1.25. "Components" shall mean have the meaning set forth in Section
2.1(a) of the Manufacturing and Supply Agreement. 

1.26. "Confidential Information" shall have the meaning set forth in the
Confidentiality Appendix.

1.27. "Confidentiality Appendix" shall mean the Confidentiality Appendix,
attached as Exhibit VIII to the Option Agreement.

1.28. "Controlled" shall mean the legal authority or right of a party
hereto to assign, convey, transfer or grant a license or sublicense of IP rights
to another party hereto, or to otherwise disclose proprietary or trade secret
information to such other party, without breaching the terms of any agreement
with a Third Party. 

1.29. "Co-Promote" shall mean to undertake and implement the activities
of each party under the Co-Promotion.

1.30. "Co-Promotion" shall mean the joint commercialization of the Option
Product by the parties in the U.S.

1.31. "Core Countries" shall mean the U.S., Canada, Japan and Europe
(Austria, Belgium, France, Germany, Italy, the Netherlands, Spain, Switzerland
and the United Kingdom).

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1.32. "Cost of Bulk Product" shall have the meaning set forth in the
Financial Appendix.

1.33. "Cost of Finished Product" shall have the meaning set forth in the
Financial Appendix.

1.34. "Cost of Goods Sold" shall have the meaning set forth in the
Financial Appendix.

1.35. "Cost of Sales" shall have the meaning set forth in the Financial
Appendix.

1.36. "Days" shall mean any day, including working days, public holidays
and weekend days.

1.37. "Development Costs" shall have the meaning set forth in the
Financial Appendix.

1.38. "Development License and Commercialization Agreement" shall mean
the Development License and Commercialization Agreement(s) to be entered into by
Novartis and Cell Genesys. The form of the Development License and
Commercialization Agreement is attached as Exhibit II to the Option
Agreement.

1.39. "Development Information" shall have the meaning set forth in
Section 4.2 of the Option Agreement.

1.40. "Development Products" shall be the adenovirus vectors described in
Exhibit VI (Development Products) to the Option Agreement. 

1.41. "Deviating Bulk Product" shall mean a Bulk Product affected by any
Deviation.

1.42. "Deviation" shall mean any failure of a Bulk Product to conform to
the Specifications, cGMP or the quality requirements set forth the Supply and QA
Agreement. 

1.43. "Devices" shall mean the unfilled vials or other appropriate
devices that are required for filling of Bulk Products in accordance with the
Specifications.

1.44. "Disclosing Party" shall mean the party disclosing its proprietary
Confidential Information.

1.45. "Distribution Costs" shall have the meaning set forth in the
Financial Appendix.

1.46. "Early Selection Criteria" or "ESC" shall have the meaning set
forth in Exhibit III to the Option Agreement. 

1.47. "EMEA" shall mean the European Agency for the Evaluation of
Medicinal Products. 

1.48. "EU" shall mean the European Union.

1.49. "Excluded Costs" shall have the meaning set forth in Section
6.3.3(iii) of the Development License and Commercialization Agreement.

1.50. "Exercise Notice" shall have the meaning ascribed to it in Section
4.7 of the Option Agreement.

1.51. "FCA" shall mean have the meaning set forth in Section 5.2(d) of
the Manufacturing and Supply Agreement.

1.52. "FDA" shall mean the United States Food and Drug Administration.

1.53. "Fee" shall have the meaning ascribed to it in Section 3.1 of the
Option Agreement.

1.54. "Field" [*]

1.55. "Finance Sub-Committee" shall have the meaning set forth in the
Financial Appendix.

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1.56. "Financial Appendix" shall mean the Financial Appendix attached as
Exhibit IV to the Option Agreement.

1.57. "Finished Product" shall mean any formulation or dosage of the
Option Product in finished form for Commercial Use approved by the applicable
Regulatory Authority(ies), including all product labeling or other package
inserts or materials required by the applicable Regulatory Authority(ies). 

1.58. "Firm Order" shall mean have the meaning set forth in Section
5.2(b) of the Manufacturing and Supply Agreement. 

1.59. "First Commercial Sale" shall mean the first commercial sale of the
Option Product by Novartis or an Affiliate or sublicensee of Novartis and/or
Cell Genesys in a country in the Option Territory following Regulatory Approval
of the Option Product in that country or, if no such Regulatory Approval or
similar marketing approval is required, the date upon which the Option Product
is first commercially launched in such country. 

1.60. "Fully Burdened Manufacturing Cost" shall have the meaning set
forth in the Financial Appendix.

1.61. "General and Administrative Costs" shall have the meaning set forth
in the Financial Appendix.

1.62. "Gross Sale Price" shall have the meaning set forth in the
Financial Appendix.

1.63. "HSE Procedures" shall mean have the meaning set forth in Section
2.1(f) of the Manufacturing and Supply Agreement

1.64. "Improvements" shall have the meaning set forth in Section 1 of the
Assignment and License Agreement.

1.65. "IND" means the investigational new drug application relating to
the Development Period or Substitute Product, as the case may be, filed with the
FDA pursuant to United States Code published at 21 U.S.C. 355(i) and
corresponding regulations at 21 C.F.R. Part 312, including any amendments
thereto. References herein to IND shall include, to the extent applicable, any
comparable filing in another country in the Option Territory. 

1.66. "Indication" shall mean any human indications which can be treated,
prevented or cured or whose progressions can be delayed. 

1.67. "IP" shall mean intellectual property of all types, including,
without limitation, Patents, copyrights, trademarks, service marks, trade dress,
trade secrets, know-how, technology, data, invention (whether patented or not),
data exclusivity, orphan drug exclusivity and other marketing exclusivity, and
registrations and applications for registration of the foregoing.

1.68. "Joint Development Committee" or "JDC" shall have the meaning set
forth in Section 3.5 of the Development License and Commercialization
Agreement.

1.69. "Joint Patents" shall have the meaning set forth in Section 8.1.4
of the Development License and Commercialization Agreement.

1.70. "Know-How" means all proprietary material and information,
including data, technical information, know-how, experience, inventions,
discoveries, trade secrets, compositions of matter and methods, whether or not
patentable or confidential, that are Controlled by a party to the Option
Agreement or its Affiliates and that relate to the discovery, development,
utilization, manufacture or use of any Products, including but not limited to
processes, techniques, methods, products, materials and compositions.

1.71. "Launch Date" shall mean, for a particular Option Product, the date
determined by the JDC as the date for commencing the manufacture of Bulk Product
for such particular Option Product for the purposes of First Commercial Sale.

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1.72. "Laws" shall mean any United States federal, state, local or
non-United States statute, law, ordinance, regulation, rule, code, order, other
requirement or rule of law.

1.73. "Liaisons" shall have the meaning ascribed to it in Section 2.2(a)
of the Development and Option Agreement.

1.74. "Licensed Patents" shall have the meaning set forth in Section 1 of
the Assignment and License Agreement.

1.75. "Losses" means all losses, obligations, liabilities, damages, costs
and expenses, including reasonable attorney's fees. 

1.76. "MAA" shall mean the Marketing Authorization Application for
authorization for marketing of an Option Product in the European Union as
defined in the applicable regulations and directives and filed with the
competent European health authorities.

1.77. "Major Markets" shall mean each of (i) the United States, (ii) the
European Union and (iii) other countries in the Option Territory which had been
expected by Novartis to generate aggregate sales amounting to [*] of Novartis'
expected Gross Sales of the Bulk Product (in its finished packaged form).

1.78. "Manufacturing and Supply Agreement" shall mean the Manufacturing
and Supply Agreement(s) to be entered into between Novartis and Cell Genesys.
The form of the Manufacturing and Supply Agreement is attached as Exhibit V to
the Option Agreement.

1.79. "Manufacturing Responsibilities" shall have the meaning set forth
in Section 3.3 of the Manufacturing and Supply Agreement.

1.80. "Manufacturing Standards" shall have the meaning set forth in
Section 2.1 of the Manufacturing and Supply Agreement

1.81. "Marketing Costs" shall have the meaning set forth in the Financial
Appendix.

1.82. "Marketing Sample" shall mean a sample of the Option Product in
Finished Product from to be distributed free of charge to physicians and
hospitals for promotional purposes. 

1.83. "Materials" shall have the meaning set forth in Section 1 of the
Assignment and License Agreement.

1.84. "Novartis Development Program" shall have the meaning set forth in
Section 3.1 of the Development License and Commercialization Agreement.

1.85. "Novartis Inventions" shall mean all inventions, discoveries and/or
improvements made by Novartis or Novartis' Affiliates that may be subject to a
Patent.

1.86. "Novartis Know-How" shall mean all Know-How Controlled by Novartis
relating to an Option Product.

1.87. "Novartis Patents" shall mean any Patents Controlled by Novartis,
and Novartis' interest in any Joint Patent, having one or more Valid Claims
covering the Option Product or its manufacture or use, to the extent such
Patents arise out of work performed pursuant to the Option Agreement and the
Development License and Commercialization Agreement. 

1.88. "Novartis Technology" shall mean, collectively, the Novartis
Patents and Novartis Know-How.

1.89. "NDA" shall mean a New Drug Application for authorization for
marketing of a Option Product in the United States of America as defined in the
applicable laws and regulations and filed with the FDA. 

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1.90. "Net Profits" or "Net Losses" shall have the meaning set forth in
the Financial Appendix.

1.91. "Net Sales" shall have the meaning set forth in the Financial
Appendix.

1.92. "Option" shall have the meaning set forth in Section 4.5 of the
Option Agreement.

1.93. "Option Agreement" shall mean the Product Development and Option
Agreement, dated as of the Closing, between Novartis and Cell Genesys.

1.94. "Option Period" shall have the meaning set forth in Section 4.4 of
the Option Agreement.

1.95. "Option Product" shall mean a Product Candidate with respect to
which Novartis has exercised an Option pursuant to the Option Agreement. In each
Development License and Commercialization Agreement governing a particular
Option Product, the parties shall duly describe such Option Product in Exhibit I
attached to such Development License and Commercialization Agreement.

1.96. "Option Product Materials" shall mean (i) biological or chemical
substances relating to the Option Product, including, cell lines containing the
adenovirus vector, and (ii) documentation relating to the production and
maintenance of the foregoing.

1.97. "Option Territory" shall mean all the countries in the world except
for China.

1.98. "Other Operating Income/Expenses" shall have the meaning set forth
in the Financial Appendix, attached as Exhibit IV to the Option Agreement.

1.99. "Other Products" shall mean the following adenovirus vectors: [*]
and adenovirus vectors using Target Technology IP.

1.100. "Other Research and Development Programs" shall have the meaning set
forth in Section 2.2 of the Option Agreement.

1.101. "Patents" means all patents and patent applications (and the patents
resulting therefrom) existing at the Effective Date, and all patent applications
(and the patents resulting therefrom) hereafter filed during the term of the
Patent Assignment and License Agreement and Development License and
Commercialization Agreement, including any reissues, reexaminations, extensions
(including any supplementary protection certificate), continuations,
continuations-in-part (to the extent the claims thereof are supported by the
specifications of patent applications otherwise included herein), divisions,
provisionals, substitute applications, registration patents or patents of
addition based on any such patent and all foreign counterparts of any of the
foregoing.

1.102. "PDP " shall have the meaning set forth in Section 2.1(a) of the
Option Agreement. 

1.103. "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization or
government or political subdivision thereof. 

1.104. "Phase I Clinical Trials" shall mean the initial portion of the
clinical development that provides for the continued trials of pharmaceutical
product on sufficient numbers of patients to establish safety and
tolerability.

1.105. "Phase II Clinical Trial" shall mean that portion of the clinical
development that provides for the continued trials of a pharmaceutical product
on sufficient numbers of patients to establish safety and tolerability.

1.106. "Post Proof of Concept Development Program" or "Novartis Development
Program" shall mean activities associated with development of the Option
Product, including (a) manufacture and formulation of the Option Candidate for
Clinical Trials; (b) planning, implementation, evaluation and administration of
human Clinical Trials, manufacturing process development and scale-up for the
commercial manufacture of the Option Product; (c) preparation and submission of
applications for Regulatory Approval in connection therewith; and (d) post-
market surveillance of approved drug Indications, as required or agreed as part
of a marketing approval by any Regulatory Authority.

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1.107. "Processing" shall mean any and all processing operations, including
packaging for shipment, carried out by or on behalf of Cell Genesys in the
preparation of the Bulk Product under the Manufacturing and Supply Agreement in
accordance with the Processing Procedures.

1.108. "Processing Procedures" shall mean have the meaning set forth in
Section 2.1(c) of the Manufacturing and Supply Agreement

1.109. "Product Candidate" shall mean a Development Product or Substitute
Product that has successfully completed the Proof of Concept Study.

1.110. "Product Marketing Plan" shall mean the product marketing plan defined
by Novartis for an Option Product in connection with the Co-Promotion.

1.111. "Products" shall mean, collectively, the Development Products,
Substitute Products, Other Products and Additional Products.

1.112. "Proof of Concept Study" shall mean, with respect to each Development
Product or Substitute Product (if applicable), a Phase I study rolling over into
a Phase II study which includes a safety evaluation component (Phase I) designed
to determine a safe and practical dose for further evaluation of the Development
Product or Substitute Product (if applicable), and an efficacy evaluation
component (Phase II) in which patients are evaluated for evidence of clinical
activity of the Development Product or Substitute Product (if applicable)
administered at a safe and practical dose. This Phase I study rolling over into
a Phase II study shall include sufficient eligible patients as outlined in an
IND submitted to Regulatory Authorities in writing. This Phase I study rolling
over into a Phase II study will be conducted in approximately twenty-five (25)
to thirty (30) evaluable patients.

1.113. "Quality Assurance" shall mean the quality assurance implemented in
accordance with and subject to the Supply and QA Agreement.

1.114. "Receiving Party" shall mean party receiving Confidential Information
of the other Party.

1.115. "Refused Product Candidate" shall have the meaning set forth in
Section 4.7 of the Option Agreement.

1.116. "Registration" shall mean any and all governmental approvals necessary
and/or required to be granted by a regulatory authority for the manufacturing,
import, marketing, distribution and sale of the Bulk Product as labeled,
packaged and presented for sale to the pharmaceutical trade.

1.117. "Regulatory Approval" shall mean, with respect to any country, all
authorizations by the appropriate governmental entity or entities necessary for
commercial sale of an Option Product in that country, including, without
limitation and where applicable, approval of use, storage, import, transport,
sale, labeling, price, reimbursement and manufacturing. "Regulatory Approval" in
the United States shall mean final approval of a BLA or NDA, if applicable,
pursuant to United States Code published at 21 U.S.C. 355 and corresponding
regulations at 21 C.F.R. Part 314, permitting marketing of the applicable drug
product in interstate commerce in the United States. "Regulatory Approval" in
the European Union shall mean final approval of the MAA pursuant to Council
Directive 2001/83/EC, as amended, or Council Regulation 2309/93/EEC, as
amended.

1.118. "Regulatory Authority" shall mean any governmental authority in any
country or group of countries competent to grant approval of use, storage,
import, transport, sale labeling, pricing and manufacturing for an Option
Product.

1.119. "Rejected Product" shall mean any Other Product or Additional Product
that has been previously offered by Cell Genesys to Novartis under Section
2.2(b) of the Option Agreement that has been rejected by Novartis, but excluding
any such Other Product or Additional Product, which when offered to Novartis,
was not going under or had not completed a Phase I study.

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1.120. "Relevant Cell Genesys Patents" shall have the meaning set forth in
Section 8.1.1 of the Option Agreement.

1.121. "Research Program" shall mean all research and development activities
undertaken by Cell Genesys with respect to each Development Product and
Substitute Product designed to complete the Development Information criteria.

1.122. "Royalty Costs" shall mean have the meaning set forth in the Financial
Appendix.

1.123. "Sales Costs" shall have the meaning set forth in the Financial
Appendix.

1.124. "Sales Report" shall mean a written report or written reports showing
each of (i) the Net Sales of each Product in each country in the Option
Territory during the reporting period by any party selling a Product and each
Affiliate, licensee and sublicensee who sells a Product; (ii) the royalties,
payable in U.S. Dollars in respect of such sales and the basis of calculating
those royalties; (iii) withholding taxes, if any, required by law to be deducted
in respect of any such sales; (iv) the exchange rates used in converting into
U.S. Dollars, from the currencies in which sales were made, any payments due
which are based on Net Sales; and (v) dispositions of Products other than
pursuant to arm's-length sales exclusively for cash. 

1.125. "Sales Returns and Allowances" shall have the meaning set forth in the
Financial Appendix.

1.126. "Specifications" shall mean have the meaning set forth in Section
2.1(b) of the Manufacturing and Supply Agreement.

1.127. "Subscription Agreement" shall mean the Subscription Agreement, dated
July 23, 2003, among Novartis, Genetic Therapy, Inc. and Cell Genesys.

1.128. "Substitute Development Costs" shall mean development costs directly
attributed to and incurred by Cell Genesys in connection with the development of
a Substitute Product, which development costs are in excess of the Fee.

1.129. "Substitute Product" shall mean a product (including any derivatives
or back-ups to the Development Products) that is substituted for any of the
Terminated Development Products.

1.130. "Supply and QA Agreement" shall mean have the meaning set forth in
Section 2.1(e) of the Manufacturing and Supply Agreement.

1.131. "Target Technology IP" shall have the meaning set forth in Section 1
of the Assignment and License Agreement.

1.132. "Technical Information" shall mean all documents and materials
generated by Novartis and Cell Genesys and any Subcontractors, as the case may
be, as well as all written amendments thereto, including, without limitation,
manufacturing and quality control instructions or requirements under any quality
control agreements between the parties (including the Supply and QA Agreement),
and specifications necessary to manufacture, label, package Bulk Products,
store, handle, stability test, quality control test and release Bulk Products in
accordance with the Manufacturing and Supply Agreement.

1.133. "Terminated Development Product" shall have the meaning set forth in
Section 2.4 of the Option Agreement.

1.134. "Third Party" shall mean any Person that is not a party or an
Affiliate of any party to the Transaction Documents. 

1.135. "Third Party Obligations," with respect to a party and a particular
Product, shall mean any actual, due and payable amounts by such party to a Third
Party pursuant to a licensing arrangement with such Third Party. For the
avoidance of any doubt, "Third Party Obligations" of Cell Genesys shall include
the reimbursement to Novartis of royalties and other costs under Section 4.5 of
the Assignment and License Agreement.

 [*] Certain information on this page has been omitted and filed separately wit the Commission.
Confidential treatment has been requested with respect to the omitted portions.

1.136. "Transaction Documents" shall mean the Assignment and License
Agreement, the Subscription Agreement, Employee Side Letter between Cell Genesys
and Genetic Therapy, Inc., the Option Agreement, the Development License and
Commercialization Agreement and the Manufacturing and Supply Agreement. 

1.137. "Transaction Patents" shall have the meaning set forth in Section 1 of
the Assignment and License Agreement.

1.138. "USD" or "US Dollars" shall mean the legal tender (currency) in the
United States of America.

1.139. "Valid Claim" shall mean a claim (a) of an issued and unexpired Patent
that has not been revoked or held permanently unenforceable or invalid by a
decision of a court or other governmental agency of competent jurisdiction,
unappealable or unappealed within the time allowed for appeal, and which has not
been admitted to be invalid or unenforceable through re-issue or disclaimer or
otherwise, or (b) of any patent application included in the Patents that has not
been cancelled, withdrawn or abandoned or been pending for more than seven (7)
years.

1.140. "Validation" shall mean the validation in accordance with the
Validation Plan set forth in Annex 5 attached to the Manufacturing and Supply
Agreement.

1.141. "Validation Plan" shall mean have the meaning set forth in Section
2.1(d) of the Manufacturing and Supply Agreement. 

 [*] Certain information on this page has been omitted and filed separately wit the Commission.
Confidential treatment has been requested with respect to the omitted portions.Q2 2003 Exhibit 10.4

NOTE:  Information in this document marked with an "[*]" has been omitted and filed separately
with the Commission.  Confidential treatment has been requested with respect to the omitted portions.

Exhibit 10.4

 

PRODUCT DEVELOPMENT AND OPTION AGREEMENT

BETWEEN

NOVARTIS PHARMA AG

AND

CELL GENESYS, INC.

 

 

 

 

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

This Product Development and Option Agreement (hereinafter, the "Option Agreement") is made and entered into as of this
23rd day of July 2003 (hereinafter the "Effective Date") between Cell Genesys, Inc. a Delaware
corporation (hereinafter "Cell Genesys"), and Novartis Pharma AG, a Swiss corporation (hereinafter
"Novartis"). 

WITNESSETH

WHEREAS, Cell Genesys has developed expertise to
undertake broad drug discovery programs in connection with the Field;

WHEREAS, Novartis and its Affiliates are engaged
in the research, development, marketing, manufacture and distribution of
pharmaceutical compounds that are safe and effective in treating or preventing
human and animal diseases and conditions;

WHEREAS, Novartis and Cell Genesys have entered into the Patent
Assignment and License Agreement, dated as of even date herewith, pursuant to
which Novartis has transferred and licensed certain intellectual property
related to the Field; and

WHEREAS, in connection
with the transfer and license referred to above, both parties desire to enter
into a collaboration, the objective of which is the development and
commercialization of certain products in the Field.

NOW THEREFORE, in
consideration of the mutual covenants set forth in this Option Agreement, the
parties agree as follows:

ARTICLE I

DEFINITIONS

All capitalized terms used but not otherwise defined in
this Option Agreement shall have the meanings set forth in the Definitions
Appendix, attached hereto as Exhibit VII.

 
ARTICLE II

PRODUCT DEVELOPMENT PROGRAM

2.1.Product
Development Program

(a)Subject to the terms and conditions set forth
in this Option Agreement, Cell Genesys shall diligently engage in pre-clinical
product development of the Development Products (including any derivatives or
back-ups thereof as a Substitute Product as provided under Section 2.4) into
Product Candidates.  No later than one hundred and twenty (120) Days from the
Effective Date, Cell Genesys shall submit to Novartis the product development
plan for each Development Product ("PDP") detailing Cell Genesys'
proposed Research Program, together with a budget proposal and plans to meet the
Development Information criteria in connection therewith.  Cell Genesys will
entertain, in good faith, any comments and suggestions Novartis may have
regarding the PDP.  Consistent with the foregoing, Cell Genesys shall be solely
responsible for the details (and implementation) of the finalized PDP.  The PDP
shall be attached hereto and made part hereof as Exhibit I.  Subject to Section
2.4, Cell Genesys shall use diligent and commercially reasonable efforts
consistent with sound and reasonable business practices
and judgment to develop the Development Products into Product Candidates as soon
as reasonably practicable, devoting not less than the same degree of attention and diligence to such
efforts that it devotes to such activities for other of its products of
comparable market potential.  In determining whether Cell Genesys is in
compliance with the foregoing provisions, there shall be taken into account the
normal course of drug development programs in the pharmaceutical industry
conducted with sound and reasonable business practices and judgment for
compounds with a comparable market potential. 

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

(b)Cell Genesys shall commence and conduct the Research Program with
respect to the Development Products in accordance with the PDP.  Cell Genesys
shall ensure that it submits an IND for each of the Development Products (other
than for Terminated Development Products) and Substitute Products (if
applicable) to applicable Regulatory Authorities.  Cell Genesys shall promptly
notify Novartis of any acceptance or any objection or rejection of the submitted
IND by the applicable Regulatory Authorities.  Cell Genesys shall use
commercially reasonable efforts to overcome any such objection or rejection
until final acceptance of such IND by the applicable Regulatory Authorities.
During the course of the Research Program, Cell Genesys shall promptly inform
Novartis of any planned or implemented material change to or deviations from the
PDP, together with the reasons for such changes or deviations.  In the event
that Novartis objects to or makes any comments or suggestions to any such
changes or deviations, Cell Genesys shall entertain such objections, comments or
suggestions in good faith, and implement any such objection, comments or
suggestions acceptable to Cell Genesys. 

2.2.Information Exchange

(a)Liaison Meetings.

Each party will designate not more than four (4) employees to act as
liaisons for purposes of this Option Agreement (such employees, the "Liaisons").  The Liaisons
will be individuals with expertise in research and development, or other matters
as each party may determine in its sole discretion.  The identities of the initial Liaisons
will be communicated by the
parties to each other.  The
parties may change their Liaisons at any time by providing notice of such change
pursuant to the notice provisions of this Option Agreement.  The Liaisons shall
meet periodically, but no less than semi-annually or as otherwise agreed between
the parties, to (i) review the progress made by Cell Genesys under the Research
Program, (ii) provide Novartis with the occasion to exchange with Cell Genesys
comments and suggestions to the further research under the Research Program,
(iii) provide the parties with the possibility to prepare for an eventual
exercise of Novartis' Option for Product Candidates in order to allow for
seamless and efficient further development.  The Liaisons' meetings shall be
documented with minutes which will be approved by Novartis and Cell Genesys.

(b)Other Research and Development Programs.

Additionally, from the Effective Date until the 7th
anniversary thereof or the termination of this Option Agreement, whichever
occurs first, the parties shall meet semi-annually whereby Cell Genesys shall
also provide information to Novartis regarding its other research and
development programs with respect to Other Products and Additional Products in
the Field (collectively, "Other Research and Development Programs").
Prior to consummating any transaction with a Third Party for the development or
commercialization of such Other Products or Additional Products (other than any
Rejected Products), Cell Genesys shall offer Novartis the right to negotiate the
rights to develop or commercialize such Other Products or Additional Products
(other than any Rejected Products).  Novartis shall indicate its interest no
later than twenty (20) Days from such offer.  Upon Novartis' notification to
Cell Genesys indicating with interest, the parties shall enter into exclusive
negotiations (for a period to be mutually agreed by the parties, but no less
than a period of sixty (60) Days from the time of such notification, or as
otherwise mutually agreed by the parties) to agree in good faith on the terms
and conditions any such right of development or commercialization.   

2.3.  Conduct of Research
and Development

Cell Genesys will work, at its own
cost, diligently and use commercially reasonable and good faith efforts,
consistent with prudent business judgment and consistent with pharmaceutical and
biotechnology industry standards to implement the PDP, with qualified,
experienced scientists, and in material compliance with the requirements of applicable laws and
regulations in an effort to
achieve its objectives efficiently and expeditiously.  Cell Genesys shall
maintain adequate laboratories, offices and other
facilities to carry out the activities to be performed pursuant to the PDP.  In
conformity with standard pharmaceutical and biotechnology industry practices,
the requirement of regulatory authorities and the terms and conditions of this
Option Agreement, Cell Genesys shall prepare and maintain, or shall cause to be
prepared and maintained, complete and accurate written records, accounts, notes,
reports and raw data with respect to activities conducted pursuant to the PDP
and, upon Novartis' written request, shall make legible copies of the aforesaid available to Novartis.  Novartis shall have the right to freely use such primary
data for archiving and regulatory purposes.  Upon reasonable advance notice,
both Novartis and Cell Genesys agree to make its employees and non-employee
consultants reasonably available at their places of employment to consult with the other party on issues
arising during the implementation of the PDP and in connection with any request
from any regulatory agency, including, without limitation, regulatory,
scientific, technical and clinical testing issues. Cell Genesys shall keep
Novartis reasonably informed as to all relevant discoveries and technical
developments (including any inventions) made under the PDP.  Cell Genesys shall
prepare and distribute to Novartis a reasonably detailed written summary report
relating to progress regarding the PDP on an annual basis.

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

2.4Discontinuation; Substitute Product  

During the course of the Research Program, Cell Genesys may, subject to
its obligations of diligence and commercial reasonableness in Section 2.1
hereof, discontinue further research and development with respect to a
particular Development Product ("Terminated Development Product").
Cell Genesys shall promptly notify Novartis of such discontinuance and the
parties shall meet to discuss in good faith any Substitute Product for such
Terminated Development Product.  In the event that within twenty four (24)
months from the date of termination of the Terminated Development Product, Cell
Genesys, at its discretion, begins development of a Substitute Product, then
Cell Genesys shall offer to Novartis such Substitute Product, and if Novartis
accepts such Substitute Product, such Substitute Product shall be deemed a
Development Product hereunder (including a PDP and a budget for such Substituted
Product).  Cell Genesys shall conduct development of such Substitute Product
using commercially reasonable efforts to develop such Substitute Product into a
Product Candidate.  Cell Genesys shall reallocate any unused portion of the Fee
allocated or budgeted for the Terminated Development Product to the remaining
Development Products or Substitute Product under development. 

With respect to any Substitute Development Costs for a specific
Substitute Product, Novartis shall, upon the exercise of the Option (and the
execution of the Development License and Commercialization Agreement in
connection therewith) with respect to such Substitute Product, reimburse Cell
Genesys [*] of such Substitute Development Costs for such Substitute Product, in
a manner and time to be mutually agreed by the parties. 

2.5.Subcontractors  

Cell Genesys may perform some of its obligations under the Research
Program through one or more competent subcontractors, provided that (i) Cell
Genesys shall first notify Novartis of its intent to engage such subcontractor,
(ii) none of Novartis' rights hereunder are diminished or otherwise adversely
affected as a result of such subcontracting, and (iii) the subcontractor
undertakes in writing obligations of confidentiality and non-use regarding
Confidential Information which are substantially the same as those undertaken by
Cell Genesys pursuant to this Option Agreement.  Cell Genesys will at all times
be responsible for the performance and payment of such subcontractor.

2.6.Conflict of Interest

During the term of the Option Agreement, in order to avoid any conflict
of interest, Cell Genesys and Novartis hereby agrees to cooperate in the Field
with each other by informing each other without delay if one party intends to
take up a collaboration project with a Third Party that might cover or affect
the Field, in whole or in part.  

 

ARTICLE III

PAYMENTS AND ROYALTIES

3.1.  Payment

At the Effective Date, Novartis shall make a non-refundable cash
payment to Cell Genesys in the
amount of twenty eight and a half million US Dollars
(USD $28,500,000) (hereinafter the "Fee").
Novartis shall make this payment to a Cell Genesys account communicated by Cell Genesys to Novartis.  Cell Genesys shall
use the Fee solely and exclusively to pay for development costs directly
attributable to and incurred in connection with the Research Program with
respect to the Development Products and Substitute Products (if applicable) and
the budget set forth in the PDP.  The parties hereto agree that within ninety
(90) Days after the end of the first and second anniversary of the Closing, Cell
Genesys shall provide Novartis a statement setting out in reasonable detail such
development costs associated with the Research Program with respect to the
Development Products and Substitute Products (if applicable).  Except as
expressly provided in this Option Agreement, Novartis shall have no further
obligation to provide any additional financing to Cell Genesys in connection
with the Research Program with respect to the Development Products and
Substitute Products (if applicable).

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

Cell Genesys covenants that the Fee paid by Novartis hereunder shall be
deposited and remain in a bank account other than an account with Fleet National
Bank, and that the Fee (or any portion thereof) shall not be in anyway, directly
or indirectly, serve as collateral for any obligations of Cell Genesys
(including, without limitation, having a security interest or a lien held by a
Third Party on the Fee).  

3.2Option Payment 

For each Product Candidate that Novartis exercises its Option in
accordance with Article IV, upon the execution of the Development License and
Commercialization Agreement for such Product Candidate, Novartis shall make a
non-refundable, one-time payment to Cell Genesys of [*] for each such Product
Candidate.

3.3Royalties for Refused Product Candidate and Other Products

For each Refused Product Candidate or Other Product sold by Cell Genesys
or any Third Party licensee or sublicensee of Cell Genesys, Cell Genesys shall
pay Novartis the amount of [*] of the Adjusted Net Sales of such Refused Product
Candidate or Other Product.

3.4 Royalties for Additional Products

For each Additional Product sold by Cell Genesys or any Third Party
licensee or sublicensee of Cell Genesys, Cell Genesys shall pay Novartis the
amount of [*] of the Adjusted Net Sales of such Additional Product.

3.5Royalties for China

Notwithstanding anything to the contrary hereunder, for each Product sold
by Cell Genesys or any Third Party licensee or sublicensee of Cell Genesys in
China, Cell Genesys shall pay to Novartis the amount of [*] of the Adjusted Net
Sales of such Product.

3.6Payment and Sales Reports 

Royalties pursuant to Sections 3.3, 3.4 and 3.5 shall be payable to
Novartis by Cell Genesys on a quarterly basis.  Cell Genesys shall, within
forty-five (45) Days after the end of each applicable calendar quarter,  pay
Novartis such royalties for such quarter by wire transfer from Cell Genesys to
an account designated by Novartis, following wire transfer instructions
specified by Novartis periodically to Cell Genesys.  Together with such payment,
Cell Genesys shall furnish or cause to be furnished to Novartis on a quarterly
basis a Sales Report covering the applicable calendar quarter.  With respect to
sales of the aforementioned Products invoiced in U.S. Dollars, the Adjusted Net
Sales amounts and the amounts due to Novartis hereunder shall be expressed in
U.S. Dollars.  With respect to sales of the products invoiced in a currency
other than U.S. Dollars, the Adjusted Net Sales and amounts due to Novartis
hereunder shall be expressed in the domestic currency of the party making the
sale, together with the U.S. Dollar equivalent of the amount payable to Cell
Genesys, calculated using a monthly exchange rate as reported in the Wall Street
Journal at the last Business Day of such month for the translation of foreign
currency sales into U.S. Dollars.

ARTICLE IV

LICENSE OPTION

4.1.  Product Candidate

During the course of the Research Program, when and if Cell Genesys has
completed a Proof of Concept Study with respect to a Product Candidate, Cell
Genesys shall promptly notify Novartis of this fact and shall provide Novartis
all of the Development Information (as defined in Section 4.2. below) with
respect to such Product Candidate.   

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

4.2Development Information

Cell Genesys shall provide Novartis with the following with respect to
each Product Candidate (collectively, the "Development
Information"):

(a) the results of Proof of Concept Study, and the information
required under Exhibit III attached to this Option Agreement, including, without
limitation, true and correct copies of all INDs submitted to the applicable
Regulatory Authorities in connection therewith;

(b)all other material information known to Cell Genesys about the
proposed Product Candidate which shall include, without limitation, all data
relating to a Product Candidate, all results of the Proof of Concept Study,
written information on registered interaction with Regulatory Authorities and
any studies and materials on health and safety, including analysis results and raw data from the pre-
clinical development studies;

(c)any previously undisclosed information with respect to Cell
Genesys Technology relating to the
Product Candidate;

(d)knowledge of Cell Genesys regarding Third Party IP rights
necessary to commercialize the Product Candidate; and 

(e)[*] an amount of any biological or chemical substance as is
reasonably necessary for Novartis to exercise its Option.  Such substance shall
be accompanied by a certificate of analysis and shall contain no warranty other
than that of conformity with the certificate of analysis.  

4.3Acceptance of Development Information

Upon receipt of the Development Information for Cell Genesys, Novartis
shall have the right to review the Development Information and, within
reasonable time (not to be later than thirty (30) Days), to request for
additional Development Information necessary to exercise the Option.  Novartis
shall have the right to perform its own tests on such Product Candidate and Cell
Genesys shall make all reasonable effort to cooperate with Novartis in
connection with such tests.

4.4Option Period

Upon the receipt of all Development Information (including supplemental
Development Information requested by Novartis), Novartis shall have a period of
sixty (60) Days therefrom to exercise the Option (the "Option Period").  Should Novartis reasonably determine during the
Option Period, that the Development
Information is not complete, the expiration of the Option Period will be
suspended until Cell Genesys complies with such determination, or until any
dispute thereof is resolved.  Unless Cell Genesys disputes whether the Development
Information is not complete, Cell Genesys shall perform such activities as identified with particularity by Novartis to
correct any of such shortcomings and resubmit to Novartis the required
Development Information.  During the time from the notice of Novartis to Cell
Genesys of this non-satisfaction and until Cell Genesys resubmits to Novartis the
Development Information, the Option Period shall be
stayed.  Notwithstanding anything to the contrary hereunder, unless otherwise
agreed by the parties, in no event shall the Option Period for a particular
Product Candidate (together with all extensions thereof) exceed one hundred and
twenty (120) Days from the initial receipt of the Development Information for
the relevant Product Candidate.

4.5Exclusive Option

During the Option Period, Novartis shall have the
exclusive right and option (the "Option") to select any and all
Product Candidates proposed to Novartis by Cell Genesys hereunder for further
development and commercialization, under the terms and conditions set forth in
the Development License and Commercialization Agreement.
During the Option Period (including any extensions thereof) or until Novartis
has provided written notice to Cell Genesys that it will elect not to exercise
its right and option hereunder, whichever occurs first, Cell Genesys shall not
grant any licenses with respect to the Product Candidate to any Third Party
other than a license in respect to the territories of China.  After expiration of the Option
Period (if an Option is not timely taken by Novartis) or, if earlier, on receipt
of such written notice from Novartis not to exercise the Option, Cell Genesys
shall be free to grant licenses and to assign any and all of its rights with
respect to a Product Candidate to any Third Party, subject to any other
restrictions in the Transaction Documents.

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

4.6. Extension of
Option Period

Novartis may further propose to Cell Genesys by
written notice delivered during the Option Period, that the Option Period for the Product
Candidate be extended for additional studies or data generation for a specified
time to permit Novartis, at its expense, to conduct such additional studies of
the Product Candidate as may be specified in the notice.  Cell Genesys shall
discuss this request with Novartis and the parties shall reach a mutual
agreement in good faith with respect to the requested extension of the Option
Period and the conduct of additional studies.  At the request of Novartis, Cell
Genesys shall supply Novartis with such amounts of the
biological or chemical substances as reasonably necessary for Novartis to
conduct such additional studies during the Option Period.  Such reference substance shall be accompanied by a
certificate of analysis and shall contain no warranty other than that of
conformity with the certificate of analysis.  

4.7. Exercise of Option

Novartis may exercise its Option and accept a Product Candidate for
further development and commercialization by delivery to Cell Genesys, within the Option Period,
by providing to Cell Genesys a
written notice of exercise (an "Exercise Notice"), specifying the Product Candidate as to which the
Option is being exercised.  No later than ten (10) Days
after such Exercise Notice is received by Cell Genesys, (i) both parties shall
be obliged to duly execute the Development License and Commercialization
Agreement, and (ii) Cell Genesys shall provide Novartis with updated Exhibit I to the Development License and Commercialization
Agreement.  For the avoidance of doubt, it shall
be understood that the terms and conditions of the Development License and
Commercialization Agreement shall not be changed or amended, except as provided
for in this Section 4.7, and that
the obligation of both parties to duly execute the Development License and
Commercialization Agreement is entered into with the full knowledge that the
terms may not be changed or amended and that the
obligation to have each party to sign the Development License and
Commercialization Agreement as attached are valid and enforceable by the other
party.  In the event that Novartis fails to exercise the Option
with respect to a particular Product Candidate prior to the expiration of the
Option Period (and extensions thereof) or indicates expressly that it shall not
exercise the Option with respect to a particular Product Candidate, such Product
Candidate shall be deemed a "Refused Product Candidate."

   

ARTICLE V

AUDITS

5.1.Audit Right

During the term of this Option Agreement and for a
period of three (3) years thereafter, Cell Genesys and its Affiliates shall keep
accurate, necessary and proper books and records, including financial records,
relating to its obligations under, and compliance with, the terms of this Option
Agreement, and Novartis shall have the right to conduct audits of such records
in accordance with this Article V.  Novartis, or through representatives
appointed by Novartis and reasonably acceptable to Cell Genesys, shall have the
right, at reasonable times and upon reasonable notice, but not more often than
two (2) times each calendar year, to examine such books and records as may be
necessary (a) to determine the correctness of any report or payment made under
this Option Agreement, (b) to determine the consistency of actual expenditures
relating to the PDP, (c) to determine compliance by Cell Genesys with the terms
and conditions for use of such expenditures as stipulated throughout this Option
Agreement versus the actual expenditures of the Fee, and (d) to determine
compliance by Cell Genesys of any other financial obligations under this Option
Agreement.  Cell Genesys and its Affiliates shall cooperate fully with Novartis
and its representatives in connection with such audit.    

5.2 Cost of Audit

Novartis shall bear the full cost and expense of the audit conducted
under this Article V, unless (i) a discrepancy in excess of the greater of two
percent (2%) of royalties or USD $100,000, whichever is greater, in favor of
Novartis is discovered, or (ii) Cell Genesys misstated wilfully the financial
data it reported to Novartis.  In that event, Cell Genesys shall bear the full
cost and expense of such audit (which cost and expense, together with all
amounts in discrepancy, shall be paid to Novartis promptly upon notice
thereof).

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

ARTICLE VI

CONFIDENTIALITY

The parties acknowledge and agree that all
Confidential Information disclosed by one party to the other party shall be
subject to the Confidentiality Appendix, attached hereto as Exhibit VIII. 

ARTICLE VII

INDEMNIFICATION

7.1.  Indemnification by
Cell Genesys

Cell Genesys will defend, indemnify and hold
Novartis and its Affiliates, and their employees, officers and directors,
harmless against all Losses that are based on or arise out of:

(a) the breach for
Losses arising out of the handling of the Development Products and Substitute
Products by Cell Genesys or its Affiliates under any of its obligations,
covenants, representations or warranties set forth in this Option Agreement;  

(b) the gross negligence or wilful misconduct of Cell Genesys and its
Affiliates, and their employees, officers and directors, in the performance of
obligations or exercise of rights
under this Option Agreement; and

(c)Cell Genesys' or its Affiliates' violation of any applicable law
or regulation; 

provided, however, that the
foregoing indemnification shall not apply to any Loss to the extent such Loss is
caused by the grossly negligent or
wilful misconduct of Novartis and its Affiliates, and
their employees, officers and directors.

7.2.  Indemnification by Novartis

Novartis will defend, indemnify and hold Cell Genesys
and its Affiliates, and their employees, officers and directors harmless against
all Losses that is based on or
arises out of: 

(a) the breach by
Novartis of any of its obligations, covenants, representations or warranties set
forth in this Option Agreement; 

(b) the gross negligence or wilful misconduct of Novartis and its
Affiliates, and their employees, officers and directors in the performance of
obligations or exercise of rights
under this Option Agreement; and

(c)Novartis or its Affiliates' violation of any applicable law or
regulation;

provided, however, that the foregoing indemnification shall not apply to
any Loss to the extent such Loss is caused by the grossly negligent or wilful
misconduct of Cell Genesys and its Affiliates, and their employees, officers and
directors.

7.3.  Claims Procedures as to Third Party Claims

Each party entitled to be indemnified by the other
party (an "Indemnified
Party") pursuant to Section
7.1 or 7.2 hereof shall give notice to the other party (an "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any threatened or asserted Third Party claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom; provided that: 

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(a) the Indemnifying Party may so assume the
defense of any such claim or any litigation resulting therefrom only if it shall
give notice to the Indemnified Party of the Indemnifying Party's decision to so
assume such defense within thirty (30) Days after the date of the notice from
the Indemnified Party of the Third Party claim as to which indemnity is sought
and acknowledges in writing to the Indemnified Party that any Loss in connection
with such claim or any litigation resulting therefrom is a Loss for which the
Indemnified Party shall be entitled to indemnification pursuant to this Article
VII;

(b) counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom (if such defense is assumed by
the Indemnifying Party), shall be approved by the
Indemnified Party (whose approval shall not be unreasonably  withheld) and the
Indemnified Party may participate in such defense with the
Indemnified Party's own counsel at the Indemnified Party's own expense (unless (i) the employment of counsel by such
Indemnified Party has been authorized by the Indemnifying Party; (ii) the Indemnified Party shall have reasonably concluded
that there may be a conflict of interest between the Indemnifying Party and the
Indemnified Party in the defense of such action; or (iii) the
Indemnifying Party shall have failed to assume the defense as provided herein, in each of which cases the Indemnifying Party shall
pay the reasonable fees and expenses of one law firm serving as counsel for the
Indemnified Party, which law firm shall be subject to approval, not to be
unreasonably withheld, by the Indemnifying Party); 

(c) the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Option Agreement to the extent
that the failure to give notice did not result in prejudice to the Indemnifying Party;  

(d) no Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the approval of each
Indemnified Party, which approval shall not be unreasonably withheld, consent to
entry of any judgment or enter into any settlement which (i) would result in
injunctive or other relief being imposed against the Indemnified Party; or (ii)
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation;      

(e) each Indemnified
Party shall furnish such information regarding itself or the claim in question
as an Indemnifying Party may reasonably request in writing and shall be
reasonably required in connection with the defense of such claim and litigation
resulting therefrom; and

(f) if the Indemnifying Party assumes the defense of the Third Party
claim or litigation, the Indemnified Party shall not settle or agree to a
judgment with respect to such claim or litigation without the consent of the
Indemnifying Party.

ARTICLE VIII

INTELLECTUAL PROPERTY

8.1.Prosecution and Maintenance of Patent
Rights

8.1.1Except as provided
below and in the Assignment and License Agreement and the Development License
and Commercialization Agreement, Cell Genesys shall, at its discretion, be
responsible, at its own expense, for diligently taking
all commercially reasonable steps necessary to file, prosecute, maintain and
extend all Cell Genesys Patents, including, but not limited to, deciding whether to pursue any Patents relevant to the Product
Candidates ("Relevant Cell Genesys Patents").  

8.1.2Cell Genesys shall consider in good faith the
requests and suggestions of Novartis with respect to strategies for filing,
prosecuting, maintaining and extending the Relevant Cell Genesys Patents.     

8.2Third Party Intellectual Property

Cell Genesys shall use commercially reasonable efforts to acquire or
license all necessary Third Party Intellectual Property rights necessary for
Novartis to develop and commercialize the Product Candidates in accordance with
the Development License and Commercialization Agreement. 

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ARTICLE IX

TERM AND TERMINATION

9.1.  Term

Unless earlier terminated as set forth in this Article
IX, this Option Agreement shall be effective as of
the Effective Date and shall expire: (i) upon the expiration
or termination of the last active Development License and Commercialization
Agreement, or (ii) if no Development License and Commercialization Agreement
is ever executed, upon completion of all Research Programs by Cell Genesys in
accordance with this Option Agreement such that all possibility of Product
Candidates to be offered to Novartis are exhausted.

9.2.  Termination by
Novartis for Cause

Upon written notice to Cell Genesys, Novartis may
at its sole discretion unilaterally terminate this Option Agreement upon the
occurrence of any of the following events: 

(a) Cell Genesys shall materially breach any
of its material obligations under this Option Agreement and shall not have remedied such material breach within sixty (60) Days after Novartis sends written
notice of specifying such breach to Cell Genesys; 

(b) Cell Genesys shall cease to function as a going concern by
suspending or discontinuing its business for any reason (including bankruptcy)
except for merger and acquisition or interruptions caused by force majeure,
strike, labour dispute or any other events over which it has no control.  

In the event of any valid termination under this
Section 9.2, Novartis shall have the right with respect to any Product
Candidate to immediately
exercise the Option.  Notwithstanding the foregoing, any
Development License and Commercialization Agreement then in effect shall
continue in effect unless it is expressly terminated in accordance with its
terms.

9.3Termination by Cell Genesys for Cause

Cell Genesys may terminate this Option Agreement
upon written notice to Novartis upon the occurrence of any of the following
events:

(a) Novartis shall materially breach any of its material obligations under this
Option Agreement and shall not have remedied such material breach within sixty (60)
Days after Cell Genesys sends written notice of specifying such breach to
Novartis; or

(b) Novartis shall cease to function as a
going concern by suspending or discontinuing its business for any reason except
for merger and acquisition or interruptions caused by force majeure, strike,
labour dispute, or any other events over which it has no control.

Notwithstanding the foregoing, any Development
License and Commercialization Agreement then in effect shall continue in effect
unless it is expressly terminated in accordance with its terms.

9.4  Effect of
Termination

Except where explicitly provided elsewhere herein,
termination of this Option Agreement for any reason, or expiration of this
Option Agreement, will not affect:  (i) obligations which have accrued as of the
date of termination or expiration and (ii) obligations and rights which,
expressly or from the context thereof, are intended to survive termination or
expiration of this Option Agreement.

9.5Survival

Articles V, VI, VII, X, XI and XII, and all exhibits attached hereto,
shall survive the expiration or termination of this Option Agreement.
Obligations under Article III shall survive until the expiration of the last to
expire patent assigned or licensed to Cell Genesys under the Assignment and
License Agreement.  

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ARTICLE X

REPRESENTATIONS, WARRANTIES AND COVENANTS

10.1.  Representations and
Warranties of Cell Genesys

Cell Genesys represents and warrants to Novartis
as follows as of the Effective Date: This Option Agreement has been
duly executed and delivered by Cell Genesys and constitutes the valid and
binding obligation of Cell Genesys, enforceable against Cell Genesys in
accordance with its terms.  The execution, delivery and performance of this
Option Agreement have been duly authorized by all necessary action on the part
of Cell Genesys, and its officers
and directors on behalf of Cell Genesys.  

10.2.Representations and Warranties of Novartis

Novartis represents and warrants to Cell Genesys as
follows as of the Effective Date: This Option Agreement has been
duly executed and delivered by Novartis and constitutes the valid and binding
obligation of Novartis, enforceable against Novartis in accordance with its
terms.  The execution, delivery and performance of this Option Agreement have
been duly authorized by all necessary action on the part of Novartis, and its officers and directors on
behalf of Novartis.

10.3.Limitations

(a)EXCEPT AS EXPRESSLY PROVIDED UNDER THIS
AGREEMENT, NONE OF THE PARTIES MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY
KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR ANY OTHER
MATTER WITH RESPECT TO THE SUBJECT MATTER OF THIS OPTION AGREEMENT. 

(b)EXCEPT FOR LOSSES WHICH ARE SUBJECT TO INDEMNIFICATION OBLIGATIONS
OF EITHER PARTY WITH RESPECT TO INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR
EXEMPLARY DAMAGES RECOVERED BY A THIRD PARTY, UNDER NO CIRCUMSTANCES SHALL ANY
PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL,
SPECIAL OR EXEMPLARY DAMAGES (EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES AND REGARDLESS OF THE THEORY OF LIABILITY), ARISING
FROM ANY PROVISION OF THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, LOSS OF
REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS. 

ARTICLE XI

DISPUTE RESOLUTION

11.1Governing Law and
Jurisdiction

This Option Agreement shall be governed by and
interpreted under the laws of the State of New York, excluding its conflict of
laws principles.

11.2Conciliation

In the event of any controversy or claim arising out of or relating to
any provision of this Option Agreement, the parties shall, and either party may,
initially refer such controversy or claim to the chief executive officer (or
his/her representative) of Cell Genesys and the head of the Oncology business
unit (or any successor business unit) of Novartis who shall, as soon as
practicable, attempt in good faith to resolve the controversy or claim.  If such
controversy or claim is not resolved within sixty (60) Days of the date of
initial referral of the matter, either party shall be free to initiate legal
proceedings of the following Section.   

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11.3.Jurisdiction

Except with respect to disputes which shall be
resolved through conciliation in accordance with Section 11.2, each party
irrevocably submits to the exclusive jurisdiction in the United States District
Court for the Southern District of New York and any state courts sitting in New
York, New York, for purposes of any action, suit or other proceeding arising out
of this Option Agreement. 

ARTICLE XII

MISCELLANEOUS PROVISIONS

12.1.Waiver

No provision of this Option Agreement may be waived except in writing by
both parties hereto.  No failure or delay by either party hereto in exercising
any right or remedy hereunder or under applicable law will operate as a waiver
thereof, or a waiver of any right or remedy on any subsequent occasion.  

12.2.Force Majeure

The failure of either party to perform its
obligations under this Option Agreement (other than the obligations to make any
payments or obligations of confidentiality) shall not subject such party to any
liability or place it to be in breach of any term or condition of this Agreement
to the other party if such failure is caused by Force Majeure; provided,
however, that the party affected shall promptly notify the other party of the
condition constituting Force Majeure as defined herein and shall exert
reasonable efforts to eliminate, cure and overcome any such causes and resume
the performance of its obligations as soon as reasonably practicable. If a
condition constituting Force Majeure exists for more than ninety (90)
consecutive Days, the parties shall negotiate a mutually satisfactory solution
at the expense of the party invoking Force Majeure. "Force Majeure"
shall mean any cause beyond the reasonable control of such nonperforming party,
including, without limitation, acts of God, fire, explosion, flood, earthquake,
drought, war, hostility, revolution, riot, civil disturbance, national
emergency, sabotage, embargo, strikes or other labor trouble. 

12.3.Severability

If any term or other provision of this Option
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Option Agreement shall
nevertheless remain in full force and effect for so long as the economic or
legal substance of the transactions contemplated by this Agreement is not
affected in any manner materially adverse to any party.  Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this Option
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated by
this Option Agreement are consummated as originally contemplated to the greatest
extent possible.

12.4.Assignment

This Option Agreement may not be assigned or
otherwise transferred by either party without the prior written consent of the
other party; provided, however, that (i) either party may assign the benefit of
this Option Agreement, without the consent of the other party, to any of its
Affiliates, if the assigning party remains obligated on a
primary basis for the full performance of its
Affiliates' obligations hereunder, and (ii) Novartis may assign this Option
Agreement, without the consent of Cell Genesys, in connection with the transfer
or sale of all or substantially all of its assets or business to which this
Option Agreement relates or in the event of its merger or consolidation with
another company.  In the event Cell Genesys consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or transfers all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Cell Genesys shall
assume the obligations set forth in this Option Agreement.  Any purported
assignment in contravention of this Section 12.4 shall, at the option of
the non-assigning party, be null and void and of no effect.  No assignment shall
release either party from responsibility for the performance of any accrued
obligation of such party hereunder.  This Option Agreement shall be binding upon
and enforceable against the successor to or any permitted assignees from either
of the parties hereto.

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12.5Compliance

The parties shall comply in all material respects with all applicable
laws and regulations in connection with their respective activities under this
Option Agreement.

12.6.Affiliates

Novartis may perform its obligations hereunder
personally or through one or more Affiliates, although each party shall
nonetheless be solely responsible for the performance of its Affiliates.
Neither party shall permit any of its Affiliates to commit any act (including
any act or omission) which such party is prohibited hereunder from committing
directly.  The use of subcontractors by either party shall not increase the
financial obligations of the other party hereunder in any respect.  

12.7.Counterparts

This Option Agreement may be executed in
duplicate, each of which shall be deemed to be original and both of which shall
constitute one and the same agreement.

12.8.No Agency

Nothing herein contained shall be deemed to create
an agency, joint venture, amalgamation, partnership or similar relationship
between Novartis and Cell Genesys.  Notwithstanding any of the provisions of
this Option Agreement, neither party to this Option Agreement shall at any time
enter into, incur, or hold itself out to third parties as having authority to
enter into or incur, on behalf of the other party, any commitment, expense, or
liability whatsoever, and all contracts, expenses and liabilities in connection
with or relating to the obligations of each party under this Option Agreement
shall be made, paid, and undertaken exclusively by such party on its own behalf
and not as an agent or representative of the other.

12.9.Notices

All communications between the parties with
respect to any of the provisions of this Option Agreement will be sent to the
addresses set out below, or to such other addresses as may be designated by one
party to the other by notice pursuant hereto, by personal
delivery (which shall be deemed received when delivered), by reputable
international express courier (which shall be deemed received when delivered),
by prepaid, certified mail
(which shall be deemed received by the other party on the seventh Day following
deposit in the mails), or by facsimile transmission, or other electronic means
of communication (which shall be deemed received when transmitted), with
confirmation by prepaid certified mail, given by the close of business on or before the next
following Business Day:

If to Novartis, at:

Novartis Pharma AG

   Lichtstrasse 35

   4056 Basel

   Switzerland

   Attention: General Counsel

   Tel.: +41 61 324 1111

   Fax: +41 61 324 8001

If to Cell Genesys, at:

Cell Genesys, Inc.

   500 Forbes Blvd.

   South San Francisco, CA 94080

   Attention:  Stephen A. Sherwin, M.D.

   Tel.:  (650) 266 3000

   Fax:  (650) 266 3010

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12.10.Headings

The descriptive headings contained in this Option
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Option Agreement.

12.11.Entire Agreement

This Option Agreement including the Exhibits
attached hereto contain the entire understanding of the parties relating to the
matters referred to herein, and may only be amended by a written document, duly
executed on behalf of the respective parties.  

12.12.Notice of
Pharmaceutical Side-Effects

During the term of this Option Agreement, the
parties shall keep each other promptly and fully informed and will promptly
notify appropriate authorities in accordance with applicable law, after receipt
of information with respect to any adverse reaction, as defined by the World
Health Organization or applicable regulatory authority, directly or indirectly attributable to the use or
application of a Product Candidate.

 

[Signature
Page and Exhibits Follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Option Agreement
to be executed by their duly authorized representatives in duplicate as of the
day, month and year first above written.

	
NOVARTIS PHARMA AG

By:___________________________________

Name:

Title:
	
CELL GENESYS, INC.

By:___________________________________

Name:

Title:

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Exhibit I  PDP

Exhibit II Form of Development License and Commercialization
Agreement

Exhibit IIIDevelopment Information and ESC

Exhibit IVFinancial Appendix

Exhibit VForm of Manufacturing and Supply Agreement

Exhibit VIDevelopment Products

Exhibit VIIDefinitions Appendix

Exhibit VIIIConfidentiality Appendix

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Confidential treatment has been requested with respect to the omitted portions.

EXHIBIT I

OPTION AGREEMENT

PDP

To be attached within one hundred and twenty (120) Days from the
Effective Date.

EXHIBIT II

OPTION AGREEMENT

FORM OF
DEVELOPMENT LICENSE AND COMMERCIALIZATION AGREEMENT

See attached.

 [*] Certain information on this page has been omitted and filed separately with the Commission.
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DEVELOPMENT LICENSE AND
COMMERCIALIZATION AGREEMENT

BETWEEN

NOVARTIS PHARMA AG

AND

CELL GENESYS, INC.

 [*] Certain information on this page has been omitted and filed separately with the Commission.
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This Development License and Commercialization Agreement (hereinafter this
"Development License and Commercialization
Agreement") is made and entered into as of [___] (hereinafter the "Effective Date") between Cell Genesys, Inc. ("Cell Genesys") and
Novartis Pharma AG ("Novartis").  

WITNESSETH 

WHEREAS, Cell Genesys and Novartis are parties
to that Product Development and Option Agreement dated July
23, 2003 (hereinafter the "Option Agreement") pursuant to which Cell Genesys
has developed a Product Candidate relating to oncolytic adenovirus vector
therapies;  

WHEREAS, in accordance with the Option
Agreement, Novartis has exercised its Option  to develop and commercialize such Product
Candidate; and  

NOW THEREFORE, in consideration of the
foregoing premises, the parties agree as follows: 

ARTICLE I

DEFINITIONS

All capitalized terms used, but not otherwise
defined herein, shall have the meanings given to such terms in the Definitions
Appendix, attached hereto as Exhibit II.

ARTICLE II

LICENSE

2.1.Grant to Novartis

(a)Subject to the terms and conditions of this
Development License and Commercialization Agreement and the Manufacturing and
Supply Agreement, Cell Genesys hereby grants to Novartis an exclusive right and
license in the Option Territory under the Cell Genesys Technology to develop,
manufacture, have manufactured, export, import, market, use, offer to sell, sell
and register, and otherwise exploit, the Option Product
in the Field.  Novartis shall have the right to grant sublicenses freely to any
Third Party of its choosing under this Development License and Commercialization
Agreement. For the avoidance of any
doubt, "exclusive" under this Section 2.1 (a) shall mean that neither
Cell Genesys nor any other Third Party shall have any rights under the Cell
Genesys Technology with respect
to the Option Product; provided, however, subject to
the terms and conditions of this
Development License and Commercialization Agreement, Cell Genesys shall have the
right to use Cell Genesys Technology to comply with its obligations and exercise
its rights under this Development License and Commercialization Agreement and
the Manufacturing and Supply Agreement.  

(b)Novartis may subcontract its rights to develop the
Option Product to a Third Party and may contract with Third Parties of its choice to conduct or
assist in its development program
and in the conduct of human Clinical Trials and the evaluation of trial data or
for any of its co-commercialization purposes (other than manufacturing).

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2.2.Information and Materials Transfer 

During the term of this Development License and
Commercialization Agreement, Cell
Genesys shall disclose in writing
to Novartis all Cell Genesys
Technology that is reasonably necessary or useful for Novartis to develop and commercialize the Option Product.  Cell Genesys shall, as soon as practicable after the Effective
Date, supply Novartis, [*] with such amounts of Option Product Materials for
Clinical Trials as is reasonably necessary for Novartis to develop and
commercialize the Option Product under this Development License and
Commercialization Agreement.  Delivery of such Option Product Materials shall be
accompanied by a certificate of analysis and shall
contain no warranty other than that of conformity with the certificate of
analysis.

2.3.Non-Competition

With respect to the Option Product, Cell Genesys
shall not, directly or indirectly, commercialize any Competing Product for a
period of time commencing from the commercial Launch Date for such Option
Product to the longer of (i) the tenth (10th) anniversary of such
Launch Date, or (ii) the expiration of the last to expire applicable Patent,
included in the Cell Genesys Patents, having a Valid Claim covering such Option
Product.

ARTICLE III

DEVELOPMENT

3.1.Commencement of the Post Proof of
Concept Development Program

Novartis shall commence and
continue, subject to this Article III, a Post Proof
of Concept Development Program with respect to the Option Product ("Novartis
Development Program").  Novartis will have sole authority and
responsibility for the Novartis Development Program with respect to the Option Product.    

3.2.Development Costs

From the Effective Date of this Development License and Commercialization
Agreement, each of Cell Genesys and Novartis shall be responsible for the
Development Costs.  The Development Costs shall be allocated in the form set out
in the chart illustrated in this Section 3.2, and the Development Costs shall be
subject to and calculated in accordance with the Financial Appendix, attached
hereto as Exhibit III:

	 	
Cell Genesys
	
Novartis

	
Option Territory (excluding the U.S.)
	
[*] of Development Costs
	
[*] of Development Costs

	
U.S.
	
[*] of Development Costs
	
[*] of Development Costs

3.3.Registration
Dossiers for Regulatory Approvals

[*] shall be [*] responsible for and authorized to prepare and submit registration dossiers
for Regulatory Approval of the Option Product in the Option Territory.  All
Regulatory Approvals in the Option Territory shall be held by and in the name of
[*], and [*] shall own all submissions in connection with them.  

3.3.1Principal Interface:  All formulary or
marketing approvals shall be obtained by and in the name of [*], and [*] will be
the principal interface with and will otherwise handle all interactions with
regulatory agencies concerning any Option Product, including, to the extent
legally possible, being the sole contact with such agencies.  

3.3.2Regulatory Meetings:  [*] will [*] control as to the regulatory
strategy and regulatory decision-
making for any Option Product.  [*] shall be entitled to join [*] at the
portions of the official FDA meetings to the extent 

such portions of such meetings relate solely to the Option Product as an
observer to the extent permitted by the FDA.

3.3.3Regulatory Approvals for China:  [*] agrees to assist [*] in
obtaining [*] Regulatory Approvals in China by providing information, to the
extent in the possession or under the control of [*], necessary to complete
registration dossiers and other assistance in connection with the preparation
and submission of registration dossiers.  Nothing herein shall obligate [*] to
generate such information.  [*] shall provide such information [*].  [*] shall
reimburse [*] for [*] reasonable out-of-pocket costs incurred by [*] in
connection with such assistance. 

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3.4.Reasonable Efforts in
Development

Novartis will use diligent, commercially
reasonable efforts consistent with
those used by Novartis for its own products of
similar commercial potential to develop and commercialize the Option Product.
Novartis will promptly notify Cell Genesys in writing if it should determine
that development of the Option Product is not technically feasible or
commercially justifiable, specifying in reasonable detail the reasons for that
determination.  Novartis will promptly notify Cell Genesys in writing at any time there exists any
material safety (including toxicity), efficacy, regulatory, medical or legal
issue affecting Novartis' ability to develop or
commercialize the Option Product.  If Novartis shall
give any such notice to Cell Genesys, upon Cell Genesys' election, the parties
shall then [*]

3.5. Joint Development Committee

(a) Members; Officers.
Immediately after the Effective Date, the parties shall establish a joint
development committee (the "Joint Development Committee" or
"JDC"), which shall consist of an equal number of representatives from
each of Cell Genesys and Novartis, up to a maximum total of eight (8) members on
the JDC.  Each of Cell Genesys and Novartis may replace any or all of its
representatives on the JDC at any time upon written notice to the other party.
Such representatives shall include individuals within the senior management of
each such party, and those representatives of each such party shall,
individually or collectively, have expertise in pharmaceutical drug development
and/or marketing.  Any member of the JDC may designate a substitute to
temporarily attend and perform the functions of that member at any meeting of
the JDC.  Cell Genesys and Novartis each may, in its discretion, invite
non-member representatives of such party to attend meetings of the JDC.  

(b) Responsibilities.  The JDC shall perform the following
functions:

(i)define, manage and oversee the implementation of the Novartis
Development Program in the United States.  Notwithstanding that the JDC shall be
responsible for the United States territory only, it shall also take into
consideration the rest of the Option Territory and China with the aim of having
a harmonised and efficient registration strategy;

(ii)review and make proposals for clinical development plans which
shall include Clinical Trials and manufacturing Specifications;

(iii)develop, propose and implement a budget reasonably necessary to
develop, register and commercialize the Option Product, and review any
amendments or modifications of the Novartis Development Plan or the budget for
such program; 

(iv)at each meeting of the JDC, review a comparison of actual
clinical development and regulatory expenses to the budgeted expenses in the
Novartis Development Program budget for the year-to-date, as current as
practicable to a date immediately prior to the date of the meeting; 

(v)review and approve all uses of the Option
Product; 

(vi)review and approve the joint publication
strategy;

(vii)review and approve the regulatory strategy and submissions;

(viii)set up systems necessary to capture costs and profits or losses;

(ix)determine manufacturing specifications, validation procedures and
supply requirements for each Option Product; and

(x)have such other responsibilities as may be assigned to the JDC
pursuant to this Development License and Commercialization Agreement or as may
be mutually agreed upon by the parties from time to time.

(c)Meetings.  The JDC shall meet in person at least once
during every calendar quarter, and more frequently as Cell Genesys and Novartis
deem appropriate or as reasonably requested by either such party, on such dates,
and at such places and times, as such parties shall agree.  Meetings of the JDC
that are held in person shall alternate between the offices of Cell Genesys and
Novartis or such other place as such parties may agree.  The members of the JDC
also may convene or be polled or consulted from time to time by means of
telecommunications, video conferences, electronic mail or correspondence, as
deemed necessary or appropriate.

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(d)Decision-making.  The JDC may make decisions with
respect to any subject matter that is subject to the JDC's decision-making
authority.  All decisions of the JDC shall be made by unanimous vote or written
consent, with Cell Genesys and Novartis each having, collectively, one (1) vote
in all decisions.  If, with respect to any issue that is subject to the JDC's
decision-making authority, the JDC cannot reach consensus within fifteen (15)
Business Days after it has first met and attempted to reach such consensus, the
parties shall refer such issue to the chief executive officer (or his/her
representative) of Cell Genesys and the Oncology business unit (or successor
unit) of Novartis, who shall, as soon as practicable, attempt in good faith to
resolve the controversy or claim.  If such controversy or claim is not resolved
within twenty (20) Days of the date of initial referral of the matter to such
individuals, Novartis shall have the right to make the relevant decision at
its own discretion which shall be taken in good faith.  Novartis agrees that any
decision made by it regarding the commercialization and development budget for
an Option Product in the U.S. shall be reasonable and taken in good faith.

ARTICLE IV

MANUFACTURING AND SUPPLY

4.1.Manufacturing Agreement

The parties shall enter into a Manufacturing and
Supply Agreement for the Option Product as of the Launch Date.  Cell Genesys
shall be responsible for the manufacture and supply of the Option Product to
Novartis on the terms and conditions of the Manufacturing and Supply
Agreement.

ARTICLE V

MARKETING AND COMMERCIALIZATION

5.1.Marketing and Promotion

5.1.1 As set forth in Section
2.1(a) and subject to the other terms and conditions of this Development License
and Commercialization Agreement, Novartis shall have exclusive rights to market,
promote, sell and distribute the Option Product in the Option Territory. With
respect to the United States, Novartis shall have the right to define and
implement a Product Marketing Plan, and each of Novartis and Cell Genesys shall
meet its obligations under the Product Marketing Plan.  Novartis shall provide
copies of any proposed Product Marketing Plan (and related investment
information) or proposed revisions thereto to Cell Genesys for Cell Genesys'
review and comment as soon as possible after preparation and as frequently as
may be required based on Novartis' usual marketing campaign cycles.  All
promotional materials and promotional activities shall be developed by Novartis,
with input from Cell Genesys, following general guidelines established by
Novartis.  Cell Genesys will be included in, and be allowed to participate in,
all such promotional activities or portions thereof solely relating to the
Option Product being conducted by Novartis, including participation in symposia,
key opinion leader events and similar events.  Each party shall ensure that its
field force is adequate to meet its obligations under the Product Marketing
Plan.  Novartis' and Cell Genesys' field force will meet on a regular basis in
order that Cell Genesys field force will receive guidance and support for the
implementation of the Product Marketing Plan.

5.1.2  In accordance with the intention of Section 5.1.1,
Novartis and Cell Genesys agree that irrespective of which party sells the
Option Product, such sale shall be booked in the name of Novartis.

5.2  Co-Promotion in the U.S.

Within the territory of the United States, Novartis and Cell Genesys
shall Co-Promote the Option Product in accordance with the Product Marketing
Plan.  The parties shall cooperate to diligently implement the Product Marketing
Plan.

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

5.3 Marketing Costs

From and after the Effective Date, each of Cell Genesys and Novartis
shall be responsible for those Marketing Costs in accordance with the following
table, as applicable in the Option Territory, and each shall be entitled to its
aforementioned costs as illustrated in the chart set out in this Section 5.3.
However, any final payment by either party hereto made under this Section 5.3
will only be made within the payment settlement arrangement as defined under
Article VI and in the Financial Appendix.

	
	
Cell Genesys
	
Novartis

	
Option Territory (excluding the U.S.)
	
[*] of Marketing Costs
	
[*] of Marketing Costs

	
U.S.
	
[*] of Marketing Costs
	
[*] of Marketing Costs

5.4.Use of Reasonable Efforts

Novartis shall use diligent and commercially
reasonable efforts consistent with sound and reasonable business practices and
judgment to effect introduction of Option Product into the Option Territory as
soon as reasonably practicable, devoting not less than the same degree of
attention and diligence to such efforts that it devotes to such activities for
other of its products of comparable market potential.  Following the First
Commercial Sale of the Option Product and until the expiration of this
Development License and Commercialization Agreement, Novartis shall use commercially reasonable efforts
to keep the Option Products reasonably available to the public in each of the
Major Markets.  Novartis shall promptly notify Cell Genesys if it shall
determine that the marketing and sale of the Option Product in any country is
not commercially reasonable or economically profitable or if for other
unforeseen reasons further commercial support of the Option Product in certain
countries is no longer prudent or practical. In determining whether Novartis is
in compliance with the foregoing provisions, there shall be taken into account
the normal course of drug development programs in the pharmaceutical industry
conducted with sound and reasonable business practices and judgment for
compounds with a comparable market potential.

5.5Financial Appendix to Control

The parties acknowledge and agree that the Financial Appendix shall
govern the details of the financial matters regarding the Co-Promotion.  In the
event of an irreconcilable conflict between this Development License and
Commercialization Agreement and the Financial Appendix, the terms of the
Financial Appendix shall prevail.     

ARTICLE VI

PAYMENTS AND COMPENSATION

6.1.Royalty Fees 

As further consideration to Cell Genesys for the rights granted to
Novartis in the Option Territory under this Development License and
Commercialization Agreement, Novartis shall pay to Cell Genesys a royalty fee
equal to [*] of the Adjusted Net Sales of the Option Products in the Option
Territory (excluding the U.S.).

6.2Payment of Royalty Fees 

Within forty-five (45) Days following the end of each calendar quarter
during the term hereof following the First Commercial Sale, Novartis shall
submit to Cell Genesys a Sales Report the amount of Net Sales in the Option
Territory, the calculation of royalty fees due thereon with respect to the
Option Product, and the royalty fees due and payable thereon.
  

6.3Profit and Cost Sharing in the United
States

6.3.1 Profit and Cost Sharing

Subject to the terms of this Development License and
Commercialization Agreement and the Financial Appendix, within the territory of
the United States, the parties agree that Novartis or its designees shall be
allocated a [*] share of all Net Profits (or Net Losses, as the case may be) and
Cell Genesys shall be allocated a [*] share of all Net Profits or Net
Losses.

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

6.3.2Financial Appendix; Records

The sharing of Net Profits (or Net Losses, as the case may be) under
Section 6.3.1 above, including the calculation and settlement thereof and all
other financial matters relating thereto, shall be in accordance with this
Development License and Commercialization Agreement and the Financial Appendix.
Each Party shall maintain complete and accurate books and records in connection
with its development, manufacture and commercialization of the Option Products
in the United States, including as required under the Financial Appendix (and
subject to the inspection, audit and cooperation rights set forth therein).
Cell Genesys and Novartis shall provide to each other (or its designated
Affiliate) all data and information required for the financial
consolidation.

6.3.3Excluded Costs

Notwithstanding anything to the contrary in this Development License
and Commercialization Agreement, if any party suffers any direct or indirect
damages, losses, costs, consequential, special, indirect, incidental or punitive
damages arising out of or in connection with;

(i) the negligence, recklessness, international wrongful acts or negligent or
willful omissions of such party or its Affiliates or their respective officers,
directors, employees or agents in connection with the manufacture, development
or commercialization in the United States of or other activities in the United
States relating to the Option Product during the term of this Agreement; 

(ii) the manufacture by or on behalf of such Party or its Affiliates of any
Option Product which is not in compliance with applicable specifications (as set
forth in the relevant Manufacturing and Supply Agreement(s)), cGMPs or any other
legal requirements as well as other applicable Regulatory Approvals granted or
required for the Option Product; and 

(iii) the failure by such Party or its Affiliates to properly report on any
adverse incidents or events relating to the Option Product (collectively,
"Excluded Costs"), then any such Excluded Costs shall be solely for
the account of such party, and shall not be included in costs and expenses for
the United States for the purpose of calculating of Net Profits (or Net Losses,
as the case may be), to be shared under this Development License and
Commercialization Agreement.

6.4 Withholding Tax

  

If, during the term of this Development License and Commercialization
Agreement, withholding tax should be required by law to be deducted from any
payments required to be made by Novartis to Cell Genesys or Cell Genesys to
Novartis hereunder, the parties agree that such tax payment will be deducted
from any payment to be made by either party, and Novartis or Cell Genesys, as
the case may be, shall promptly notify the other party of such withholding and,
within a reasonable amount of time after making such deduction, furnish the
other party with copies of any tax certificate or other documentation evidencing
such withholding.  Each party agrees to cooperate with the other party in
claiming exemptions from such deductions or withholdings under any agreement or
treaty from time to time in effect.

ARTICLE VII

AUDITS

7.1 Audit Right

During the term of this Agreement and for a period of three (3) years
thereafter:  Novartis, Cell Genesys and their Affiliates shall keep accurate,
necessary and proper books and records, including financial records, relating to
its obligations under, and compliance with, the terms if this Development
License and Commercialization Agreement.  Novartis and Cell Genesys shall have
the right to conduct audits of such records in accordance with this Article VII.
The parties, or through representatives which shall be appointed at the
discretion of each party, and reasonably acceptable to either party, shall have
the right, at reasonable times and upon reasonable notice, but not more often
than two (2) times each calendar year, to examine such books and records as may
be necessary to determine the correctness of any report or payment made under
this Development License and Commercialization Agreement and matters set forth
in the Financial Appendix, including, without limitation, all matters related to
"CGNov" (as defined in the Financial Appendix).

7.2 The party conducting the audit shall bear the full cost and expense of such
audit, unless (i) a discrepancy in excess of the greater of two percent (2%) or
USD $100,000 in favor of the auditing party is discovered, or (ii) the audited
party misstated wilfully the financial data it reported to the auditing party.
In such an event, the audited party shall bear the full cost and expense of such
audit (which cost and expense, together with all amounts in discrepancy, shall
be paid to the auditing party promptly upon notice thereof).

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

ARTICLE VIII

INTELLECTUAL PROPERTY

8.1Inventions and Patents

8.1.1Ownership

Ownership of inventions made, developed, conceived or reduced to
practice in connection with activities of the parties under this Development
License and Commercialization Agreement shall be determined in accordance with
the laws of inventorship under
United States patent laws.  

8.1.2Cell Genesys Inventions

Cell Genesys shall solely
own all Inventions made, developed, conceived, and
reduced to practice solely by its employees and agents acting on its behalf, and all Patents claiming such Cell Genesys Inventions. For
the avoidance of doubt, all such Patents shall be included within the Cell Genesys Patents.

8.1.3Novartis Inventions

Novartis shall solely own all Inventions made, developed, conceived, and
reduced to practice solely by its employees and agents acting on its behalf, and all Patents claiming such Novartis Inventions.  For
the avoidance of doubt, all such Patents shall be included within the Novartis Patents.  

8.1.4Joint Inventions

In the event that any Inventions (and the
Patents resulting therefrom) are jointly made by (i) employees or agents (if
applicable) of Cell Genesys and (ii) employees or agents (if applicable) of
Novartis, during the term of and as result of this Development License and
Commercialization Agreement  ("Joint Patents"), the parties will jointly own such Joint Patents and decide at such point in time on the responsibility for filing, maintenance, defense and prosecution of such Joint Patents.  If the parties are unable to decide as to such matter, the
matter shall be resolved as set forth in Article XI.    

8.2.Prosecution and Maintenance of Patent
Rights

8.2.1Except as otherwise set
forth in the Assignment and License Agreement, Cell
Genesys shall be responsible, at its own expense, for diligently taking all
steps necessary to file, prosecute, maintain and extend all Patents within the
Cell Genesys Patents (other than the Assigned Patents), including, but not
limited to, determining whether to pursue, any Patents and applicable patent reissues, extensions and re-
examinations.  

8.2.2Cell Genesys shall
consider and accept the requests and suggestions of Novartis with respect to
strategies for filing, prosecuting, maintaining and extending Cell Genesys
Patents (other than the Assigned Patents) relevant to the
Option Products for which Cell Genesys is responsible pursuant to Section 8.2.1.
In particular, Cell Genesys will consider in good
faith filing patent applications with respect to such Cell Genesys Patents in the
Core Countries. 

8.2.3In the event Cell Genesys finally elects not to file, procure,
maintain or extend any Cell Genesys Patents (other than the Assigned Patents) for which Cell Genesys is responsible pursuant to Section 8.2.1, it shall promptly (and in any event not less than one
month prior to the deadline for taking appropriate action with respect to such
Patent) notify Novartis of that election.  Cell Genesys shall, at Novartis'
request and at Novartis' cost, assign to Novartis all right, title and interest
in and to such Cell Genesys Patent,
and, in return, Novartis shall grant to Cell Genesys a non-exclusive, limited
license back under such Cell Genesys Patent to the extent necessary for Cell
Genesys to perform its obligations under this Development License and
Commercialization Agreement and the associated Manufacturing and Supply
Agreement. 

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

8.3.Infringement 

8.3.1Third Party Infringement.  If either party
becomes aware of any activity that such party believes represents an
infringement of the claims of the Cell Genesys Patents or Novartis Patents with
respect to the Option Product in the Field, the party obtaining such
knowledge shall promptly advise the other of all relevant facts and
circumstances pertaining to the potential infringement.  Novartis and Cell
Genesys shall thereafter consult and cooperate fully to determine a course of
action, including, but not limited to, the commencement of legal action to
terminate any infringement of the Cell Genesys Patents or
Novartis Patents with respect to the Option Product in the Field. 

8.3.2Novartis shall have the first right, but no
obligation, to initiate and prosecute such legal proceedings, at its own expense and in the name of Novartis, with respect to the Cell Genesys Patents if the
alleged infringer is making, having made, using or selling a product that is similar to, the same as or competes with the
Option Product in the Field.  Cell Genesys shall reasonably cooperate with Novartis
in such effort, including being joined as a participant to such action, if necessary,
and Novartis shall reimburse Cell Genesys for the costs and expenses incurred by
Cell Genesys in so cooperating with Novartis (other than Cell Genesys' costs and
expenses of the time of its own personnel).  In
deciding whether to pursue, and in the pursuit of such legal
proceedings, Novartis will use diligent,
commercially reasonable efforts consistent with those used by Novartis for its
own compounds or products of
similar commercial potential.  

8.3.3 If Novartis has the first right to pursue an infringement pursuant to Section 8.3.2 and does not succeed, within ninety (90) Days after
receiving notice from Cell Genesys of the potential infringement or
within sixty (60) Days after providing Cell Genesys with notice of such potential infringement, either in terminating such infringement or in instituting an action to prevent continuation thereof,
or if Novartis notifies Cell Genesys that it does not plan to seek to terminate the infringement
or to institute any such action, then Cell Genesys shall have the right to do so
at its own cost and expense.

8.3.4The costs and expenses (including attorneys'
fees) of any action against an infringement brought in accordance with this
Section 8.3, or to defend a declaratory judgment suit as
provided in this Section 8.3, shall be borne by the
party controlling the infringement or declaratory judgment
action.  

8.3.5Any recovery obtained in legal proceedings
brought against an infringer pursuant to Section 8.3.2 or 8.3.4, whether
obtained by settlement, judgment or otherwise, shall be applied in the following
order of priority:

(a)First, the party initiating the legal
proceedings shall be reimbursed for all costs in connection with such
proceedings paid by such party and not otherwise recovered; and

(b)Second, (i) if such legal proceedings were
brought by Novartis pursuant to Section 8.3.2, any remainder shall be paid [*]
to Novartis and [*] to Cell Genesys, and (ii) if such proceedings were brought
by Cell Genesys pursuant to Section 8.3.4, any remainder shall be paid [*] to
Cell Genesys and [*] to Novartis.

8.3.6Notwithstanding anything in this Section 8.3 to
the contrary, Cell Genesys or Novartis may participate, at its own cost and
expense, in any proceeding involving a challenge to the validity or
enforceability of any Cell Genesys Patent or Novartis Patent, respectively.

8.3.7Updates

Each party shall keep the other reasonably
informed of developments in any action or proceeding subject
to Section 8.3.2 or 8.3.4 relating to the potential
infringement of the claims of a Cell Genesys Patent or Novartis
Patent, including, to the extent permissible by law,
the state of any settlement negotiations and the terms of any offer related
thereto.

  

8.3.8 Defense and Settlement of Third Party
Claims

If a Third Party asserts that a patent owned
by it is infringed by the importation, manufacture, use or sale of the Option Product, Novartis shall defend, and be solely responsible for
defending, against any such
assertions and controlling any related litigation at its own cost and expense.

8.3.9Novartis will use diligent, commercially reasonable efforts
consistent with those used by Novartis for its own compounds of similar
commercial potential in defending against such charge of infringement.  

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

8.3.10 If Novartis is required to pay royalties to any Third Party in order to
exercise its rights to sell an Option Product in a country because such Option
Product infringes a patent of a Third Party, then the royalties payable by
Novartis to such Third Party (x) in the case of any such Option Product sold in
the Option Territory (excluding the United States) shall be deemed to be a Third
Party Obligation, and (y) in the case of any such Option Product sold in the
United States shall be included as costs and expenses for the purpose of
calculating Net Profits (or Net Losses, as the case may be) under Co-Promotion
arrangement hereunder.

8.3.11 Subject to Section 8.3.10, if Novartis is required to pay a one-time or
milestone charge to any Third Party in order to exercise its rights to sell the
Option Product in a country because such Option Product infringes a patent of a
Third Party, then the amount of such one-time or milestone charge payable by
Novartis to such Third Party (x) in the case of any such Option Product sold in
the Option Territory (excluding the United States) shall be deemed to be a Third
Party Obligation, and (y) in the case of any such Option Product sold in the
United States, shall be included as costs and expenses for the purpose of
calculating Net Profits (or Net Losses, as the case may be) under the
Co-Promotion arrangement hereunder.  

ARTICLE IX

REPRESENTATIONS AND WARRANTIES; NOVARTIS
COVENANTS

9.1.Representations and Warranties of Cell
Genesys

Cell Genesys represents and warrants to Novartis
as follows: 

9.1.1Authorization.  This Development License and
Commercialization Agreement has been duly executed and delivered by Cell Genesys
and constitutes the valid and binding obligation of Cell Genesys, enforceable
against Cell Genesys in accordance with its terms.  The execution, delivery and
performance of this Development License and Commercialization Agreement have
been duly authorized by all necessary action on the part of Cell Genesys, and its officers and
directors on behalf of Cell Genesys.  

9.1.2  No Third Party Rights.  Except as disclosed in
writing by Cell Genesys to Novartis or its agents as of the Effective Date, to
the knowledge of Cell Genesys, (a) Cell Genesys owns or possesses adequate
licenses or other such rights to use all Cell Genesys Patents and Cell Genesys
Know-How, and to grant the licenses herein granted by
it and (b) the granting of the licenses to Novartis
hereunder does not violate any right known to Cell Genesys of any Third Party.

9.1.3  No Third Party Patents.  Except as disclosed in writing by Cell Genesys to
Novartis or its agents as of the Effective Date, to the knowledge of Cell
Genesys, the development, manufacture, use or sale of the Option Product pursuant to this Development License and
Commercialization Agreement will not infringe or conflict with any Third Party
right or patent, and Cell Genesys is not aware of any Third Party patent or pending patent application that, if
issued, would be infringed by the development, manufacture, use or sale of any Option Product. 

 

9.2.Representations and Warranties of
Novartis

Novartis represents and warrants to Cell Genesys
as of the Effective Date as follows: 

9.2.1Authorization.  This Development License and
Commercialization Agreement has been duly executed and delivered by Novartis and
constitutes the valid and binding obligation of Novartis, enforceable against
Novartis in accordance with its terms.  The execution, delivery and performance
of this Development License and Commercialization Agreement have been duly
authorized by all necessary action on the part of
Novartis and its officers and directors on
behalf of Novartis.  

9.3. Limitations

9.3.1  No other warranties.  EXCEPT AS EXPRESSLY PROVIDED UNDER
THIS AGREEMENT, NONE OF THE PARTIES MAKE ANY REPRESENTATIONS OR WARRANTIES OF
ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR ANY
OTHER MATTER WITH RESPECT THE OPTION PRODUCT. 

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

9.3.2  Consequential Damages.  EXCEPT FOR LOSSES WHICH ARE SUBJECT TO
INDEMNIFICATION OBLIGATIONS OF EITHER PARTY WITH RESPECT TO INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES RECOVERED BY A THIRD
PARTY, UNDER NO CIRCUMSTANCES SHALL ANY PARTY BE LIABLE TO THE OTHER PARTY FOR
INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND REGARDLESS OF THE
THEORY OF LIABILITY), ARISING FROM ANY PROVISION OF THIS AGREEMENT, INCLUDING,
BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST
BUSINESS.

ARTICLE X

CONFIDENTIALITY AND PUBLICATION

10.1Confidentiality

The parties acknowledge and agree that all Confidential Information
disclosed by one party to the other shall be subject to the Confidentiality
Appendix.

10.2Publication

Each of Novartis and Cell Genesys reserves the right to publish or
publicly present the results (the "Results") of the Novartis Development Program, subject to the
following terms and conditions.  The party proposing to publish or publicly
present the Results (the "publishing party") will submit a draft of any proposed manuscript or
speech to the other party (the "non-publishing party") for comments at least sixty (60) Days prior to
submission for publication or at least thirty (30) Days prior to submission for
oral or poster presentation.  The non-publishing party shall notify the
publishing party in writing within fifteen (15) Days of receipt of such draft
whether such draft contains (i) information of the non-publishing party which it
considers to be confidential under Section 10.1 hereof,
(ii) information that if published would have an adverse effect on a patent
application covering the subject matter of this Development License and
Commercialization Agreement which the non-publishing party intends to file, or
(iii) information which the non-publishing party reasonably believes would be
likely to have a material adverse impact on the development or commercialization of the Option Agreement (including without
limitation information relating to data package exclusivity or marketing
exclusivity).  In any such notification, the non-
publishing party shall provide specific wording for the disclosure to be made by
the publishing party.  In the case of item (ii) above, the non-publishing party
may request a delay and the publishing party shall delay such publication, for a
period not exceeding ninety (90) Days, to permit the timely preparation and
filing of a patent application or an application for a certificate of invention
on the information involved.  In the case of item (i) above, no party may
publish confidential information of the other party without its consent in
violation of the Confidentiality Appendix to this
Development License and Commercialization Agreement.  In the case of item (iii)
above, if the publishing party shall disagree with the non-publishing party's
assessment of the impact of the publication, then the issue shall be determined by the JDC.  The parties agree that authorship of any publication
will be determined based on the customary standards then being applied in the
relevant scientific journal. 

ARTICLE XI

DISPUTE RESOLUTION

11.1Governing Law and Jurisdiction

This Development License and Commercialization
Agreement shall be governed by and interpreted under the
laws of the State of New York, excluding its conflicts of laws principles.

11.2.Dispute Resolution Process

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11.2.1Conciliation.  Except as set forth below in this Section 11 or as otherwise explicitly provided herein, in the event of
any controversy or claim arising out of or relating to any provision of this
Development License and Commercialization Agreement, the parties shall, and either party
may, initially refer such controversy or claim to the chief executive officer of Cell Genesys and the
head of the Oncology business unit (or successor unit) of Novartis, who shall,
as soon as practicable, attempt in good faith to resolve the controversy or
claim.  If such controversy or claim is not resolved within sixty (60)
Days of the date of initial referral of the matter, either party shall be free
to initiate legal proceedings.   

11.2.2Jurisdiction.  Except
with respect to disputes which shall be resolved through conciliation in
accordance with Section 11.2.1, each party hereto irrevocably submits to the
exclusive jurisdiction in the United States District Court for the Southern
District of New York and any State courts sitting in New York, New York for
purposes of any action, suit or other proceedings arising out of this
Development License and Commercialization Agreement. 

ARTICLE XII

TERM AND TERMINATION

12.1Term

This Development License and
Commercialization Agreement shall become effective upon the Effective Date and
the term of this Development License and Commercialization Agreement shall
extend, subject to all applicable laws, with respect to an Option Product in a
particular country until the later of:  (a) the tenth (10th)
anniversary of the Effective Date, or (b) the expiration of the last to expire
of any Cell Genesys Patent or Joint Patent containing a Valid Claim covering the Option Product or
its use, sale or manufacture in that country. 

12.2Termination for Bankruptcy

If at any time during the term of this
Development License and Commercialization Agreement, an Event of Bankruptcy (as
defined below) relating to a
party (the "Bankrupt
Party") occurs, the other party (the "Other Party") shall have, in addition to all other
legal and equitable rights and remedies available hereunder, the option to
terminate this Development License and Commercialization Agreement upon thirty
(30) Days' written notice to the Bankrupt Party.  As used above, the term "Event of Bankruptcy"
shall mean, with respect to a party, (a) the dissolution, termination of existence, or
liquidation of the party; (b) the appointment of a custodian or receiver
with respect to all or substantially all of the business or assets of the party, which custodian or receiver
is not terminated or dismissed within thirty (30) calendar days following
appointment; the institution by the party of any petition for relief or similar
proceeding under bankruptcy, reorganization, receivership or other similar laws
affecting the rights of creditors generally or the making by the party with respect to all or substantially all of the
business or assets of the party of a composition or
any assignment or trust mortgage for the benefit of creditors or under any
bankruptcy, reorganization, receivership or other similar law affecting the
rights of creditors generally, which petition, proceeding or other action is not dismissed within ninety (90) Days of filing.  

12.3Termination

12.3.1Termination by Novartis

(a)Novartis may at its sole discretion unilaterally terminate
this Development License and Commercialization Agreement if Cell Genesys shall
materially breach any of its material obligations under this Development License
and Commercialization Agreement and shall not have remedied such material breach
within sixty (60) Days after Novartis sends written notice specifying such
breach to Cell Genesys.

(b)Novartis may terminate this Development License and
Commercialization Agreement at any time upon thirty (30) Days' prior written notice to Cell
Genesys if either scientific or economic circumstances, in Novartis' sole
judgment, do not warrant further development or commercialization by
Novartis.

12.3.2Termination by Cell Genesys

Cell Genesys may terminate this Development License and
Commercialization Agreement if Novartis shall materially breach any of its
material obligations under this Development License and Commercialization
Agreement and shall not have remedied such material breach within sixty (60)
Days after Cell Genesys sends written notice specifying such breach to
Novartis.

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12.4Effect of Termination

Termination of this Development License and
Commercialization Agreement for any reason, or expiration of this Development
License and Commercialization Agreement, will not affect:  (i) obligations,
including the payment of any royalties and any supply price payments, which have
accrued as of the date of termination or expiration, and (ii) rights and
obligations which, from the context thereof, are intended to survive termination
or expiration of this Development License and Commercialization Agreement.  Upon the natural expiration of this Development License and
Commercialization Agreement, Novartis shall retain a non-exclusive, royalty-
free, paid-up, perpetual, irrevocable, worldwide, fully transferable and
sublicensable right and license under the Cell Genesys Technology to make, have
made, use, sell, offer to sell, export and import the Option Product.   

12.5Survival 

Articles VI (for accrued but unpaid payments), VII, VIII, IX, XI, XII
(other than Section 12.6), XIII and XIV, Section 10.1 and all exhibits attached
hereto, shall survive the expiration or termination of this Development License
and Commercialization Agreement.

12.6Change of Control 

In the event that Cell Genesys has gone through a Change of Control Event
that results in a Third Party acquiring an interest in Cell Genesys, which Third
Party is developing or commercializing a Competing Product to the Option
Product, Novartis shall have, in its sole discretion, the right to terminate the
Co-Promotion in accordance with this Section 12.6.  

Novartis may exercise its right to terminate the Co-Promotion under this
Section 12.6 by informing Cell Genesys of its election no later than ninety (90)
Days after Cell Genesys has informed Novartis of the consummation of such Change
of Control Event.  The termination of the Co-Promotion under this Section 12.6
shall become effective upon end of the fiscal quarter during which Novartis
makes the initial payment of the Co-Promotion Termination Fee (as defined
below).  

Upon communication of Novartis' election hereunder, the parties shall
negotiate in good faith the valuation of royalties, fees or a combination of
both (the "Co-Promotion Termination Fee") to be paid to Cell Genesys
by Novartis to terminate the Co-Promotion under this Section 12.6.  Whether the
Co-Termination Fee will be in the form of royalties, fees or a combination of
both shall be decided by Novartis in its sole discretion.  In the event that the
parties cannot come to resolution with respect to the valuation of the Co-
Promotion Termination Fee within sixty (60) Days from the receipt of Novartis'
election by Cell Genesys, the parties shall settle the valuation of such
royalties, fee or combination of both, as the case may be, in the following
manner:  Each of Cell Genesys and Novartis shall chose an investment bank of
international reputation.  The two chosen investment banks shall promptly agree
to chose a third investment bank (the "Deciding Bank") of
international reputation.  The Deciding Bank shall, within sixty (60) Days of
submission of the matter to the Deciding Bank, determine and report to the
parties regarding the Deciding Bank's valuation of the Co-Promotion Termination
Fee.  The parties agree that such valuation of the Deciding Bank shall be final,
binding and conclusive.  Each party shall bear all costs and fees associated
with investment bank chosen by such party.  The fees and disbursement of the
Deciding Bank shall be shared equally between the parties.  The parties shall
cooperate and timely provide to the Deciding Bank all information necessary for
the Deciding Bank to make its valuation decision.

For the avoidance of any doubt, the termination of the Co-Promotion
arrangement under this Section 12.6 by Novartis shall mean that Cell Genesys
shall cease all activities under the Co-Promotion arrangement, Novartis shall
have the exclusive rights to such activities in the United States, and Cell
Genesys' obligation to share in any costs, as well as to share in the Net
Profits or Net Losses, as the case may be, shall cease.  Notwithstanding the
foregoing, termination of the Co-Promotion arrangement under this Section 12.6
by Novartis shall not affect in any way the Co-Promotion arrangement (including
the applicable financial arrangement under the Financial Appendix) with respect
to the manufacture and supply by Cell Genesys under the Manufacturing and Supply
Agreement, unless the Manufacturing and Supply Agreement is also terminated
under the terms thereof.  

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Confidential treatment has been requested with respect to the omitted portions.

ARTICLE XIII

INDEMNIFICATION

13.1 Indemnification by Cell Genesys

Cell Genesys will indemnify and hold Novartis and
its Affiliates, and their employees, officers and directors, harmless against
all Losses that are based on or arise out of:

(a) the breach by Cell Genesys of any of its
obligations, covenants, representations or warranties set forth in this
Development License and Commercialization Agreement; and

(b) the gross negligence or wilful misconduct of
Cell Genesys and its Affiliates, and their employees, officers and directors in
the performance of obligations or exercise of rights under this Development
License and Commercialization Agreement; 

provided,
however, that the foregoing indemnification shall not apply to any Loss to the
extent such Loss is caused by the grossly negligent or wilful misconduct of
Novartis and its Affiliates, and their employees, officers and directors.

13.2
Indemnification by Novartis

Novartis will indemnify and hold
Cell Genesys, and its Affiliates, and their employees, officers and directors
harmless against all Losses that are based on or arise out of: 

(a) the breach by Novartis of any of its
obligations, covenants, representations or warranties set forth in this
Development License and Commercialization Agreement; and

(b) the gross negligence or wilful misconduct of
Novartis and its Affiliates, and their employees, officers and directors in the
performance of obligations or exercise of rights under this Development License
and Commercialization Agreement;

provided, however, that the foregoing
indemnification shall not apply to any Loss to the extent such Loss is caused by
the grossly negligent or wilful
misconduct of Cell Genesys or its Affiliates and their employees, officers and
directors. 

13.3.Claims Procedures as to Third Party Claims

Each party entitled to be indemnified by the
other party (an "Indemnified Party")
pursuant to Section 13.1 or 13.2 hereof shall give notice to the other party (an
"Indemnifying Party")
promptly after such Indemnified Party has actual
knowledge of any threatened or asserted Third Party claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom; provided that:

13.3.1The Indemnifying Party may so assume the
defense of any such claim or any litigation resulting therefrom only if it shall
give notice to the Indemnified Party of the Indemnifying Party's decision to so
assume such defense within thirty (30) Days after the date of the notice from
the Indemnified Party of the Third Party claim as to which indemnity is sought
and acknowledges in writing to the Indemnified Party that any Loss in connection
with such claim or any litigation resulting therefrom is a Loss for which the
Indemnified Party shall be entitled to indemnification pursuant to this Article
XIII;

13.3.2 Counsel for the
Indemnifying Party, who shall conduct the defense of
such claim or any litigation resulting therefrom (if such
defense is assumed by the Indemnifying Party), shall
be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld) and the Indemnified Party may participate in such defense with
the Indemnified Party's own counsel at the Indemnified Party's own
expense (unless (i) the employment of counsel by such Indemnified Party has been authorized by the Indemnifying Party; (ii) the Indemnified Party shall
have reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in the
defense of such action; or (iii) the
Indemnifying Party shall have failed to assume the defense as provided herein, in each of which cases the Indemnifying Party shall
pay the reasonable fees and expenses of one law firm serving as counsel for the
Indemnified Party, which law firm shall be subject to
approval, not to be unreasonably withheld, by the Indemnifying Party);

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13.3.3The failure of any
Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Development License and Commercialization Agreement to the extent that the
failure to give notice did not result in prejudice to the Indemnifying Party;

13.3.4No Indemnifying
Party, in the defense of any such claim or litigation,
shall, except with the approval of each Indemnified Party, which approval shall not be unreasonably withheld,
consent to entry of any judgment or enter into any settlement which (i) would
result in injunctive or other relief being imposed against the Indemnified
Party; or (ii) does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim
or litigation;

13.3.5 Each Indemnified
Party shall furnish such information regarding itself or
the claim in question as an Indemnifying Party may reasonably request in writing
and shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom; and

13.3.6 If the Indemnifying Party assumes the defense
of the Third Party claim or litigation, the Indemnified Party shall not settle
or agree to a judgment with respect to any claim or litigation without the
consent of the Indemnifying Party.

13.4. Compliance 

The parties shall comply in
all material respects with all applicable Laws and
regulations in connection with their respective activities under this
Development License and Commercialization Agreement. 

 

13.5 Insurance

Each party shall use commercially reasonable efforts to maintain insurance
and/or self-insurance, including product liability insurance, with respect to
its activities hereunder.

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Confidential treatment has been requested with respect to the omitted portions.

ARTICLE XIV

MISCELLANEOUS PROVISIONS

14.1 Notice of Pharmaceutical Side-Effects

During the term of this Development License and
Commercialization Agreement, Cell Genesys and Novartis will notify appropriate authorities in accordance with
applicable Law, and concurrently, promptly after receipt
of information with respect to any serious adverse reaction, as defined by the
World Health Organization or applicable regulatory
authority, directly or indirectly attributable to
the use or application of the Option Product.  

14.2 Waiver 

No provision of the Development License and
Commercialization Agreement may be waived except in writing by both parties
hereto.  No failure or delay by either party hereto in exercising any right or
remedy hereunder or under applicable law will operate as a waiver thereof, or a
waiver of a particular right or waiver of any right or remedy on any subsequent
occasion.  

14.3 Force Majeure 

The failure of either party to perform its
obligations under this Development License and Commercialization Agreement
(other than the obligations to make any payments or obligations of
confidentiality) shall not subject such party to any liability or place it to be
in breach of any term or condition of this Agreement to the other party if such
failure is caused by Force Majeure; provided, however, that the party affected
shall promptly notify the other party of the condition constituting Force
Majeure as defined herein and shall exert reasonable efforts to eliminate, cure
and overcome any such causes and resume the performance of its obligations as
soon as reasonably practicable. If a condition constituting Force Majeure exists
for more than ninety (90) consecutive Days, the parties shall negotiate a
mutually satisfactory solution at the expense of the party invoking Force
Majeure. "Force Majeure" shall mean any cause beyond the reasonable
control of such nonperforming party, including, without limitation, acts of God,
fire, explosion, flood, earthquake, drought, war, hostility, revolution, riot,
civil disturbance, national emergency, sabotage, embargo, strikes or other labor
trouble.  

14.4 Registration of License 

Novartis may, at its expense and subject to compliance with terms of this Development License and Commercialization
Agreement, register the license granted under this Development License and
Commercialization Agreement in any country where Novartis uses, sells or
manufactures an Option Product. Upon request by Novartis, Cell Genesys agrees
promptly to execute any "short form" licenses submitted to it by Novartis
in order to effect the foregoing registration in such country, but such licenses
shall in no way alter or affect the obligations of the parties hereunder. 

 

14.5 Severability 

If any term or other provision of this
Development License and Commercialization Agreement is invalid, illegal or
incapable of being enforced by any Law or public policy, all other terms and
provisions of this Development License and Commercialization Agreement shall
nevertheless remain in full force and effect for so long as the economic or
legal substance of the transactions contemplated by this Agreement is not
affected in any manner materially adverse to any party.  Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Development License and Commercialization Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated by this Development License and
Commercialization Agreement are consummated as originally contemplated to the
greatest extent possible.  

14.6 Government
Approvals

Novartis and Cell Genesys will use reasonable
efforts to obtain any government approval required to enable this Development
License and Commercialization Agreement to become effective, or to enable any
payment hereunder to be made, or any other obligation hereunder to be observed
or performed.  Each party will keep the other informed of progress in obtaining
any such approvals.  

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Confidential treatment has been requested with respect to the omitted portions.

14.7 Assignment

This Development License and Commercialization
Agreement may not be assigned or otherwise transferred by either party without
the prior written consent of the other party; provided, however, that (i) either
party may assign the benefit of this Development License and Commercialization
Agreement, without the consent of the other party, to any of its Affiliates, if
the assigning party remains obligated on a primary basis for the full
performance of its Affiliates' obligations hereunder, and (ii) Novartis may
assign this Development License and Commercialization Agreement, without the
consent of Cell Genesys, in connection with the transfer or sale of all or
substantially all of its assets or business to which this Development License
and Commercialization Agreement relates or in the event of its merger or
consolidation with another company.  In the event Cell Genesys consolidates with
or merges into any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or transfers all or
substantially all of its properties and assets to any Person, then, and in each
such case, proper provision shall be made so that the successors and assigns of
Cell Genesys shall assume the obligations set forth in this Development License
and Commercialization Agreement.  Any purported assignment in contravention of
this Section 14.7 shall, at the option of the non-assigning party, be null
and void and of no effect.  No assignment shall release either party from
responsibility for the performance of any accrued obligation of such party
hereunder.  This Development License and Commercialization Agreement shall be
binding upon and enforceable against the successor to or any permitted assignees
from either of the parties hereto.

  

14.8 Affiliates

Novartis may perform its obligations hereunder
personally or through one or more Affiliates, although each party shall
nonetheless be solely responsible for the performance of its Affiliates.
Neither party shall permit any of its Affiliates to commit any act (including
any act of omission) which such party is prohibited hereunder from committing
directly.  The use of subcontractors by either party shall not increase the
financial obligations of the other party hereunder in any respect.  

14.9 Counterparts

This Development License and Commercialization
Agreement may be executed in duplicate, both of which shall be deemed to be
originals, and both of which shall constitute one and the same agreement.  

14.10No Agency

Nothing herein contained shall be deemed to create an agency, joint
venture, amalgamation, partnership or similar relationship between Novartis and
Cell Genesys.  Notwithstanding any of the provisions of this Development License
and Commercialization Agreement, neither party shall at any time enter into,
incur, or hold itself out to third parties as having authority to enter into or
incur, on behalf of the other party, any commitment, expense, or liability
whatsoever, and all contracts, expenses and liabilities undertaken or incurred
by one party in connection with or relating to the development, manufacture or
sale of the Option Product shall be undertaken, incurred or paid exclusively by
that party, and not as an agent or representative of the other party.  

14.11Notice

All communications between the parties with
respect to any of the provisions of this Development License and
Commercialization Agreement will be sent to the addresses set out below, or to
such other addresses as may be designated by one party to the other by notice pursuant
hereto, by personal delivery (which shall be deemed received
when delivered), by reputable international express courier (which shall be
deemed received when delivered), by prepaid, certified, mail (which shall be deemed received by the other party
on the seven (7) Days following deposit in the mail), or by facsimile transmission, or other electronic means of
communication (which shall be deemed received when transmitted), with
confirmation by prepaid certified mail, given by the close of business on or before the next
following Business Day: 

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Confidential treatment has been requested with respect to the omitted portions.

If to Novartis, at:

Novartis Pharma AG

   Lichtstrasse 35

   4056 Basel

   Switzerland

   Attention: General Counsel

   Tel.: +41 61 324 1111

   Fax: +41 61 324 8001

If to Cell Genesys, at:

Cell Genesys, Inc.

   500 Forbes Blvd.

   South San Francisco, CA 94080

   Attention:  Stephen A. Sherwin, M.D.

   Tel.:  (650) 266 3000

   Fax:  (650) 266 3010

14.12Headings

The descriptive headings contained in this Development License and
Commercialization Agreement are included for convenience of reference only and
shall not affect in any way the meaning or interpretation of this Development
License and Commercialization Agreement.  

14.13Entire Agreement

This Development License and Commercialization
Agreement, including the Exhibits hereto, contains the entire understanding of
the parties relating to the matters referred to herein, except as matters
referenced herein are also addressed in the Option Agreement and the Assignment
and License Agreement, and may only be amended by a written document, duly
executed on behalf of the respective parties.  

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

IN WITNESS WHEREOF, the parties hereto have caused this Development License
and Commercialization Agreement to be executed by their duly authorized
representatives in duplicate as of the day, month and year first above written.  

Cell Genesys, Inc.   

By:    ___________________________________________

Title: ___________________________________________

Novartis Pharma AG      

By:    ___________________________________________

Title: ___________________________________________

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

EXHIBIT I

(Development License and Commercialization Agreement)

OPTION PRODUCT

[To be attached upon execution.]

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

EXHIBIT II

(Development License and Commercialization Agreement)

DEFINITIONS APPENDIX

[To be identical to Exhibit VII of the Option Agreement]

 

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

EXHIBIT
III

OPTION AGREEMENT

DEVELOPMENT INFORMATION AND ESC

·
ESC criteria (criteria to be fulfilled before products transition from
research to development).  See attached.

·
DDM criteria (criteria to be fulfilled before products go into human
clinical trials).  See attached.

·
IND, outlining in detail the Proof of Concept design and study concept,
including patient numbers for the Phase I and Phase II study components.

·
All and any FDA interactions and documentation (meeting minutes, notes,
letters, etc.). 

·
Proof of Concept study:  Final, signed study report, including a statement
on safety and efficacy of the Product Candidate.  The parties shall cooperate to
ensure that Novartis shall have access to and is able to interact with such lead
investigator.

·
Investigator brochure draft.

ESC Criteria

[*]

DDM Criteria

[*]

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

EXHIBIT IV

OPTION AGREEMENT

FINANCIAL APPENDIX

This Financial Appendix shall cover the financial planning, accounting
policies and procedures to be followed in determining the "Net Profit"
or "Net Loss" (as defined below) and related sharing of revenue and
costs and expenses in the United States pursuant to the Development License and
Commercialization Agreement(s) and the Manufacturing and Supply Agreement(s).
For such purposes, this Financial Appendix sets out the principles of reporting
actual results, budgeted plans, forecasts and long range plans of
"CGNov" (as defined below), the frequency of reporting, the use of a
single "Functional Currency" (as defined below) for determining and
reporting payments to the parties, auditing of accounts and other matters. The
consolidated entity will be referred to as "CGNov."  It should be
noted that "CGNov" is not a legal entity and has been defined for
identification purposes only in this Financial Appendix.

This Financial Appendix also provides agreed upon definitions of financial
terms applicable to the parties for purposes of the Development License and
Commercialization Agreement(s) and the Manufacturing and Supply Agreement(s).
All capitalized terms used herein, but not otherwise defined herein, shall have
the meanings set forth in the Definition Appendix. In the event of a conflict
between the terms and provisions of this Financial Appendix and the Development
License and Commercialization Agreement, the terms and provisions of the
Development License and Commercialization Agreement shall govern.

All activities (including information exchanges) under this Financial
Appendix are to be governed by the terms and conditions of the Development
License and Commercialization Agreement and the Manufacturing and Supply
Agreement, including the confidentiality obligations set forth therein.

1.Principles of Cell Genesys / Novartis Reporting

For the purposes of the sharing of costs and sharing of "Net
Profit" or "Net Loss" (as the case may be) between the parties as
provided under the Development License and Commercialization Agreement and this
Financial Appendix, the presentation of results of operations of the parties for
the United States will be based on each party's respective financial information
for the territory of the United States in the reporting format depicted as
follows:

	
For the United States
	
Novartis
	
Cell Genesys
	
Total

Gross Sales 

./. Sales Returns and Allowances 

= Net Sales

./. Fully Burdened Manufacturing Costs 

= Gross Profit 

./. Marketing Costs

./. Development Costs 

./. General & Administrative Costs 

./. Distribution Costs

./. Other Operating Income / Expense

./. Royalty Costs

= Net Profit or Net Loss 

   for purposes of Cell Genesys / Novartis profit share; and

= Net Profit or Net Loss in the U.S. as defined below

2.  Finance Sub-Committee  

The parties hereto envisage setting up a finance sub-committee, which
shall be responsible for the review, administration and consolidation of
operations under the Development License and Commercialization Agreement, the
Manufacturing and Supply Agreement and this Financial Appendix.

3.  Construction

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

The parties agree that, notwithstanding anything to the contrary in the
Development License and Commercialization Agreement and the Manufacturing and
Supply Agreement, the financial terms to be calculated herein shall be made
without duplication, such that if an item is additive or subtractive in one or
more circumstances, such item will be added or subtracted only once.   

4.Frequency of Reporting and Settlements

The fiscal year of CGNov will be a calendar year.
Reporting and other information exchange by each party for CGNOV, revenue and
expenses shall be calculated in the following manner:

	
Reporting Event

(Responsible Party
	

Frequency
	

Timing for Submission

	
Monthly Net Sales (both Parties)
	
Monthly
	
+15 Days

	
Quarterly Gross Sales and Net Sales (both
Parties)
	
Quarterly
	
+15 Days

	
Actual results and Sales Costs (both Parties) (by
Quarter)
	
Quarterly
	
Q1 - Q4: +30 Days

	
Draft settlement statements (both
Parties)
	
Quarterly
	
Q1 - Q4: +45 Days

	
Settlement between the Parties (both
Parties
	
Quarterly
	
Q1 - Q4: +60 Days

Novartis shall be responsible for the preparation of reporting of CGNov
(including the quarterly calculation of Net Profit or Net Loss, as the case may
be, calculated as provided in this Financial Appendix) for purposes of
determining the cash settlement between the parties.  Cash settlement shall take
place immediately after such determination.

4.  Definitions

	"Allocable Overhead" means costs incurred by a party or for
its account which are attributable to such party's supervisory functions,
services functions, occupancy costs, corporate bonus (to the extent not charged
directly to department), and its payroll, information systems, human relations
or purchasing functions and which are allocated to company departments based on
space occupied or headcount or other activity-based method.  Allocable Overhead
shall not include any costs attributable to general corporate activities
including, by way of example only, executive management, investor relations,
business development, legal affairs and finance.
	"Costs of Goods Sold" shall mean Costs of Allocable
Overhead and Cost of Bulk Product, as well as delivery thereof to Novartis.
	"Cost of Bulk Product" The purchase unit cost of any
materials and packaging components necessary to make the Bulk Product and
Devices multiplied by the actual quantity consumed in the manufacturing process
including any usage variance.

	"Cost of Finished Product" The unit cost of any Bulk
Product necessary to make the Finished Product multiplied by the actual quantity
consumed in the manufacturing process including any usage variance.

	"Development Costs" shall mean the development
costs as defined by the JDC and later incurred by each party with respect to an
Option Product, from the Effective Date of the Development License and
Commercialization Agreement through the later of (i) the date of
Registration (including thereafter costs to maintain or expand such Registration
including Registration of additional Indications, formulations, presentations
and Phase IIIb and IV Clinical Trials) of such Option Product in the Field, or
(ii) the date of termination of development efforts of such Option Product
in the Field for which Registration is sought.  Such costs shall comprise those
costs required to obtain, maintain and/or expand the relevant authorization
and/or ability to manufacture, formulate, fill, use, ship, sell and/or
distribute such Option Product in commercial quantities to Third Parties.  It is
explicitly understood that any cost incurred in any territory pursuant to which
developments are also used in the United States, shall entitle such developer to
include such Development Cost within the cost consolidation mechanism and
computations set out in the Financial Appendix.

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Confidential treatment has been requested with respect to the omitted portions.

(a)  Development Costs shall include, without limitation, costs of
research or development including costs of studies on the toxicological,
pharmacokinetical, metabolical or clinical aspects of an Option Product
conducted internally or by individual investigators or consultants necessary for
the purpose of obtaining, maintaining and/or expanding marketing approval of a
Product, costs for preparing, submitting, reviewing or developing data or
information for the purpose of submission to a governmental authority to obtain,
maintain and/or expand marketing approval of a Product, and applicable Allocable
Overhead.

(b)Development Costs shall also include, without limitation, expenses
for data management, statistical designs and studies, document preparation, and
other administration expenses associated with the clinical testing program or
post-marketing studies required to maintain product approvals.

(c)In determining Development Costs chargeable under the Development
License and Commercialization Agreement, each party will use its respective
project accounting systems and will review and approve its respective project
accounting systems and methodologies with the other.

	"Distribution Costs" shall mean the costs, including
applicable Allocable Overhead, specifically identifiable to the distribution of
an Option Product by a party including customer services, collection of data
about sales to hospitals and other end users, order entry, billing, shipping,
bad debt, credit and collection and other such activities.  
	"Fully Burdened Manufacturing Cost" means a party's
consolidated fully burdened manufacturing cost (in accordance with GAAP in the
United States, in each case as consistently applied by the manufacturing
party(ies)) of the Option Product (in bulk, vialed or finished product form, as
the case may be), which shall comprise the sum of:

(a) The "Cost of Goods", as determined by the
party(ies) performing (or contracting with a Third Party for performance of)
each stage of the manufacturing process performed by such party(ies), including,
but not limited to, direct labor and material and product testing costs
(including in-bound freight and insurance), failed lot charges in the ordinary
course of production (subject to the terms of the Manufacturing and Supply
Agreement), and Allocable Overhead;

(b) All of the party's allocable IP acquisition and licensing costs
(including royalties, milestone payment or up front payments) paid to third
parties to the extent it relates to the Option Product;

(c) Any other costs borne by the manufacturing party(ies) for
transport, customs clearance and storage of product (if necessary) at the
request of another party, an Affiliate or a Third Party (i.e. freight,
customs, duty, and insurance); provided, however, that Fully Burdened
Manufacturing Cost shall not include any costs, or expenses included or
includible in Distribution Costs as defined above;

(d) Bulk manufacturing by Cell Genesys including distribution to
Novartis; and 

(e)Labeling, packing and distribution incurred by Novartis including
distribution to Novartis customer.

The Fully Burdened Manufacturing Cost shall in no event exceed [*] of Net
Sales.  Cell Genesys shall bear all costs in excess of [*] of Net Sales.

	"General and Administrative Costs" means costs chargeable
to CGNov equal to [*] of the aggregate sum of (i) the Marketing Costs of Cell
Genesys and Novartis in the United States and (ii) the Development Costs of Cell
Genesys and of Novartis allocated to the United States as provided herein, but
in each case only to the extent these costs are chargeable to CGNov.
	"Gross Sale Price" shall mean the gross amount invoiced by
Novartis on the Sales of the Option Product in the Option Territory.

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

	"Marketing Costs" shall mean the direct or accrued costs of
marketing, promotion, advertising, Option Product promotional materials,
professional education, product related public relations, relationships with
opinion leaders and professional societies, market research (before and after
product approval), healthcare economics studies, post-marketing studies not
required to maintain product approvals (Phase IV Clinical Trial studies), Sales
Cost, and other similar activities, relating to Option Product sales efforts of
a party in the applicable Option Territory and specifically identifiable to the
Distribution Costs of the Option Product by a party including customer services,
collection of data about sales to hospitals and other end users, order entry,
billing, shipping, bad debt, credit and collection and other such
activities.
	"Net Profits" or "Net Losses" shall mean
the definition as set forth in the reporting principles in Section 1 above.
	"Net Sales", with respect to any Option Product, shall mean
the gross amount invoiced and actually paid by a party or its Affiliate,
licensee or sublicensee for that Option Product sold to Third Parties other than
licensees or sublicensees in bona fide, arm's-length transactions, less (i)
quantity and/or cash discounts from the gross invoice price which are actually
allowed or taken; (ii) freight, postage and shipping insurance included in the
invoice price; (iii) amounts repaid or credited by reasons of rejection or
return of goods or because of retroactive price reductions specifically
identifiable to the Option Product; (iv) amounts payable resulting from
governmental (or agency thereof) mandated rebate programs; (v) Third Party
rebates to the extent actually allowed; and (vi) invoiced custom duties and
sales taxes and other governmental charges (excluding income taxes), if any,
actually paid and directly related to the sale.
	"Other Operating Income/Expense" means other operating
income or expense of a party from or to Third Parties which is not part of the
primary business activity relating to the Development License and
Commercialization Agreement, but (i) is permitted to be charged to CGNov by a
party under the Development License and Commercialization Agreement and approved
by the parties, (ii) is reviewed by the finance sub-committee as approved by the
parties as income or expense for purposes of CGNov, and (iii) is limited to the
following:

(a) actual inventory write-offs (but not including any write-offs
included or includible in Fully Burdened Manufacturing Cost, or which are
Excluded Costs under the Development License and Commercialization Agreement, or
which are caused by a party's negligence); 

(b) idle plant charges (subject to the terms of the Manufacturing and
Supply Agreement, which shall define capacity and idle capacity); and other
items, provided they are permitted under the Development License and
Commercialization Agreement, reviewed by the finance sub-committee and approved
by the parties.

	"Royalty Costs" shall mean payments paid by Novartis and
Cell Genesys to Third Parties in connection with rights to use such Third
Party's intellectual property for the Option Product, including, but not limited
to, royalty payments, milestone payments and any up-front payment due under
Third Party licenses or settlements with Third Parties.
	"Sales Returns and Allowances" shall mean the sum of (a)
and (b), where: (a) is a provision for (i) cash and quantity discounts or
rebates on an Option Product (other than price discounts granted at the time of
invoicing and which are included in the determination of Gross Sales), (ii)
credits or allowances given or made for rejection or return of previously sold
Option Product or for retroactive price reductions (including Medicare and
similar types of rebates and chargebacks), (iii) sales taxes, duties or other
governmental charges levied on or measured by the billing amount for an Option
Product, as adjusted for rebates and refunds, (iv) charges for freight and
insurance directly related to the distribution of Option Product, to the extent
included in the invoice to the customer, and (v) credits for allowances given or
made for wastage replacement, indigent patient and any other sales programs
agreed to by Cell Genesys and Novartis for Option Product; and (b) is a periodic
adjustment of the provision determined in (a) to reflect amounts actually
incurred by Cell Genesys or Novartis for items (i), (ii), (iii), (iv) and (v) in
clause (a). The provision allowed in clause (a) and adjustments made in clauses
(b) will be reviewed and approved by the Finance Sub-Committee.

	"Cost of Sales" or "Sales Costs" shall
mean sales costs approved by the parties and  incurred by the parties for their
account and specifically identifiable to the sales efforts of Option Products to
all markets in the Option Territory.

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

(a)"Sales Costs" shall include, without limitation,
costs associated with sales representatives for Option Products in the
Territory, as the case may be, including compensation, benefits and travel,
supervision and training of such sales representatives, sales meetings, and
other sales related expenses.

(b)"Sales Costs" will not include the start-up costs
associated with any party's sales force relating to that party's sales efforts
in the United States, including recruiting, relocation and other similar
costs.

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

EXHIBIT V

OPTION AGREEMENT

FORM OF MANUFACTURING AND SUPPLY AGREEMENT

See attached.

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

MANUFACTURING AND SUPPLY AGREEMENT

Between

Novartis Pharma AG

(hereinafter "Novartis")

and

Cell Genesys, Inc.

(hereinafter "Cell Genesys")

This Manufacturing and Supply Agreement (this "Agreement") is
entered into as of [____] (the "Effective Date"), by and between
Novartis and Cell Genesys.

WHEREAS, Novartis and Cell Genesys have entered into a Development
License and Commercialization Agreement, as of even date herewith
("Development License and Commercialization Agreement"), pursuant to
which Cell Genesys has granted to Novartis certain exclusive rights with respect
to an Option Product; and

WHEREAS, Novartis desires to engage Cell Genesys to manufacture and
supply the Option Product in bulk form suitable for commercialization, all in
accordance with the terms and conditions of this Agreement; 

 

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

All capitalized terms used, but not otherwise defined herein, shall have
the meanings set forth in the Definitions Appendix, attached hereto as Annex
7.

ARTICLE 2

MANUFACTURING STANDARDS

2.1Development of Manufacturing Standards.
No later than ninety (90) Days following the Effective Date, the JDC, in
compliance with all Laws, regulatory requirements of applicable Regulatory
Authorities, cGMP and other requirements set forth in this Agreement, shall
develop and approve the following descriptions, specifications, standards,
schedules and procedures related to the manufacture of Bulk Product
(collectively, "Manufacturing Standards"):

(a)description of the Bulk Product and the
components, raw materials, and excipients required to manufacture the Bulk
Product ("Components"), which descriptions will be attached to this
Agreement as Annex 1;

(b)specifications for the Bulk Product ("Specifications"),
which specifications will be attached to this Agreement as Annex
2;

(c)standards and procedures for Processing the Bulk Product
("Processing Procedures"), which standards and procedures will be
attached to this Agreement as Annex 4;

(d)procedure and schedule to validate the Bulk Product manufacturing
process ("Validation Plan"), which Validation Plan will be attached to
this Agreement as Annex 5;

(e)supply requirements and quality assurance standards and procedures
related to the manufacture of the Bulk Product pursuant to the Supply and QA
Agreement ("Supply and QA Agreement"), which Supply and QA Agreement
shall be executed by the parties and will be attached to this Agreement as
Annex 3; and

(f)procedures for complying with health, safety and environmental
protection Laws governing the manufacture of Bulk Product ("HSE
Procedures"), which procedures will be attached to this Agreement as
Annex 6.

2.2Acceptance of
Engagement.  After delivery by the JDC to Cell Genesys of the final approved
version of the Manufacturing Standards, Cell Genesys will have ten (10) Business
Days to accept the engagement to manufacture and supply the Bulk Product in
accordance with the terms of this Agreement.  If Cell Genesys does not agree
within ten (10) Business Days, then Novartis may, at its sole discretion and
option, undertake to (i) engage a Third Party or Third Parties to manufacture
and supply the Bulk Product for Novartis, or (ii) manufacture and supply the
Bulk Product by itself or through its Affiliates, in each case, under the
Manufacturing Standards approved by the JDC.  This Agreement will terminate upon
Cell Genesys' receipt of written notice from Novartis of its decision;
provided, however, until Novartis, an Novartis Affiliate, or a
Third Party agrees to manufacture and supply the Bulk Product as specified
above, Novartis and Cell Genesys will negotiate diligently and good faith to
agree upon an amendment to this Agreement under which Cell Genesys will accept
the engagement to manufacture and supply the Bulk Product on a transitional
basis.  Until Cell Genesys accepts the engagement to manufacture and supply
the Bulk Product, Cell Genesys will have no other obligations under this
Agreement. 

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

ARTICLE 3

TERMS OF ENGAGEMENT

3.1Engagement.  Subject to Cell Genesys' acceptance in accordance
with Section 2.2, Novartis hereby engages Cell Genesys to manufacture and supply
to Novartis Bulk Product during the Term of this Agreement subject to the terms
and conditions of this Agreement.  Cell Genesys shall manufacture and supply the
Bulk Products to Novartis in full conformance with the Manufacturing Standards.

3.2Requirements Contract.  Subject to the terms and conditions
of this Agreement, Cell Genesys shall manufacture, store, test, release, supply,
deliver and sell to Novartis all of Novartis and Novartis' Affiliates'
requirements of the Bulk Products for Clinical Supply and Commercial Use in the
Option Territory.  Except as expressly permitted by Novartis, and except to
fulfill Cell Genesys' requirements for China, Cell Genesys shall not
manufacture, store, test, release, supply, deliver and sell the Option Product
(including Bulk Product) to any Person other than Novartis and Novartis'
Affiliates in the Field and in the Option Territory.

3.3Manufacturing Responsibilities.  Cell
Genesys covenants that it shall manufacture, store, test and release, supply,
deliver and sell to Novartis the Bulk Products for Novartis' and Novartis'
Affiliates' Commercial Use and Clinical Supply in full compliance with (a) the
Manufacturing Standards; (b) cGMP, (c) the prevailing Laws on health, safety and
environmental protection; and (d) all applicable Laws that may be amended from
time to time.  The foregoing responsibilities and obligations of Cell Genesys
shall be hereinafter referred to as the "Manufacturing
Responsibilities."  Cell Genesys shall be responsible for acquiring all
required Components, and all necessary rights thereto, to comply with its
obligations hereunder, and all related costs shall be included in the
computation of Cell Genesys' Fully Burdened Manufacturing Cost.

3.4[*] Subcontractors.  [*] Cell Genesys
shall require all [*] Subcontractors to agree to comply with the Manufacturing
Responsibilities and other applicable obligations and responsibilities
hereunder.  Cell Genesys shall be solely and fully responsible for executing and
monitoring the work performed by such [*] Subcontractors pursuant to the terms
and conditions of this Agreement.  Cell Genesys shall, and undertakes to cause
its [*] Subcontractors to, hold all necessary authorizations and permits for any
and all Processing under this Agreement from the authorities of the country or
countries where such Processing takes place, including, but not limited, to all
necessary authorizations and permits for the acquisition, storage and handling
of the Components and the Bulk Product.  Cell Genesys shall make available to
Novartis, upon Novartis' request, true and correct copies of all such
authorizations and permits.  Without prejudice to any of Novartis' other rights
under this Agreement, Cell Genesys shall promptly inform Novartis in the event
any such authorization or permit is not obtained in timely fashion or is
withdrawn or otherwise under investigation.

3.5Changes to Processing.  Any changes relating to the Processing
are subject to Novartis' approval and the terms of the Supply and QA Agreement,
which approval will not be unreasonably withheld or delayed.  Except with the
prior written consent of Novartis, Cell Genesys will not make any change to any
Bulk Product ingredients (including liquid, Device and Components), analytical
procedures, manufacturing and any testing documents, Specifications, controls,
storage and/or stability protocols therefor or Manufacturing Standards.  The
parties shall enter into the Supply and QA Agreement following Cell Genesys'
acceptance of the engagement under this Agreement, which Supply and QA Agreement
shall, among other things, supplement and add to this Agreement. 

ARTICLE 4

Preparation for Manufacture

4.1Preparation of Facilities.  Cell Genesys warrants that its
facilities, which will be used in the Processing of Bulk Products, will be ready
and able to produce the validation batches required for Validation by Cell
Genesys in strict accordance with Validation requirements set forth and within
the time schedule specified in the Validation Plan.  Cell Genesys shall commence
production of the required Validation batches for the Bulk Product in strict
accordance with the time schedule specified in the Validation Plan.  This time
frame may be adjusted by the JDC.

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

4.2Validation.  Cell Genesys shall use commercially reasonable
efforts to successfully validate the production process according to the
Validation Plan.  In the event that the production process shall not be
successfully validated pursuant to the Validation Plan, the parties agree to
meet to discuss a path forward.  If the parties cannot agree on a path forward
within sixty (60) Days of such non-Validation, Novartis may terminate this
Agreement without further liability to Cell Genesys, Cell Genesys' Affiliates
and [*] Subcontractors.

4.3Inspection.  As further enumerated in Article 8, Novartis shall
have the right to perform inspections of the Cell Genesys facilities, operations
and quality systems as they relate to the production of the Bulk Products in
order to ensure compliance with the registration of the Option Product and
compliance with cGMP guidelines, applicable Laws and Manufacturing Standards.
[*]

4.4Operations.  Cell Genesys shall, at its cost, operate and
maintain its facilities and all equipment and machinery used, directly or
indirectly, to produce the Bulk Products in a state of repair and operating
efficiency to meet the Specifications and the Manufacturing Standards.  Cell
Genesys shall perform, at its sole cost and expense, all Validation of machinery
and equipment used to manufacture the Bulk Products at its facilities, and to
validate all production, cleaning and manufacturing processes employed in
manufacturing the Bulk Product, in accordance with the Manufacturing
Responsibilities.  Cell Genesys shall strictly adhere to the Validation Plan for
the Bulk Product. 

4.5Ready, Willing and Able.  Cell Genesys shall be ready, willing
and able to supply Novartis with Bulk Product for Clinical Supply, as of the
Effective Date, and Commercial Use, as of the Launch Date.  In order to make the
necessary quantities of the Bulk Product available at the Launch Date, Cell
Genesys shall ensure that the required manufacturing capacity to fill the first
Firm Order is in place and ready for pre-approval by Regulatory Authorities in
accordance with the time schedule set forth in the Validation Plan and as
required by the JDC.  The parties agree that to the extent that Cell Genesys'
failure to meet such agreed to time schedules results in a delay to the
commercial launch of the Option Product, such failure will cause great harm to
Novartis.  In such an event, without limiting any other remedies available to
Novartis, Cell Genesys shall provide compensation to Novartis for its failure to
meet such time schedule, which compensation shall be equal to [*] per seven (7)
Days of delay.  Cell Genesys acknowledges and agrees that such compensation is
fair and adequate, and that such compensation is not a penalty. 

4.6Qualification.  Cell Genesys shall use or have used only such
equipment and personnel as are qualified for the Processing of Bulk Product.

4.7Guarantee.  In order to ensure continuous supply of the Bulk
Product, Cell Genesys shall use commercially reasonable efforts to obtain prior
to the Launch Date (or, if agreed to by the parties, on a date which is one year
after commercial launch of the Option Product) supply guaranties for all
Components in sufficient quantities (based on the non-binding forecast to be
provided by Novartis) from [*] Subcontractors.  Upon the written request of
Novartis, Cell Genesys shall provide Novartis with copies of such guarantee
statements as well as any amendments that may be made thereto.  Cell Genesys shall not be responsible for any delays
caused by [*] other than as a result of [*].

4.8Commercially Reasonable Efforts.  Cell Genesys shall use
commercially reasonable efforts to ensure that:  (a) its stock of Component is
always sufficient to permit the uninterrupted manufacture and supply of Bulk
Product in full compliance with Novartis' Firm Orders, (b) the quantities of
Components ordered and stored by it relate appropriately to Novartis' Firm
Orders for manufacturing and supply requirements and Cell Genesys obligations
hereunder so as to minimize the items in stock that become obsolete or
unsaleable, and (c) the Components are of suitable quality required under the
Specifications. 

ARTICLE 5

Finished Product; orders and delivery

5.1Finished Product.  The JDC shall
allocate responsibility for processing Finished Product in accordance with the
description of Bulk Product and the capabilities of Cell Genesys and
Novartis.  For the avoidance of any doubt, the labeling and finishing of the
Finished Product shall be in accordance with Novartis' own standards, including
use of Novartis trademarks in connection therewith.  Novartis shall be
responsible for all distribution and related operations of such Finished
Product.

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Confidential treatment has been requested with respect to the omitted portions.

5.2Forecasting / Ordering Procedures / Delivery

(a)Novartis shall provide Cell Genesys
with a good faith written, rolling forecast of the monthly quantities of Bulk
Product that Novartis may order during the following twelve (12) month period,
which forecast will be updated on a monthly basis.  Each forecast shall be non-
binding on both parties; provided, however, a forecast with
respect to quantities forecasted to be ordered six (6) months from the date of
the forecast shall be firm (subject to the variations set forth in Section
5.2(b)).  

(b)Novartis shall submit a firm written purchase order ("Firm
Order") for a quantity of Bulk Product that is (i) no less than fifty
percent (50%) of the order quantity forecasted by Novartis in the binding
forecast pertaining to this order, and (ii) no greater than one hundred twenty
five percent (125%) of the order quantity forecasted by Novartis in the binding
forecast pertaining to this order.  Cell Genesys shall not be obligated to
accept Firm Orders to the extent that the quantity ordered exceeds one hundred
twenty five percent (125%) of the order quantity forecasted by Novartis in the
binding forecast pertaining to the order, but shall use commercially reasonable
efforts to fulfill the full quantity of the Firm Order.  Cell Genesys will use
commercially reasonable efforts to notify Novartis within ten (10) Days of
receiving a Firm Order of Cell Genesys' ability to fill the excess quantities of
the Firm Order.  If Novartis submits a Firm Order for less than the minimum
quantity required above, Novartis will nevertheless have an obligation to accept
and purchase from Cell Genesys the minimum quantity of Bulk Product. 

(c)The lead time for delivery of quantities ordered under all Firm
Orders shall be initially determined by the JDC.  All Firm Orders shall specify
Novartis' purchase order number, quantities, shipment schedule and any other
elements necessary to ensure the timely production and correct shipment of the
Bulk Product.  The parties agree to review the Firm Order lead times within two
(2) years of the Launch Date, in order to reduce the lead times if possible.

(d)Shipments of Bulk Products shall be made FCA ("FCA", as
such term is defined in INCOTERMS 2000).  Cell Genesys shall bear the risk of
loss or of damage to Bulk Products until the Bulk Products have been delivered
into the custody of the carrier.  Novartis shall have the right to designate
such carrier as it may communicate, from time to time to Cell Genesys.

(e)The parties, through the authority of the JDC, shall endeavor to
ensure that the total shelf life of the Bulk Product shall be no less than the
minimum requirements set by the Regulatory Authorities.  Cell Genesys shall use
commercially reasonable efforts to ensure that the residual shelf life of the
Bulk Product upon delivery of the Bulk Products shall not be less than [eighty
five percent (85%)] of the total shelf life, initially.  The parties agree to
review the residual shelf life requirements on an annual basis with the view of
achieving a target shelf life percentage of [ninety percent (90%)] of the Bulk
Product's total shelf life.  In case the approved shelf life shall be less than
twenty-four (24) months, the parties shall mutually agree on the required
residual shelf life requirement upon delivery (not to be less than eighty
percent (80%)). The shipment of Bulk Product with less than the required
residual shelf life pursuant to this Section 5.2(e) requires the prior written
approval of Novartis.

(f)In the event that Cell Genesys fails to deliver the properly
ordered Bulk Products within two (2) weeks after the agreed delivery date, Cell
Genesys shall grant a price reduction equal to [*] of the price payable to Cell
Genesys for such Bulk Products delivered with delay for each full calendar week
beyond such two (2) week period, but at a maximum price reduction of [*].  The
parties agree that a delay in delivery within the agreed upon time limits equal
to or less than five (5) full weeks beyond such two (2) week period will not
constitute a breach of this Agreement.  A delay in delivery of the ordered Bulk
Products greater than five (5) full weeks from the delivery date for such order
Bulk Products shall constitute a material breach of this Agreement by Cell
Genesys.

(g)The parties acknowledge and agree that the terms and conditions of
supply shall be further supplemented by the Supply and QA Agreement.  In the
event of any irreconcilable conflict between the terms of this Agreement and the
Supply and QA Agreement, the terms of the Supply and QA Agreement shall
prevail.

ARTICLE 6

Purchase Price AND PAYMENT

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

6.1 Manufacturing Costs.  From the Effective
Date of the Development License and Commercialization Agreement, each of Cell
Genesys and Novartis shall be responsible for the Fully Burdened Manufacturing
Costs.  The foregoing costs shall be allocated in the form set out in the chart
illustrated in this Section.  However, the Fully Burdened Manufacturing Costs
shall be consolidated and calculated within the formula set forth in Section 6.3
of the Development License and Commercialization Agreement and the Financial
Appendix:

	 	
Cell Genesys
	
Novartis

	
Option Territory (excluding U.S.)
	
[*] of Fully Burdened Manufacturing Costs
	
[*] of Fully Burdened Manufacturing Costs

	
U.S.
	
[*] of Fully Burdened Manufacturing Costs
	
[*] of Fully Burdened Manufacturing Costs

6.2Purchase Price for Commercial Use.  The purchase price for Bulk
Product supplied by Cell Genesys to Novartis pursuant to this Agreement for
Commercial Use in the Option Territory shall be equal to Cell Genesys' Fully
Burdened Manufacturing Cost for the Bulk Product plus [*] of such Fully Burdened
Manufacturing Cost.  For the purposes hereof, Cell Genesys' Fully Burdened
Manufacturing Cost shall not exceed the amount equal to [*] of Net Sales; Cell
Genesys shall bear all such costs in excess of [*] of Net Sales.

6.3Purchase Price for Clinical Supply and Marketing Samples.  The
purchase price for Bulk Product supplied by Cell Genesys to Novartis pursuant to
this Agreement for Clinical Supply and Marketing Samples, if any, shall be Cell
Genesys' Fully Burdened Manufacturing Cost for Bulk Product [*]. 

6.4Settlement and Payment for the U.S.  The settlement and payment
for all Bulk Product supplied by Cell Genesys to Novartis pursuant to this
Agreement for Commercial Use and Clinical Supply within the United States shall
be consolidated, computed and settled in accordance with the formula and process
as set forth in Section 6.3 of the Development License and Commercialization
Agreement and the Financial Appendix.

6.5Settlement and Payment for Option Territory (Excluding U.S.).
For all Bulk Product supplied to Novartis pursuant to this Agreement for
Commercial Use and Clinical Supply within the Option Territory (excluding the
United States), Cell Genesys shall submit invoices to Novartis for Bulk Product
promptly after shipment.  The invoiced amount shall be Cell Genesys' Fully
Burdened Manufacturing Cost for the Bulk Product plus [*] of such Fully Burdened
Manufacturing Cost for the ordered Bulk Products.  Provisional payments shall be
made by Novartis within sixty (60) Days after Novartis' receipt of the invoice.
Novartis has no obligation to pay for any shipment of Bulk Product that is
rejected by Novartis in accordance with Article 7.  Notwithstanding the amount
invoiced, the parties agree that Section 6.2 shall apply.  Accordingly, the
parties shall consolidate, compute and settle the proper amounts to be invoiced
and paid in accordance with consolidation, computation and settlement procedure
set forth in the Financial Appendix by the Finance Sub-Committee.  Such
procedure shall also include reconciliation and reimbursement of payments made
by Novartis under this section taking into account that Novartis shall not be
liable for Cell Genesys' Fully Burdened Manufacturing Cost that exceed the
amount equal to [*] of Net Sales as provided under Section 6.2.  

6.6Transparency.  The parties (including all [*] Subcontractors)
shall operate under an "open book" principle providing for full
transparency and detailed cost calculation in order to be able to determine
Fully Burdened Manufacturing Costs.  In determining the Fully Burdened
Manufacturing Costs and costs of the Bulk Product and [*], Cell Genesys will
agree to work with Novartis in order to [*].  To this end, Cell Genesys will
provide Novartis with the necessary information [*].  

6.7Financial Appendix.  In the event of an irreconcilable conflict
between this Agreement and the Financial Appendix, the terms of the Financial
Appendix shall prevail. 

6.8Improvements.  Cell Genesys will pursue and implement a
continuous improvement and competitive best practices strategy to improve the
manufacturing performance within its facilities in order to reduce the
manufacturing and material costs at said facilities.  

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

ARTICLE 7

Deviations

7.1Deviations.  Cell Genesys shall
ensure that the Bulk Products and Devices delivered to Novartis shall conform to
the requirements and obligations set forth in the Supply and QA Agreement.  In
the event that Cell Genesys delivers any Deviating Bulk Product to Novartis,
Novartis shall inform Cell Genesys thereof in accordance with the terms and
timelines set forth in the Supply and QA Agreement.  Novartis shall have, at its
sole discretion, the right

(a)to reject any Deviating Bulk Product; or

(b)to reject the entire shipment containing any Deviating Bulk
Product; and

(c)to replace the entire shipment containing such Deviating Bulk
Product.  

7.2Remedy.  In the event that Cell
Genesys delivers any Deviating Bulk Product to Novartis and subject to Novartis'
duly and timely notification of Cell Genesys thereof within the periods defined
in the Supply and QA Agreement, Cell Genesys shall replace any such Deviating
Bulk Product or, at Novartis' sole discretion, any shipment containing such
Deviating Bulk Product, with unobjectionable Bulk Product or unobjectionable
shipment of Bulk Product, as the case may be, at Cell Genesys' cost.  In
addition, Cell Genesys shall bear sole responsibility for all costs associated
with the transportation, testing and disposal of the Deviating Bulk Product or
shipment containing Deviating Bulk Product, as the case may be.  Cell Genesys
shall use commercially reasonable efforts to complete such replacement within
the replacement time frame set forth in the Supply and QA Agreement.

7.3Disputes.  In the event of an unresolved dispute as to any
Deviation, the parties shall appoint an independent first-class laboratory to
undertake the relevant testing within the time frame set forth in the Supply and
QA Agreement and upon the terms agreed upon within the Supply and QA Agreement.
The parties shall ensure that such independent laboratory is bound to the
parties by obligations of confidentiality no less exacting than those applying
between the parties and outlined in this Agreement.  All fees and expenses of
the said laboratory shall be borne solely by the unsuccessful party.  In the
event that no independent laboratory referred to above has the capability to
resolve any such dispute, the Novartis and Cell Genesys representatives
identified in the Supply and QA Agreement will then conduct an investigation and
determine an appropriate retest plan.  The parties agree that during the
resolution of any such dispute, Novartis shall, irrespective of the final
allocation of the cost for the replacement of Deviating Bulk Product in
accordance with Sections 7.1 and 7.2 above, purchase any replacement of
Deviating Bulk Product requested by Novartis under Section 7.1 above pursuant to
the terms of this Agreement, and Cell Genesys shall reimburse Novartis for such
costs as appropriate in accordance with Sections 7.1 and 7.2 above.  Any such
replacement shipment of Bulk Product shall be treated as a new, additional
shipment of Bulk Product (that will be separately accounted for invoiced by Cell
Genesys) for all purposes, including testing for Deviations and payment or
settlement for such additional shipment.  In the event that any Bulk Product
shipment or batch thereof is ultimately agreed or found not to be Deviating Bulk
Product, Novartis shall accept and pay for such shipment or batch if such
payment remains outstanding.

ARTICLE 8

Inspections

8.1Records.  Cell Genesys shall keep and cause the [*]
Subcontractors to keep complete and accurate records of the manufacture,
specifications, test procedures, packaging, approved supplier listing and
shipping and, without limitation, shall retain those samples and records
specified in the Supply and QA Agreement that are necessary to comply with
manufacturing regulatory requirements as well as to assist with resolving
product complaints and other similar investigations, and ensure compliance with
the manufacturing responsibilities set forth in this Agreement.  Copies of such
records and samples shall be made available to Novartis upon its request and
shall be retained by Cell Genesys and be available to Novartis for the period
agreed upon in the Supply and QA Agreement. 

8.2Inspections.  Novartis will have the right and Cell Genesys
shall permit or cause to be permitted, [*] on reasonable prior notice, to have
qualified individuals (as identified in the Supply and QA Agreement) to inspect
Cell Genesys' and [*] Subcontractor's production facilities and more
particularly the equipment used in the manufacturing, filling, packaging,
storage, testing, shipping or receiving of Bulk Products and Components, and the
suppliers of Components.  Such inspections may include cGMP inspections [*].
Representatives of Novartis shall have access [*] to all documents, records,
reports, data, procedures, facilities, regulatory submissions, and all other
information required to be maintained by the Regulatory Authorities.  Moreover,
Novartis shall have the right, [*] on reasonable prior notice, to observe the
manufacture, packaging, storing, testing and shipment of Bulk Products, Devices,
Components and proprietary active ingredients.  Novartis may inspect Cell
Genesys' and the [*] Subcontractors' reports and records relating to the
Processing pursuant to this Agreement during normal business hours and with
reasonable advance notice, and a Cell Genesys representative shall be present
during any such inspection.  

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

8.3Regulatory Inspections.  Furthermore Cell Genesys shall permit
or cause to be permitted authorized officials of any Regulatory Authority or
other competent governmental agencies to inspect its production facilities,
including the equipment, used for the manufacturing, filling, packaging,
storage, testing, shipping or receiving of Bulk Products and Device and/or
Components, as required or necessary for the granting or maintaining of any
Registration.

8.4Audit.  Cell Genesys shall keep and cause the [*]
Subcontractors to keep complete and accurate records of the cost per unit of the
Bulk Products and Devices.  Upon the written request of Novartis and every
financial quarter, Cell Genesys shall permit an independent certified public
accounting firm of nationally recognized standing selected by Novartis, at
Novartis' expense, to have access during normal business hours to such records
of Cell Genesys and its Affiliates, being [*] Subcontractors, as may be
reasonably necessary to verify, inter alia, the accuracy of the price per unit
and any other price and cost calculation and reconciliation made or provided for
hereunder for any financial quarter.  If such accounting firm concludes that
additional sums are owed or payable during such period, such sums shall be paid
by the appropriate party within seven (7) Days of the date Novartis delivers to
Cell Genesys such accounting firm's written report so concluding.

8.5Survival.  The rights of inspection hereunder held by Novartis
shall survive five (5) years from termination or expiration of this
Agreement.

ARTICLE 9

Exchange of information

9.1Exchange of Information.  Without prejudice to Novartis' rights
to information set forth in the Supply and QA Agreement, the parties shall
continually exchange information and experiences in all matters pertaining to
the manufacturing of the Bulk Products and Quality Assurance. 

9.2Prior Notice.  Each party shall give prompt notice by telephone
(to be confirmed in writing) to the Director of Quality Control/Quality
Assurance of the other party upon discovery that the Bulk Product should be
recalled or corrected, or may be required to be recalled or corrected.  

9.3Recall.  The decision to initiate a recall or to take some
other corrective action, if any, shall be made and implemented by Novartis.  The
recall procedure shall be set forth in the Supply and QA Agreement.  Costs
related to a recall will be same as set forth in Article 7.

9.4Returns.  Novartis shall have the responsibility for handling
customer returns of the Bulk Products.  Cell Genesys shall provide Novartis with
such assistance as Novartis may reasonably need to handle such returns.  In the
event of a return, at Novartis' request, Cell Genesys shall use its commercially
reasonable efforts to replace the returned Bulk Products with new Bulk Products
within the time frame set forth in the Supply and QA Agreement from the date
that Novartis notifies Cell Genesys about the returned Bulk Products.

9.5Complaints and ADE's.  Novartis shall have the sole
responsibility for responding to questions and complaints from Novartis
customers and for reporting adverse drug events ("ADE") as defined by
applicable regulation to the relevant Regulatory Authorities, unless otherwise
required by applicable laws, rules and regulations.  Questions or complaints
received by Cell Genesys shall be immediately referred to Novartis.  The parties
shall keep each other promptly and fully informed of any information concerning
any ADE or pharmaceutical technical complaints coming to their knowledge with
regard to any Option Product regardless of the origin of such information.  Cell
Genesys shall cooperate as reasonably required to allow Cell Genesys to
determine the cause of and resolve any customer questions and complaints.  Such
assistance shall include follow-up investigations, including testing.  In
addition, as soon as possible in light of the circumstances, Cell Genesys shall
provide Novartis with all requested information in order to assist Novartis in
responding properly to questions or complaints relating to the Bulk
Products.

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ARTICLE 10

[*] Manufacturing and Intellectual Property

10.1Intellectual Property.  Subject to the provisions relating
to IP rights contained in the Transaction Documents, which provisions shall
remain in full force and effect, all Technical Information provided by Novartis
shall be and remain the property of Novartis, and all Technical Information
provided by Cell Genesys shall be and remain the property of Cell Genesys.

10.2[*] Manufacturing.  [*]

ARTICLE 11

Indemnification and liabilities

11.1Cell Genesys Indemnity.  Notwithstanding anything contained
in, and without prejudice or limitation to the indemnification provisions in,
the Option Agreement or Development License and Commercialization Agreement,
which remain in full force and effect, Cell Genesys is liable for and shall
indemnify and hold Novartis and its Affiliates harmless against all Losses
incurred by Novartis and/or any of its Affiliates resulting from Cell Genesys',
its Affiliates' or the [*] Subcontractors' willful misconduct or negligence in
respect of the performance, breach of or failure to perform any of its
obligations under this Agreement, except for any such Loss against Novartis or
any of Novartis' Affiliates results from Novartis' or Novartis' Affiliates'
willful misconduct or negligence in respect of the performance, breach of or
failure to perform any of its obligations under this Agreement.

11.2Novartis Indemnity.  Notwithstanding anything contained in,
and without prejudice or limitation to the indemnification provisions in, the
Option Agreement and Development License and Commercialization Agreement, which
remain in full force and effect, Novartis is liable for and shall indemnify and
hold Cell Genesys and/or any of Cell Genesys' Affiliates harmless against all
Losses incurred by Cell Genesys and Cell Genesys' Affiliates resulting from
Novartis' and/or its Affiliates willful misconduct or negligence in respect of
the performance, breach of or failure to perform any of its obligations under
this Agreement and the safety of the Finished Product distributed by or on
behalf of Novartis or Novartis' Affiliates, except for any such Loss against
Cell Genesys and/or any of Cell Genesys' Affiliates results from Cell Genesys'
or Cell Genesys' Affiliates' willful misconduct or negligence in respect of the
performance or breach of or failure to perform any of its obligations under this
Agreement.

11.3Procedure.  Each party entitled to be indemnified by the other
party (an "Indemnified Party") pursuant to Section 11.1 or 11.2 hereof
shall give notice to the other party (an "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any threatened or
asserted Third Party claim as to which indemnity may be sought, and shall permit
the Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom; provided that: 

(a) the Indemnifying Party may so assume the defense of any such
claim or any litigation resulting therefrom only if it shall give notice to the
Indemnified Party of the Indemnifying Party's decision to so assume such defense
within thirty (30) Days after the date of the notice from the Indemnified Party
of the Third Party claim as to which indemnity is sought and acknowledges in
writing to the Indemnified Party that any Loss in connection with such claim or
any litigation resulting therefrom is a Loss for which the Indemnified Party
shall be entitled to indemnification pursuant to this Article 11;

(b) counsel for the Indemnifying Party, who shall conduct the defense
of such claim or any litigation resulting therefrom (if such defense is assumed
by the Indemnifying Party), shall be approved by the Indemnified Party (whose
approval shall not be unreasonably  withheld) and the Indemnified Party may
participate in such defense with the Indemnified Party's own counsel at the
Indemnified Party's own expense (unless (i) the employment of counsel by such
Indemnified Party has been authorized by the Indemnifying Party, (ii) the
Indemnified Party shall have reasonably concluded that there may be a conflict
of interest between the Indemnifying Party and the Indemnified Party in the
defense of such action, or (iii) the Indemnifying Party shall have failed to
assume the defense as provided herein, in each of which cases the Indemnifying
Party shall pay the reasonable fees and expenses of one law firm serving as
counsel for the Indemnified Party, which law firm shall be subject to approval,
not to be unreasonably withheld, by the Indemnifying Party); 

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(c) the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Agreement to the extent that the failure to give notice did not result in
prejudice to the Indemnifying Party;  

(d) no Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the approval of each Indemnified Party, which
approval shall not be unreasonably withheld, consent to entry of any judgment or
enter into any settlement which (i) would result in injunctive or other relief
being imposed against the Indemnified Party; or (ii) does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation;

(e) each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom; and

(f) if the Indemnifying Party assumes the defense of the Third Party
claim or litigation, the Indemnified Party shall not settle or agree to a
judgment with respect to such claim or litigation without the consent of the
Indemnifying Party. 

11.4Limitations.  

(a)EXCEPT AS EXPRESSLY PROVIDED UNDER THIS AGREEMENT, NONE OF THE
PARTIES MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR ANY OTHER MATTER WITH RESPECT TO
THE SUBJECT MATTER OF THIS AGREEMENT. 

(b)EXCEPT FOR LOSSES WHICH ARE SUBJECT TO INDEMNIFICATION OBLIGATIONS
OF EITHER PARTY WITH RESPECT TO INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR
EXEMPLARY DAMAGES RECOVERED BY A THIRD PARTY, UNDER NO CIRCUMSTANCES SHALL ANY
PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL,
SPECIAL OR EXEMPLARY DAMAGES (EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES AND REGARDLESS OF THE THEORY OF LIABILITY), ARISING
FROM ANY PROVISION OF THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, LOSS OF
REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS.

11.5Insurance.  Cell Genesys and Novartis each warrant that each
has appropriate and adequate insurance to cover claims or damages for which it
shall be liable under the terms of this Agreement.  Upon request by the other
party Novartis or Cell Genesys, as the case may be, will provide reasonable
evidence of its insurance.

ARTICLE 12

Storage of documents and samples

The obligations for the storage of samples and documentation shall
determined in accordance with the Supply and QA Agreement.

ARTICLE 13

Confidentiality

The parties acknowledge and agree that all Confidential Information disclosed
by one party to the other shall be subject to the Confidentiality Appendix.

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ARTICLE 14

Term and expiration

14.1Commencement.  This Agreement shall take effect on the
Effective Date.

14.2Term.  This Agreement will be effective as of the Effective
Date and will remain in effect until the expiration or termination of the
Development License and Commercialization Agreement, unless earlier terminated
in accordance with the terms of this Agreement ("Term").
Notwithstanding this Section 14.2, Novartis may terminate this Agreement with
respect a particular country at any time if a generic Competing Product enters
into the marketplace in such country. 

ARTICLE 15

Extraordinary termination

15.1For Breach.  Upon failure of either
party to remedy its material breach of any of its material obligations under
this Agreement within sixty (60) Days following the receipt of written notice
specifying such breach, the other party shall have the right to terminate this
Agreement immediately by delivering a written termination notice to the party in
breach. If Cell Genesys fails to supply properly ordered Bulk Product within [*]
after the agreed upon delivery date more than [*] times during any [*] period,
Novartis shall have the right, but is not obligated, to terminate this Agreement
immediately by delivering a written termination notice to Cell Genesys within
[*] from the end of such [*] period.

15.2For Bankruptcy.  Both parties, at their sole discretion, may
immediately terminate this Agreement upon written notice to the other party in
the event that:  (a) the other party is declared insolvent or bankrupt by a
court of competent jurisdiction; (b) a voluntary petition of bankruptcy is filed
in any court of competent jurisdiction by such other party; or (c) this
Agreement is assigned by such other party for the benefit of creditors.  In the
event of the insolvency or bankruptcy of an [*] Subcontractor, Cell Genesys
shall immediately, but after first obtaining Novartis' consent, which consent
shall not unreasonably be withheld, appoint, authorize and validate a new
subcontractor to produce the Bulk Product.

15.3For Convenience.  In addition to any other termination rights
it may have under this Agreement, Novartis may terminate this Agreement with
respect to a particular country immediately in the event that any Regulatory
Authority in such country takes any action, or raises any objection, preventing
Novartis from exporting, purchasing or selling the Bulk Product.  Additionally,
Novartis shall have the right to terminate this Agreement with respect to a
particular Major Market immediately in the event that the Bulk Product cannot
reasonably be commercialized for medical, scientific or legal reasons in such
Major Market.  Novartis shall also have the right to terminate this
Agreement in accordance with Section 12.6 of the Development License and
Commercialization Agreement.

ARTICLE 16

Rights and obligations upon termination or expiration

16.1Consequences of Termination.  In the event that Cell
Genesys declines to accept the engagement in accordance with Section 2.2 above
or upon the termination of this Agreement (other than by Cell Genesys under
Sections 15.1 and 15.2), the financial arrangement under the Financial Appendix
shall survive; provided, however, in no event shall Novartis'
burden for the Fully Burdened Manufacturing Cost of the Bulk Products
manufactured by Novartis, Novartis' Affiliate or a Third Party, as the case may
be, exceed [*] of Net Sales.  Any such amount in excess of [*] shall be borne by
Cell Genesys.

16.2Transition.  In the event that Cell Genesys declines to accept
the engagement in accordance with Section 2.2 above, or upon expiration or
termination of this Agreement (other than by Cell Genesys under Sections 15.1
and 15.2), Cell Genesys and its Affiliates shall cooperate and instruct the [*]
Subcontractors to cooperate in good faith with Novartis to ensure a smooth and
orderly transition to a new supplier of Bulk Product (including Novartis or an
Affiliate of Novartis).  During a transition period [*], Cell Genesys, its
Affiliates and the [*] Subcontractors shall [*], and Cell Genesys shall maintain
[*] inventory of Components during the transition period.  During such
transition period, the obligations under Article 12 shall continue to apply.

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16.3Manufacturing License.  In the event that Cell Genesys
declines to accept the engagement in accordance with Section 2.2 above, or upon
expiration or termination of this Agreement (other than by Cell Genesys under
Sections 15.1 and 15.2), Cell Genesys shall grant to Novartis, and hereby does
grant to Novartis a non-exclusive, royalty-free, irrevocable, perpetual and
fully transferable and sublicensable license under all of Cell Genesys' IP to
manufacture and sell the Bulk Products for the benefit of Novartis.  Novartis
shall have the option to enter into discussions and negotiations to continue to
procure the Bulk Products, as the case may be, from any or all of the [*]
Subcontractors (not in breach of their obligations) upon terms [*].  Cell
Genesys shall also provide and deliver to Novartis or Novartis' designee all
Cell Genesys Know How, biological materials, assays, Registrations and permits
from Regulatory Authorities (including drug master files) and other materials
and documents required by Novartis to manufacture and sell the Bulk
Products.

16.4Other Obligations.  In addition to the other provisions
contained in this Agreement, upon the expiration or termination of this
Agreement, Cell Genesys shall and Cell Genesys shall cause the [*]
Subcontractors to:

(a)promptly refrain from using the Technical Information belonging to
Novartis and return to Novartis all documents containing Confidential
Information relating to Novartis (including, but not limited to, any
reproduction, notes and summaries, printouts or copies of information stored in
electronic or computerized systems), delete all soft copies of information
stored in electronic or computerized systems and any other items put at
Novartis' disposal by Novartis free of charge under this Agreement. 

(b)supply all unshipped Bulk Product that was manufactured pursuant
to a Firm Order against payment of the applicable purchase price per unit in
effect at the time the Firm Order was placed.

16.5Obligations of Novartis.  In addition to the other provisions
contained in this Agreement, upon the expiration or termination of this
Agreement, Novartis shall,

(a)except where Novartis acquires a manufacturing license pursuant to
Section 16.3 above, promptly refrain from using the Technical Information
belonging to Cell Genesys and/or its Affiliates and/or [*] Subcontractors and
promptly return to Cell Genesys all documents containing Confidential
Information of Cell Genesys and/or its Affiliates and/or [*] Subcontractors
(including, but not limited to, any reproduction, notes and summaries, printouts
or copies of information stored in electronic or computerized systems), delete
all soft copies of information stored in electronic or computerized systems and
any other items put at Novartis' disposal by Cell Genesys and/or its Affiliates
and/or [*] Subcontractors free of charge under this Agreement; and 

(b)take delivery of any Bulk Product firmly ordered against payment
of the applicable purchase price per unit in effect at the time the Firm Order
was placed.

16.6Survival.  No termination or expiration of this Agreement
shall affect any outstanding obligations accrued hereunder prior to such
termination or expiration, nor shall it prejudice any other remedies that the
parties may have under this Agreement.  Upon expiration or termination of this
Agreement all outstanding unpaid invoices shall become payable immediately.  For
the avoidance of doubt, termination of this Agreement, irrespective of this
cause, shall not affect the obligations and responsibilities of the parties
under Articles 11 (with respect to any actions occurring prior to termination or
expiration), 13 and 16, all of which shall survive any termination or expiration
of this Agreement.  The obligations concerning retention of samples and
documentation shall remain in force for the period referred to in the relevant
provisions of this Agreement.

ARTICLE 17

Assignment

This Agreement may not be assigned or otherwise transferred by either party
without the prior written consent of the other party; provided, however, that
(i) (subject to the next sentence) either party may assign the benefit of this
Agreement, without the consent of the other party, to any of its Affiliates, if
the assigning party remains obligated on a primary basis for the full
performance of its Affiliates' obligations hereunder, and (ii) Novartis may
assign this Agreement, without the consent of Cell Genesys, in connection with
the transfer or sale of all or substantially all of its assets or business to
which this Agreement relates or in the event of its merger or consolidation with
another company.  In the event Cell Genesys consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or transfers all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Cell Genesys shall
assume the obligations set forth in this Agreement.  Any purported assignment in
contravention of this Article 17 shall, at the option of the non-assigning
party, be null and void and of no effect.  No assignment shall release either
party from responsibility for the performance of any accrued obligation of such
party hereunder.  This Agreement shall be binding upon and enforceable against
the successor to or any permitted assignees from either of the parties
hereto.

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ARTICLE 18

DISPUTE RESOLUTION

18.1Governing Law and Jurisdiction.  This Agreement shall be
governed by and interpreted under the laws of the State of New York, excluding
its conflict of laws principles.

18.2Conciliation.  In the event of any controversy or claim
arising out of or relating to any provision of this Agreement, the parties
shall, and either party may, initially refer such controversy or claim to the
chief executive officer (or his/her representative) of Cell Genesys and the head
of the Oncology business unit (or any successor business unit) of Novartis who
shall, as soon as practicable, attempt in good faith to resolve the controversy
or claim.  If such controversy or claim is not resolved within sixty (60) Days
of the date of initial referral of the matter, either party shall be free to
initiate legal proceedings of the following Section.

18.3Jurisdiction.  Except with respect to disputes which shall be
resolved through conciliation in accordance with Section 18.2, each party
irrevocably submits to the exclusive jurisdiction in the United States District
Court for the Southern District of New York and any state courts sitting in New
York, New York, for purposes of any action, suit or other proceeding arising out
of this Agreement. 

ARTICLE 19

Miscellaneous

19.1Independent Contractor.  For purposes of this Agreement, each
party shall be an independent contractor and not an agent or employee of the
other party.  Neither party shall have the authority or power to make any
statements, representations or commitments of any kind on behalf of the other
party, or to take any action which is binding on the other party, except as may
be explicitly provided for herein or authorized by the other party in
writing.

19.2Notices.  Any notices which either party may be required or
shall desire to give under this Agreement shall be deemed to be duly given when
in writing and delivered personally, mailed by registered mail, courier service
or sent by telefax (provided that such telefax shall be confirmed by registered
mail or courier service) to the party to whom notice is to be given, at the
address specified below or such other address or addresses of which such party
shall have given notice not less than seven (7) Days before the notice is
dispatched.  Any notices, which either party may be required or shall desire to
give under any Annex to this Agreement, shall be given at the address specified
in such Annex.  In the event no address is specified in such Annex, paragraph
(c) shall apply.  Subject to paragraph (b) above, notices shall be given to the
following address for each party:

If to Novartis, at:

Novartis Pharma AG

   Lichtstrasse 35

   4056 Basel

   Switzerland

   Attention: General Counsel

   Tel.: +41 61 324 1111

   Fax: +41 61 324 8001

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If to Cell Genesys, at:

Cell Genesys, Inc.

   500 Forbes Blvd.

   South San Francisco, CA 94080

   Attention:  Stephen A. Sherwin, M.D.

   Tel.:  (650) 266 3000

   Fax:  (650) 266 3010

19.3No License.  No license or right is granted by implication or
otherwise with respect to any Know-How, Patent application or Patent owned by
Novartis or Cell Genesys or any of its Affiliates except as and if specifically
set forth herein or in the Development License and Commercialization
Agreement.

19.4Incorporation of Annexes.  All Annexes and their enclosures
form an integral part of this Agreement and are incorporated herein by
reference.  The parties may from time to time amend, replace or supplement said
Annexes in writing and such modifications shall be attached hereto. 

19.5Amendments.  This Agreement may not be amended or modified
except by an instrument in writing signed by, or on behalf of, Cell Genesys and
Novartis.

19.6Regulatory Requirements.  Cell Genesys, together with its
Affiliates, agrees to provide Novartis with reasonable access to any information
or documentation in its possession, control or ownership and to offer Novartis
any reasonably necessary assistance to apply for the Regulatory Approvals Cell
Genesys needs to obtain.

19.7Force Majeure.  The failure of either party to perform its
obligations under this Agreement (other than the obligations to make any
payments or of confidentiality) shall not subject such party to any liability or
place it to be in breach of any term or condition of this Agreement to the other
party if such failure is caused by Force Majeure; provided, however, that the
party affected shall promptly notify the other party of the condition
constituting Force Majeure as defined herein and shall exert reasonable efforts
to eliminate, cure and overcome any such causes and resume the performance of
its obligations as soon as reasonably practicable. If a condition constituting
Force Majeure exists for more than ninety (90) consecutive Days, the parties
shall negotiate a mutually satisfactory solution, if practicable, including the
use of a Third Party to fulfill the obligations hereunder (including the
granting of a manufacturing license), at the expense of the party invoking Force
Majeure.  "Force Majeure" shall mean any cause beyond the reasonable
control of such nonperforming party, including, without limitation, acts of God,
fire, explosion, flood, earthquake, drought, war, hostility, revolution, riot,
civil disturbance, national emergency, sabotage, embargo, strikes or other labor
trouble.

19.8Entire Agreement.  This Agreement, including the Annexes
hereto, together with the terms of the Development License and Commercialization
Agreement (unless specifically superseded by the terms in this Agreement),
constitutes the entire agreement between the parties and shall supersede and
prevail over any other prior or contemporaneous arrangements, whether written or
oral, and is binding upon the parties hereto and their successors.  In the event
of any irreconcilable conflict between the terms of this Agreement and the
Development License and Commercialization Agreement, the terms of the
Development License and Commercialization Agreement shall prevail. 

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IN WITNESS WHEREOF, the parties hereto have caused this Manufacturing and
Supply Agreement to be executed by their respective authorized officers as of
the date set forth above.

Cell Genesys, Inc.   

By:    ___________________________________________ 

Title: ___________________________________________  

Novartis Pharma AG      

By:    ___________________________________________ 

Title: ___________________________________________  

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ANNEX 1

Bulk Product and Components

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ANNEX 2

Specifications

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ANNEX 3

Supply and QA Agreement

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ANNEX 4

Processing Procedures

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ANNEX 5

Validation Plan

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ANNEX 6

HSE Procedures

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ANNEX 7

Definitions Appendix

[To be identical to Exhibit VII of the Option Agreement]

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EXHIBIT VI

OPTION AGREEMENT

DEVELOPMENT PRODUCTS

"Development Products" shall mean the following adenovirus
vectors:

[*]

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EXHIBIT VII

OPTION AGREEMENT

DEFINITIONS APPENDIX

1.1.Construction.  The terms defined hereinafter, whether used in
singular or plural form, shall have the meaning set forth below.  Whenever the
words "include," "includes" or "including" are
used in this Definitions Appendix, they are deemed to be followed by the words
"without limitation."  The term "party" or
"parties" used herein shall refer to Novartis and Cell Genesys,
individually or collectively.

1.2.References.  Exhibits IV (Financial Appendix), VI (Development
Products), and VIII (Confidentiality Appendix) to the Option Agreement shall be
incorporated herein by reference and made part hereof.

1.3.  "Additional Products" [*]

1.4.  "ADE" shall have the meaning set forth in Section 9.5 of
the Manufacturing and Supply Agreement.

1.5.  "Adjusted Net Sales" shall mean, with respect to a
Product, the Net Sales of such Product less any Third Party Obligations in
connection with such Product. 

1.6.  "Affiliate", with respect to a party, shall mean any
Person that, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such party.  A
Person shall be regarded as in control of another Person if it owns or directly
or indirectly controls more than fifty percent (50%) of the voting stock or
other ownership interest of the other Person, or if it possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such Person.  For the purposes of the Transaction Documents,
Novartis and Cell Genesys shall not be deemed Affiliates of each other. 

1.7.  "Allocable Overhead" shall have the meaning set forth in
the Financial Appendix.

1.8.  "[*] Subcontractors" shall mean subcontractors of Cell
Genesys [*] to manufacture and supply the Bulk Products and/or Devices for the
benefit of Novartis under the Manufacturing and Supply Agreement.

1.9.  "Assigned Patents" shall have the meaning set forth in
Section 1 of the Assignment and License Agreement.

1.10.  "Assignment and License Agreement" shall mean the Patent
Assignment and License Agreement, dated as of the Closing, among Novartis AG,
Genetic Therapy, Inc. and Cell Genesys.

1.11.  "Bulk Product" shall mean the applicable Option Product
in bulk form, together with Devices, meeting their respective Specifications and
having passed all Processing stages, that are manufactured by Cell Genesys and
[*] Subcontractors. 

1.12.  "Business Day" shall mean any day other than Saturday,
Sunday or other Days on which commercial banks in New York, New York or Basel,
Switzerland are authorized or required by law or executive order to close. 

1.13.  "Cell Genesys Inventions" shall mean all inventions,
discoveries and/or improvements thereto made by Cell Genesys or a Cell Genesys'
Affiliate that may be subject to a Patent.

1.14.  "Cell Genesys Know-How" shall mean all Know-How
Controlled by Cell Genesys relating to an Option Product.  

1.15.  "Cell Genesys Patents" shall mean any Patents Controlled
by Cell Genesys, and Cell Genesys' interest in any Joint Patent, having one or
more Valid Claims covering a Development Product (including a Substitute
Product, if applicable) or its manufacture or use.

1.16.  "Cell Genesys Technology" shall mean, collectively, the
Cell Genesys Patents and Cell Genesys Know-How.

1.17.  "cGMP" shall mean then-current rules concerning good
manufacturing practices according to the U.S. Code of Federal Regulations, the
then-current EU/PIC GMP Guidelines, and the corresponding national laws and
regulations.  

1.18.  "Change of Control Event" shall mean (i) a merger,
reorganization or consolidation of Cell Genesys which results in the voting
securities of Cell Genesys, outstanding immediately prior to such transaction,
ceasing to represent at least fifty percent (50%) of the combined voting power
of the surviving entity immediately after such transaction, (ii) any Third Party
(other than any trustee or other fiduciary holding securities under an employee
benefit plan of Cell Genesys), or any corporation or other entity owned directly
or indirectly by the stockholders of Cell Genesys in substantially the same
proportion as their ownership of stock of Cell Genesys), together with its
Affiliates, becoming the beneficial owner of more than fifty percent (50%) of
the combined voting power of the outstanding securities of Cell Genesys, or
(iii) a sale of all or substantially all of the business of Cell Genesys.

1.19.  "China" shall mean the People's Republic of China and
Taiwan.

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1.20.  "Clinical Supply" shall mean the quantities of Bulk
Product that are required for Clinical Trials by a party or the parties to
conduct preclinical studies and Clinical Trials Phase I-III in connection with
the terms of the Development License and Commercialization Agreement.  

1.21.  "Clinical Trials" shall mean Phase I Clinical Trial,
Phase I/II Clinical Trial, Phase I/IIA Clinical Trial, Phase IIA Clinical Trial,
Phase IIB Clinical Trial, Phase III Clinical Trial, Phase IIIB Clinical Trial,
Phase IV Clinical Trial or a combination thereof.

1.22.  "Closing" shall mean the closing date (July 23, 2003) of
the transactions contemplated under the Subscription Agreement.

1.23.  "Commercial Use" shall mean, with respect to a
particular Product, any and all activities directed to promoting, marketing,
using for commercial purposes, importing, exporting, distributing, selling or
offering to sell (including pre-marketing), sampling, conducting post-marketing
drug surveillance and conducting Phase IV clinical trials with respect to such
Product. 

1.24.  "Competing Product" shall mean any product developed by
Cell Genesys that has or is contemplated to be registered for the same
Indication(s) as an Option Product in the Field, excluding any Refused Product
Candidates and Rejected Products. 

1.25.  "Components" shall mean have the meaning set forth in
Section 2.1(a) of the Manufacturing and Supply Agreement. 

1.26.  "Confidential Information" shall have the meaning set
forth in the Confidentiality Appendix.

1.27.  "Confidentiality Appendix" shall mean the
Confidentiality Appendix, attached as Exhibit VIII to the Option Agreement.

1.28.  "Controlled" shall mean the legal authority or right of
a party hereto to assign, convey, transfer or grant a license or sublicense of
IP rights to another party hereto, or to otherwise disclose proprietary or trade
secret information to such other party, without breaching the terms of any
agreement with a Third Party.  

1.29.  "Co-Promote" shall mean to undertake and implement the
activities of each party under the Co-Promotion.

1.30.  "Co-Promotion" shall mean the joint commercialization of
the Option Product by the parties in the U.S.

1.31.  "Core Countries" shall mean the U.S., Canada, Japan and
Europe (Austria, Belgium, France, Germany, Italy, the Netherlands, Spain,
Switzerland and the United Kingdom).

1.32.  "Cost of Bulk Product" shall have the meaning set forth
in the Financial Appendix.

1.33.  "Cost of Finished Product" shall have the meaning set
forth in the Financial Appendix.

1.34.  "Cost of Goods Sold" shall have the meaning set forth in
the Financial Appendix.

1.35.  "Cost of Sales" shall have the meaning set forth in the
Financial Appendix.

1.36.  "Days" shall mean any day, including working days,
public holidays and weekend days.

1.37.  "Development Costs" shall have the meaning set forth in
the Financial Appendix.

1.38.  "Development License and Commercialization Agreement"
shall mean the Development License and Commercialization Agreement(s) to be
entered into by Novartis and Cell Genesys. The form of the Development License
and Commercialization Agreement is attached as Exhibit II to the Option
Agreement.

1.39.  "Development Information" shall have the meaning set
forth in Section 4.2 of the Option Agreement.

1.40.  "Development Products" shall be the adenovirus vectors
described in Exhibit VI (Development Products) to the Option Agreement. 

1.41.  "Deviating Bulk Product" shall mean a Bulk Product
affected by any Deviation.

1.42.  "Deviation" shall mean any failure of a Bulk Product to
conform to the Specifications, cGMP or the quality requirements set forth the
Supply and QA Agreement.  

1.43.  "Devices" shall mean the unfilled vials or other
appropriate devices that are required for filling of Bulk Products in accordance
with the Specifications.

1.44.  "Disclosing Party" shall mean the party disclosing its
proprietary Confidential Information.

1.45.  "Distribution Costs" shall have the meaning set forth in
the Financial Appendix.

1.46.  "Early Selection Criteria" or "ESC" shall have
the meaning set forth in Exhibit III to the Option Agreement.  

1.47.  "EMEA" shall mean the European Agency for the Evaluation
of Medicinal Products.  

1.48.  "EU" shall mean the European Union.

1.49.  "Excluded Costs" shall have the meaning set forth in
Section 6.3.3(iii) of the Development License and Commercialization
Agreement.

1.50.  "Exercise Notice" shall have the meaning ascribed to it
in Section 4.7 of the Option Agreement.

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

1.51.  "FCA" shall mean have the meaning set forth in Section
5.2(d) of the Manufacturing and Supply Agreement.

1.52.  "FDA" shall mean the United States Food and Drug
Administration.  

1.53.  "Fee" shall have the meaning ascribed to it in Section
3.1 of the Option Agreement.

1.54.  "Field" [*]

1.55.  "Finance Sub-Committee" shall have the meaning set forth
in the Financial Appendix.

1.56.  "Financial Appendix" shall mean the Financial Appendix
attached as Exhibit IV to the Option Agreement.

1.57.  "Finished Product" shall mean any formulation or dosage
of the Option Product in finished form for Commercial Use approved by the
applicable Regulatory Authority(ies), including all product labeling or other
package inserts or materials required by the applicable Regulatory
Authority(ies).  

1.58.  "Firm Order" shall mean have the meaning set forth in
Section 5.2(b) of the Manufacturing and Supply Agreement.  

1.59.  "First Commercial Sale" shall mean the first commercial
sale of the Option Product by Novartis or an Affiliate or sublicensee of
Novartis and/or Cell Genesys in a country in the Option Territory following
Regulatory Approval of the Option Product in that country or, if no such
Regulatory Approval or similar marketing approval is required, the date upon
which the Option Product is first commercially launched in such country.  

1.60.  "Fully Burdened Manufacturing Cost" shall have the
meaning set forth in the Financial Appendix.

1.61.  "General and Administrative Costs" shall have the
meaning set forth in the Financial Appendix.

1.62.  "Gross Sale Price" shall have the meaning set forth in
the Financial Appendix.

1.63.  "HSE Procedures" shall mean have the meaning set forth
in Section 2.1(f) of the Manufacturing and Supply Agreement

1.64.  "Improvements" shall have the meaning set forth in
Section 1 of the Assignment and License Agreement.

1.65.  "IND" means the investigational new drug application
relating to the Development Period or Substitute Product, as the case may be,
filed with the FDA pursuant to United States Code published at 21 U.S.C. 355(i)
and corresponding regulations at 21 C.F.R. Part 312, including any amendments
thereto.  References herein to IND shall include, to the extent applicable, any
comparable filing in another country in the Option Territory.  

1.66.  "Indication" shall mean any human indications which can
be treated, prevented or cured or whose progressions can be delayed. 

1.67.  "IP" shall mean intellectual property of all types,
including, without limitation, Patents, copyrights, trademarks, service marks,
trade dress, trade secrets, know-how, technology, data, invention (whether
patented or not), data exclusivity, orphan drug exclusivity and other marketing
exclusivity, and registrations and applications for registration of the
foregoing.

1.68.  "Joint Development Committee" or "JDC" shall
have the meaning set forth in Section 3.5 of the Development License and
Commercialization Agreement.

1.69.  "Joint Patents" shall have the meaning set forth in
Section 8.1.4 of the Development License and Commercialization Agreement.

1.70.  "Know-How" means all proprietary material and
information, including data, technical information, know-how, experience,
inventions, discoveries, trade secrets, compositions of matter and methods,
whether or not patentable or confidential, that are Controlled by a party to the
Option Agreement or its Affiliates and that relate to the discovery,
development, utilization, manufacture or use of any Products, including but not
limited to processes, techniques, methods, products, materials and
compositions.

1.71.  "Launch Date" shall mean, for a particular Option
Product, the date determined by the JDC as the date for commencing the
manufacture of Bulk Product for such particular Option Product for the purposes
of First Commercial Sale.  

1.72.  "Laws" shall mean any United States federal, state,
local or non-United States statute, law, ordinance, regulation, rule, code,
order, other requirement or rule of law.

1.73.  "Liaisons" shall have the meaning ascribed to it in
Section 2.2(a) of the Development and Option Agreement.

1.74.  "Licensed Patents" shall have the meaning set forth in
Section 1 of the Assignment and License Agreement.

1.75.  "Losses" means all losses, obligations, liabilities,
damages, costs and expenses, including reasonable attorney's fees. 

1.76.  "MAA" shall mean the Marketing Authorization Application
for authorization for marketing of an Option Product in the European Union as
defined in the applicable regulations and directives and filed with the
competent European health authorities.

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

1.77.  "Major Markets" shall mean each of (i) the United
States, (ii) the European Union and (iii) other countries in the Option
Territory which had been expected by Novartis to generate aggregate sales
amounting to [*] of Novartis' expected Gross Sales of the Bulk Product (in its
finished packaged form).

1.78.  "Manufacturing and Supply Agreement" shall mean the
Manufacturing and Supply Agreement(s) to be entered into between Novartis and
Cell Genesys.  The form of the Manufacturing and Supply Agreement is attached as
Exhibit V to the Option Agreement.

1.79.  "Manufacturing Responsibilities" shall have the meaning
set forth in Section 3.3 of the Manufacturing and Supply Agreement.

1.80.  "Manufacturing Standards" shall have the meaning set
forth in Section 2.1 of the Manufacturing and Supply Agreement

1.81.  "Marketing Costs" shall have the meaning set forth in
the Financial Appendix.

1.82.  "Marketing Sample" shall mean a sample of the Option
Product in Finished Product from to be distributed free of charge to physicians
and hospitals for promotional purposes. 

1.83.  "Materials" shall have the meaning set forth in Section
1 of the Assignment and License Agreement.

1.84.  "Novartis Development Program" shall have the meaning
set forth in Section 3.1 of the Development License and Commercialization
Agreement.

1.85.  "Novartis Inventions" shall mean all inventions,
discoveries and/or improvements made by Novartis or Novartis' Affiliates that
may be subject to a Patent.

1.86.  "Novartis Know-How" shall mean all Know-How Controlled
by Novartis relating to an Option Product.

1.87.  "Novartis Patents" shall mean any Patents Controlled by
Novartis, and Novartis' interest in any Joint Patent, having one or more Valid
Claims covering the Option Product or its manufacture or use, to the extent such
Patents arise out of work performed pursuant to the Option Agreement and the
Development License and Commercialization Agreement.  

1.88.  "Novartis Technology" shall mean, collectively, the
Novartis Patents and Novartis Know-How.

1.89.  "NDA" shall mean a New Drug Application for
authorization for marketing of a Option Product in the United States of America
as defined in the applicable laws and regulations and filed with the FDA.  

1.90.  "Net Profits" or "Net Losses" shall have the
meaning set forth in the Financial Appendix.

1.91.  "Net Sales" shall have the meaning set forth in the
Financial Appendix.

1.92.  "Option" shall have the meaning set forth in Section 4.5
of the Option Agreement.

1.93.  "Option Agreement" shall mean the Product Development
and Option Agreement, dated as of the Closing, between Novartis and Cell
Genesys.

1.94.  "Option Period" shall have the meaning set forth in
Section 4.4 of the Option Agreement.

1.95.  "Option Product" shall mean a Product Candidate with
respect to which Novartis has exercised an Option pursuant to the Option
Agreement.  In each Development License and Commercialization Agreement
governing a particular Option Product, the parties shall duly describe such
Option Product in Exhibit I attached to such Development License and
Commercialization Agreement.

1.96.  "Option Product Materials" shall mean (i) biological or
chemical substances relating to the Option Product, including, cell lines
containing the adenovirus vector, and (ii) documentation relating to the
production and maintenance of the foregoing.

1.97.  "Option Territory" shall mean all the countries in the
world except for China.

1.98.  "Other Operating Income/Expenses" shall have the meaning
set forth in the Financial Appendix, attached as Exhibit IV to the Option
Agreement.

1.99.  "Other Products" shall mean the following adenovirus
vectors:  [*] and adenovirus vectors using Target Technology IP.

1.100.  "Other Research and Development Programs" shall have
the meaning set forth in Section 2.2 of the Option Agreement.

1.101.  "Patents" means all patents and patent applications
(and the patents resulting therefrom) existing at the Effective Date, and all
patent applications (and the patents resulting therefrom) hereafter filed during
the term of the Patent Assignment and License Agreement and Development License
and Commercialization Agreement, including any reissues, reexaminations,
extensions (including any supplementary protection certificate), continuations,
continuations-in-part (to the extent the claims thereof are supported by the
specifications of patent applications otherwise included herein), divisions,
provisionals, substitute applications, registration patents or patents of
addition based on any such patent and all foreign counterparts of any of the
foregoing.

1.102.  "PDP " shall have the meaning set forth in Section
2.1(a) of the Option Agreement.  

 [*] Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

1.103.  "Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization or government or political subdivision thereof.  

1.104.  "Phase I Clinical Trials" shall mean the initial
portion of the clinical development that provides for the continued trials of
pharmaceutical product on sufficient numbers of patients to establish safety and
tolerability.

1.105.  "Phase II Clinical Trial" shall mean that portion of
the clinical development that provides for the continued trials of a
pharmaceutical product on sufficient numbers of patients to establish safety and
tolerability.

1.106.  "Post Proof of Concept Development Program" or
"Novartis Development Program" shall mean activities associated with
development of the Option Product, including (a) manufacture and formulation of
the Option Candidate for Clinical Trials; (b) planning, implementation,
evaluation and administration of human Clinical Trials, manufacturing process
development and scale-up for the commercial manufacture of the Option Product;
(c) preparation and submission of applications for Regulatory Approval in
connection therewith; and (d) post-market surveillance of approved drug
Indications, as required or agreed as part of a marketing approval by any
Regulatory Authority.

1.107.  "Processing" shall mean any and all processing
operations, including packaging for shipment, carried out by or on behalf of
Cell Genesys in the preparation of the Bulk Product under the Manufacturing and
Supply Agreement in accordance with the Processing Procedures.

1.108.  "Processing Procedures" shall mean have the meaning set
forth in Section 2.1(c) of the Manufacturing and Supply Agreement

1.109.  "Product Candidate" shall mean a Development Product or
Substitute Product that has successfully completed the Proof of Concept
Study.

1.110.  "Product Marketing Plan" shall mean the product
marketing plan defined by Novartis for an Option Product in connection with the
Co-Promotion.

1.111.  "Products" shall mean, collectively, the Development
Products, Substitute Products, Other Products and Additional Products.

1.112.  "Proof of Concept Study" shall mean, with respect to
each Development Product or Substitute Product (if applicable), a Phase I study
rolling over into a Phase II study which includes a safety evaluation component
(Phase I) designed to determine a safe and practical dose for further evaluation
of the Development Product or Substitute Product (if applicable), and an
efficacy evaluation component (Phase II) in which patients are evaluated for
evidence of clinical activity of the Development Product or Substitute Product
(if applicable) administered at a safe and practical dose.  This Phase I study
rolling over into a Phase II study shall include sufficient eligible patients as
outlined in an IND submitted to Regulatory Authorities in writing.  This Phase I
study rolling over into a Phase II study will be conducted in approximately
twenty-five (25) to thirty (30) evaluable patients.

1.113.  "Quality Assurance" shall mean the quality assurance
implemented in accordance with and subject to the Supply and QA Agreement.

1.114.  "Receiving Party" shall mean party receiving
Confidential Information of the other Party.

1.115.  "Refused Product Candidate" shall have the meaning set
forth in Section 4.7 of the Option Agreement.

1.116.  "Registration" shall mean any and all governmental
approvals necessary and/or required to be granted by a regulatory authority for
the manufacturing, import, marketing, distribution and sale of the Bulk Product
as labeled, packaged and presented for sale to the pharmaceutical trade.

1.117.  "Regulatory Approval" shall mean, with respect to any
country, all authorizations by the appropriate governmental entity or entities
necessary for commercial sale of an Option Product in that country, including,
without limitation and where applicable, approval of use, storage, import,
transport, sale, labeling, price, reimbursement and manufacturing.
"Regulatory Approval" in the United States shall mean final approval
of a BLA or NDA, if applicable, pursuant to United States Code published at 21
U.S.C. 355 and corresponding regulations at 21 C.F.R. Part 314, permitting
marketing of the applicable drug product in interstate commerce in the United
States.  "Regulatory Approval" in the European Union shall mean final
approval of the MAA pursuant to Council Directive 2001/83/EC, as amended, or
Council Regulation 2309/93/EEC, as amended.

1.118.  "Regulatory Authority" shall mean any governmental
authority in any country or group of countries competent to grant approval of
use, storage, import, transport, sale labeling, pricing and manufacturing for an
Option Product.

1.119.  "Rejected Product" shall mean any Other Product or
Additional Product that has been previously offered by Cell Genesys to Novartis
under Section 2.2(b) of the Option Agreement that has been rejected by Novartis,
but excluding any such Other Product or Additional Product, which when offered
to Novartis, was not going under or had not completed a Phase I study.

1.120.  "Relevant Cell Genesys Patents" shall have the meaning
set forth in Section 8.1.1 of the Option Agreement.

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Confidential treatment has been requested with respect to the omitted portions.

1.121.  "Research Program" shall mean all research and
development activities undertaken by Cell Genesys with respect to each
Development Product and Substitute Product designed to complete the Development
Information criteria. 

1.122.  "Royalty Costs" shall mean have the meaning set forth
in the Financial Appendix.

1.123.  "Sales Costs" shall have the meaning set forth in the
Financial Appendix.

1.124.  "Sales Report" shall mean a written report or written
reports showing each of (i) the Net Sales of each Product in each country in the
Option Territory during the reporting period by any party selling a Product and
each Affiliate, licensee and sublicensee who sells a Product; (ii) the
royalties, payable in U.S. Dollars in respect of such sales and the basis of
calculating those royalties; (iii) withholding taxes, if any, required by law to
be deducted in respect of any such sales; (iv) the exchange rates used in
converting into U.S. Dollars, from the currencies in which sales were made, any
payments due which are based on Net Sales; and (v) dispositions of Products
other than pursuant to arm's-length sales exclusively for cash.  

1.125.  "Sales Returns and Allowances" shall have the meaning
set forth in the Financial Appendix.

1.126.  "Specifications" shall mean have the meaning set forth
in Section 2.1(b) of the Manufacturing and Supply Agreement.

1.127.  "Subscription Agreement" shall mean the Subscription
Agreement, dated July 23, 2003, among Novartis AG, Genetic Therapy, Inc. and
Cell Genesys.

1.128.  "Substitute Development Costs" shall mean development
costs directly attributed to and incurred by Cell Genesys in connection with the
development of a Substitute Product, which development costs are in excess of
the Fee.

1.129.  "Substitute Product" shall mean a product (including
any derivatives or back-ups to the Development Products) that is substituted for
any of the Terminated Development Products.

1.130.  "Supply and QA Agreement" shall mean have the meaning
set forth in Section 2.1(e) of the Manufacturing and Supply Agreement.

1.131.  "Target Technology IP" shall have the meaning set forth
in Section 1 of the Assignment and License Agreement.

1.132.  "Technical Information" shall mean all documents and
materials generated by Novartis and Cell Genesys and any Subcontractors, as the
case may be, as well as all written amendments thereto, including, without
limitation, manufacturing and quality control instructions or requirements under
any quality control agreements between the parties (including the Supply and QA
Agreement), and specifications necessary to manufacture, label, package Bulk
Products, store, handle, stability test, quality control test and release Bulk
Products in accordance with the Manufacturing and Supply Agreement.

1.133.  "Terminated Development Product" shall have the meaning
set forth in Section 2.4 of the Option Agreement.

1.134.  "Third Party" shall mean any Person that is not a party
or an Affiliate of any party to the Transaction Documents.  

1.135.  "Third Party Obligations," with respect to a party and
a particular Product, shall mean any actual, due and payable amounts by such
party to a Third Party pursuant to a licensing arrangement with such Third
Party.  For the avoidance of any doubt, "Third Party Obligations" of
Cell Genesys shall include the reimbursement to Novartis of royalties and other
costs under Section 4.5 of the Assignment and License Agreement.

1.136.  "Transaction Documents" shall mean the Assignment and
License Agreement, the Subscription Agreement, Employee Side Letter between Cell
Genesys and Genetic Therapy, Inc., the Option Agreement, the Development License
and Commercialization Agreement and the Manufacturing and Supply Agreement. 

1.137.  "Transaction Patents" shall have the meaning set forth
in Section 1 of the Assignment and License Agreement.

1.138.  "USD" or "US Dollars" shall mean the legal
tender (currency) in the United States of America.

1.139.  "Valid Claim" shall mean a claim (a) of an issued and
unexpired Patent that has not been revoked or held permanently unenforceable or
invalid by a decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed for appeal, and
which has not been admitted to be invalid or unenforceable through re-issue or
disclaimer or otherwise, or (b) of any patent application included in the
Patents that has not been cancelled, withdrawn or abandoned or been pending for
more than seven (7) years.

1.140.  "Validation" shall mean the validation in accordance
with the Validation Plan set forth in Annex 5 attached to the Manufacturing and
Supply Agreement.

1.141.  "Validation Plan" shall mean have the meaning set forth
in Section 2.1(d) of the Manufacturing and Supply Agreement.

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Confidential treatment has been requested with respect to the omitted portions.

EXHIBIT VIII

OPTION AGREEMENT

CONFIDENTIALITY APPENDIX

1.1.  Undertaking

During the term of the Transaction Documents, each
party thereunder shall keep confidential, and, other than as provided herein or in the Transaction Documents,
shall not use or disclose, directly or indirectly, any trade secrets, or
confidential or proprietary information, or any other knowledge, information,
documents or materials, owned, possessed or otherwise controlled by the other
party, whether in tangible or intangible form
("Confidential Information").

(a) Each party shall take any and all lawful
measures to prevent the unauthorized use and disclosure of such information, and
to prevent unauthorized Persons or entities from obtaining or using such
information.

(b) Each party further agrees to refrain from
directly or indirectly taking any action which would constitute or facilitate
the unauthorized use or disclosure of such information.  Each party may disclose
such information to its officers, employees and agents, to authorized licensees
and sublicensees, and to subcontractors in connection with the development or
manufacture of applicable Products, to the extent necessary to enable such parties
to perform their obligations hereunder or under the applicable license,
sublicense or subcontract, as the case may be; provided that such officers,
employees, agents, licensees, sublicensees and subcontractors have entered into
appropriate confidentiality agreements for secrecy and non-use of such
information at least as restrictive as those contained herein
which shall be by the Receiving Party at the instance of the Disclosing Party.

(c) Each party shall be liable for any
unauthorized use and disclosure of such information by its officers, employees
and agents and any such licensees,
sublicensees and subcontractors.  

1.2.  Exceptions

Notwithstanding the foregoing, the provisions of
Section 1.1 hereof shall not apply to the disclosure of knowledge, information,
documents or materials, which the Receiving Party can establish by clear and convincing
evidence: 

(a) have entered the public domain without such party's breach of any
obligation owed to the Disclosing Party;

(b) are permitted to be disclosed by the prior
written consent of the Disclosing Party; 

(c) are or have become
known to the Receiving Party from a source other than the Disclosing Party,
other than by breach of an obligation of confidentiality owed to the Disclosing
Party;

(d) are independently
developed by the Receiving Party without reference to or
reliance upon knowledge, information, documents or materials of the Disclosing
Party and without breach of this Confidentiality Appendix as established by contemporaneous
written records; or

(e)
are required to be disclosed by the Receiving Party to comply with
applicable laws or regulations, to defend litigation or
to comply with governmental laws or regulations, provided that the Receiving
Party provides prior written notice of such disclosure to the Disclosing Party
and takes all reasonable and
lawful actions to avoid or minimize the degree of such disclosure.

1.3.  Publicity

(a) Except as otherwise set forth in this Section 1.3 or as required
by Law, the parties will agree upon the timing and
content of all press releases or other public communications relating to the
Transaction Documents and the transactions contemplated herein, which agreement will
not be unreasonably withheld or delayed.  

(b) Once any press
release or other public communication has been approved in
accordance with this Section 1.3, either party or its Affiliates may communicate
the information contained in such approved release or
communication without restriction.  

(c) A party may disclose
the existence and terms of the Transaction Documents and the status of transactions described herein under obligations of confidentiality to agents,
advisors, contractors and investors in connection with such party's activities
hereunder (the "Receiving Party's Representatives") and in connection
with such party's financing activities provided that the Receiving Party's
Representatives will be bound by the same confidentiality obligation set out
herein.

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Confidential treatment has been requested with respect to the omitted portions.

1.4 Survival

The provisions of this Confidentiality Appendix shall survive the
termination of the last to expire Transaction Document and shall extend for a
period of ten (10) years from the date thereof.

 

 

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Confidential treatment has been requested with respect to the omitted portions.

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