Document:

Exhibit
10.24

 

[*] Indicates that a portion of this exhibit has
been omitted based on a request for confidential treatment submitted to the
Securities and Exchange Commission.  The
omitted portion has been filed separately with the Commission.

 

AGREEMENT

 

This Agreement is entered into and made effective as
of April 2, 2004, between NeoRx Corporation (“NeoRx”), having offices
at 300 Elliott Avenue W., Suite 500, Seattle, Washington 98119-4114, and Aletheon
Pharmaceuticals,
Inc. (“Aletheon”), having offices at 2722 Triton Drive NW, Seattle,
WA 98117.

 

WHEREAS, NeoRx has rights relating to Pretarget® patents and trademarks
and Aletheon desires to acquire certain of those rights pertaining to the
Pretarget® patents and trademarks as set forth below;

 

WHEREAS, the parties, for mutual good and valuable consideration,
hereby agree as follows:

 

1.             Definitions

 

The following terms shall have the following meanings as used in this
Agreement:

 

Clinical
Trial:  A human
clinical trial conducted pursuant to an IND or its equivalent, including a
human clinical trial conducted under physician–sponsored IND or its equivalent.

 

Effective
Date:  April 2, 2004.

 

IND:                      An
Investigational New Drug application (as defined in the U.S. Food, Drug and
Cosmetics Act and regulations promulgated thereunder), any successor
application or any foreign equivalent.

 

Net
Sales:                                        With
respect to a Pretarget Product, the [*] invoiced by Aletheon, its affiliates
and licensees for the sale of such Pretarget Product or other disposition of
such Pretarget Product, less (a) [*] and separately stated on the invoice, (b)
credits actually given in the ordinary course for [*], and (c) [*] separately
itemized on the invoice for shipping the Pretarget Product to independent third
parties.  Net Sales shall not include
any transfer between Aletheon and its affiliates for resale, but shall include
the resale from its affiliates.  Any
Pretarget Product sold or otherwise disposed of in other than an arm’s-length
transaction or for other property (e.g., barter) shall be deemed invoiced at
its fair market value in the country of sale or disposition.

 

Pivotal Clinical Trial:  A Clinical Trial of a product on a
sufficient number of human subjects done primarily to support an application
for Regulatory Approval to market the product for the proposed therapeutic
indication regardless of the outcome of the Regulatory Approval process.

 

1

 

Pretarget
Intellectual Property: 
Pretarget Patents and Pretarget Trademarks.

 

Pretarget
Patents:  Patents and
applications owned or controlled by NeoRx and set forth on Schedule A,
including foreign equivalents, provisionals, continuations, re-examinations,
re-issues and patents issuing thereon.

 

Pretarget
Product:  A product,
the use, manufacture, sale, offer for sale or import of which,  where and when used, sold, offered for sale
or imported, is covered by at least one claim of a patent or patent application
included in the Pretarget Patents.

 

Pretarget
Trademarks:  Trademark
registrations and applications, owned or controlled by NeoRx, and set forth in
Schedule B, and all goodwill associated therewith.

 

Regulatory
Approval: The action by a regulatory body which is required
before legal commercial sale or use of a product in a regulatory jurisdiction,
for example, approval by the United States Food and Drug Administration in the
United States.

 

Third Party Licenses:  The licenses set forth in Schedule C.

 

2.                                      Assignment

 

Subject to the terms and conditions of this Agreement, NeoRx hereby sells,
transfers, conveys, assigns and delivers to Aletheon, and Aletheon hereby
purchases and accepts, all of NeoRx’s right, title and interest in and to all
of the Pretarget Intellectual Property.

 

3.             Milestone
Payments, Royalties and Outlicensing Fees 

 

In consideration of the assignment of the Pretarget Intellectual
Property to Aletheon, Aletheon shall make the following payments to NeoRx:

 

Milestone Payments

 

(a)          [*] within 30 days of
initiation of a Phase I Clinical Trial in any country for a Pretarget Product
for a first indication;

 

(b)         [*] within 30 days of
initiation of a Phase I Clinical Trial in any country for a Pretarget Product
for a second indication;

 

(c)          [*] within 30 days of
the initiation of a Phase II Clinical Trial in any country for a Pretarget
Product for a first indication:

 

(d)         [*] within 30 days of the
initiation of a Phase II Clinical Trial in any country for a Pretarget Product
for a second indication:

 

2

 

(e)          [*] within 30 days of initiation
of a Pivotal Clinical Trial in any country for a Pretarget Product for a first
indication;

 

(f)            [*] within 30 days of
initiation of a Pivotal Clinical Trial in any country for a Pretarget Product
for a second indication;

 

(g)         [*] within 30 days of the
Regulatory Approval in any country of a Pretarget Product for a first
indication;

 

(h)         [*] within 30 days of the
Regulatory Approval in any country of a Pretarget Product for a second
indication;

 

(i)             [*] within 30 days of
[*] Net Sales for all Pretarget Products worldwide reaching [*]:

 

(j)             [*] within 30 days of
[*] Net Sales of all Pretarget Products worldwide reaching [*]; and

 

(k)          [*] within 30 days of
[*] Net Sales of all Pretarget Products worldwide reaching [*].

 

Milestones (a) and (b) are due only for the first two Pretarget
Products that enter a Phase I Clinical Trial. 
Milestones (c) and (d) are due only for the first two Pretarget Products
that enter a Phase II Clinical trial whether these Pretarget Products are the
same or different from the Pretarget Products that triggered milestone (a) or
(b).  Milestones (e) and (f) are due
only for the first two Pretarget Products that enter a Pivotal Clinical Trial
whether these Pretarget Products are the same or different from the Pretarget
Products that triggered milestone (a), (b), (c) or (d).  Similarly, milestones (g) and (h) are due on
the first two Pretarget Products that achieve Regulatory Approval whether they
are the same or different from the Pretarget Products that triggered milestones
(a), (b), (c), (d), (e) or (f).  Payment
of any of the foregoing milestones shall be made only once for each achievement
of such milestone.

 

Royalties

 

For a Pretarget Product that contains a radioactive effector molecule,
Aletheon shall pay NeoRx a royalty of [*] of Net Sales worldwide.

 

For a Pretarget Product that does not contain a radioactive effector
molecule, Aletheon shall pay NeoRx a royalty of [*] of Net Sales worldwide.

 

Royalties shall be paid to NeoRx within 30 days after the end of each
calendar quarter, unless such royalties are passed through from a third party
and in such event shall be paid within 60 days after the end of each calendar
quarter.

 

3

 

Outlicensing Fees

 

Aletheon shall pay NeoRx [*] of the consideration (including upfront,
license fees and milestone payments) it receives upfront or in the future under
outlicences or assignments of all or a portion of Pretarget Intellectual
Property; said payments to be based on that portion of the consideration fairly
attributable to the Pretarget Intellectual Property, said consideration
including [*].  Outlicensing fees shall
not be due on royalties which shall be passed through as obligations under the
terms in this Section 4 above. 
Outlicensing fees shall also not be due on direct R&D support.  Aletheon shall notify NeoRx within 15 days
of execution of an outlicense or assignment of all or a portion of Pretarget
Patents and provide a copy of said outlicense or assignment with sufficient
information for NeoRx to determine the financial terms of the outlicense or
assignment.  Outlicensing fees shall be
paid to NeoRx within 30 days after Aletheon’s receipt of such consideration
under each outlicense or assignment.

 

Late Fees

 

Any royalties, milestones, outlicensing fees or other amounts due under
this Agreement not paid when due shall be subject to finance charges of [*] per
month or the highest rate permitted by applicable usury law, whichever is less,
determined and compounded daily from the date due until the date paid.

 

4.             Third
Party Licenses

 

NeoRx agrees to promptly request consent from each of its licensors of
Third Party Licenses to assign the licenses to Aletheon, and to reasonably
cooperate in such assignment, but shall not be responsible for any additional
payments such licensors may seek to impose for such assignments.  NeoRx shall assign to Aletheon all of
NeoRx’s right, title and interest under the Third Party Licenses for which
NeoRx obtains such consent, which consent shall include the release of NeoRx
from any future liability under the Third Party Licenses, and Aletheon shall
assume all of NeoRx’s liabilities and obligations arising under such Third
Party Licenses after the effective date of the assignment.  NeoRx is not required to grant sublicenses
under any of its existing agreements related to the Pretarget Intellectual
Property and shall not be required to assign its agreement with the [*] unless
Aletheon pays all costs incurred or to be incurred by NeoRx to assign such
agreement.

 

5.             Due
Diligence, Progress Reports, Term and Termination

 

Due Diligence

 

Aletheon shall use commercially reasonable efforts to develop and
market at least one Pretarget Product for which payments are due under Article
4 of this Agreement and shall exercise reasonable judgment and good faith in
determining whether to cease the maintenance, prosecution or defense of any of
the Pretarget Patents.

 

4

 

Progress Reports

 

Aletheon shall provide to NeoRx a written report at least [*] per [*],
which accurately describes the current development progress of the Pretarget
Product(s).

 

6.             Royalty
Reports; Audits

 

With each payment of royalties under Section 4, Aletheon shall provide
NeoRx with a written report of (a) Net Sales and (b) a calculation of the
royalties due thereon.  Aletheon shall
keep, or cause to be kept, accurate books and records in reasonable detail
regarding the calculation of payments and the reports given hereunder, and
shall retain such books and records at its principal place of business for at
least [*] years after the end of the calendar year to which they pertain.  NeoRx shall have the right, at its expense
and not more frequently than once per calendar year, to have an independent
certified public accounting firm of nationally recognized standing, selected by
NeoRx, examine during normal business hours the books and records of Aletheon
relating to the calculation of payments and reports given hereunder for any
period during which Aletheon is to keep the books and records.  If such examination discloses an
underpayment, Aletheon shall remit to NeoRx the amount of such underpayment
(plus interest pursuant to Section 4). 
If such examination discloses an underpayment in excess of [*] for the
period under review, then Aletheon shall also remit to NeoRx an amount equal to
NeoRx’s out-of-pocket costs of the examination.

 

7.             Acknowledgement
and Warranties; Disclaimer; Indemnification

 

Each Party warrants that it has the authority to enter into this
Agreement and that its entry into or performance of this Agreement does not
conflict with any other agreement, instrument or understanding, oral or
written, to which it is a party or is bound.

 

Further, NeoRx warrants that (a) it is the owner of the Pretarget
Patents, and (b) to the knowledge of NeoRx, it has not received written notice
from any third party alleging that the issued patents included in the Pretarget
Patents are invalid or unenforceable.

 

Except for the warranties expressly set forth above, NeoRx hereby states
and Aletheon acknowledges and accepts that the Pretarget Intellectual Property
is being sold “AS IS”, “WHEREIS” and with (a) no express or implied warranties
or representations of any kind including but not limited to any warranties
regarding merchantability or fitness for a particular purpose or use, (b) no
warranties of validity, scope or enforceability, and (c) in the case of any
Pretarget Product and Pretarget Trademarks, no warranties of
non-infringement.  NeoRx makes no
representations or warranties that it shall be able to obtain the consent of
the licensors of Third Party Licenses to assign said Licenses to Aletheon.
Furthermore, NeoRx shall have no obligation to initiate, pay for, enjoin or
defend any Pretarget Intellectual Property from possible infringing actions of
third

 

5

 

parties, or to enforce, defend, prosecute or maintain any of the
Pretarget Intellectual Property after the Effective Date.  Aletheon shall reimburse any costs or
expenses incurred by NeoRx in connection with the prosecution, maintenance,
defense or enforcement of the Pretarget Intellectual Property by Aletheon after
the Effective Date.

 

EXCEPT AS SET FORTH IN THIS AGREEMENT, NEORX MAKES NO OTHER
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE PRETARGET INTELLECTUAL
PROPERTY, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, PATENTABILITY AND NONINFRINGEMENT.

 

Aletheon shall indemnify, defend and hold harmless NeoRx and its directors,
officers, employees and agents and their respective successors and assigns from
and against all liabilities, damages, losses and expenses (including, without
limitation, reasonable attorneys’ fees) arising from or attributable to (a) the
development, manufacture, distribution, use
or sale of Pretarget Products or
Pretarget Intellectual Property by Aletheon or its affiliates or licensees,
and (b) any performance or non-performance of the Third Party Licenses assigned
to Aletheon under this Agreement occurring after the effective date of the
assignment.

 

8.             Governing
Law and Jurisdiction

 

This Agreement is governed by the laws of the State of Washington
without reference to its choice of law principles to the contrary and both
parties submit to the jurisdiction of state and federal courts located in King
County, Washington for any disputes arising from this Agreement.

 

9.             Security
Interest

 

Aletheon hereby grants NeoRx a security interest in the Pretarget
Patents and all proceeds, income, royalties and other payments now or hereafter
due and payable with respect thereto (“Collateral”) to secure the payment of
all present and future royalties, milestones, and outlicensing fees payable
under this Agreement, as it may be amended from time to time.  Aletheon authorizes NeoRx to file and record
under the Uniform Commercial Code (“UCC”) and with the United States Patent and
Trademark Office financing statements, amendments and other documents deemed
reasonably necessary by NeoRx to evidence, perfect and maintain the security
interests created hereby.  Aletheon
shall cooperate with NeoRx in the timely execution and filing of such
documents.  Upon the failure of Aletheon
to pay any such amounts when due under this Agreement (after written notice
thereof and a thirty day cure period), NeoRx shall have the rights and remedies
of a secured party under the UCC; provided, however, that NeoRx shall not
terminate the rights of an assignee or licensee of Aletheon’s interests in the
Pretarget Patents if (a) such assignee or licensee agrees to pay, and does pay,
directly to NeoRx the royalties and milestones due under this Agreement that
are associated with, or arise from, its use of the

 

6

 

Pretarget Patents and (b) NeoRx is paid the outlicensing fees due under
this Agreement that are attributable to the assignment or license of the
Pretarget Patents to such assignee or licensee.

 

10.          Assignment

 

Aletheon may assign this Agreement with the written consent of NeoRx,
which consent shall not be unreasonably withheld. NeoRx can assign this
Agreement without the consent of Aletheon. 
In the event NeoRx assigns any or all of its rights under this Agreement
it shall notify Aletheon in writing.

 

11.          Confidentiality
and Publicity

 

The Parties agree to keep confidential the terms of this Agreement
except to the extent that disclosure is required by law or except as is
otherwise agreed to by the parties. 
However, Aletheon may disclose the terms of this Agreement to its
affiliates, sublicensees, and contractors, and including (without limitation)
potential sublicensees, potential merger and/or acquisition partners, potential
acquirers, and professional advisors of Aletheon (so long as each of these
executes an appropriate non-disclosure and non-use agreement with
Aletheon).  All reports, agreements or
other information provided by Aletheon to NeoRx or its agents pursuant to this
Agreement shall be kept confidential.

 

12.          Severability

 

Any provision in this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.

 

13.          Waiver

 

No failure or delay by any Party to insist on the strict performance of
any term, condition, covenant or agreement of this Agreement, or to exercise
any right, power or remedy hereunder or consequent upon a breach hereof, shall
constitute a waiver of any such term, condition, covenant, agreement, right
power or remedy of any such breach or preclude such Party from exercising any
such right, power or remedy at any later time or times.

 

14.          Compliance
with Laws 

 

The Parties shall comply with all applicable laws, rules and
regulations and orders of the United States and all jurisdictions and any
governmental agency or court thereof in connection with this Agreement and the
transactions contemplated herein.

 

7

 

15.          Notice

 

Any notice or other communication required or permitted to be made or
given to either Party under this Agreement shall be in writing and shall be
deemed given if delivered by hand or by facsimile transmission (transmission
verified), received by registered or certified mail (return receipt requested),
postage prepaid, or sent by overnight or express courier service, to the
Parties at the following addresses (or at such other address for a Party as
shall be specified by like notice; provided, however, that notices of a change
of address shall be effective only upon receipt thereof):

 

In the case of NeoRx:

 

NeoRx Corporation

300 Elliott Avenue W., Suite 500

Seattle, WA 98119-4114

Attention: 
Vice President, Legal

Telephone: 
(206) 286-2526

Facsimile:  (206) 286-2537

 

 

In the case of Aletheon:

 

Aletheon Pharmaceuticals, Inc.

c/o Heller Ehrman White & McAuliffe LLP

701 5th Avenue, Suite 6100

Seattle, WA 98104

Attention: 
Debra Leith

Telephone: 
(206) 389-6017

Facsimile: (206) 447-0849

 

16.          Entire
Agreement

 

This Agreement constitutes the entire agreement and understanding
between the parties with respect to the subject matter hereof and supersedes
all prior agreements, understandings, negotiations, representations and statements,
whether oral, written, implied or expressed, relating to such subject matter.

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the Effective Date by their duly authorized representatives.

 

8

 

	
   

  	
  Aletheon
  Pharmaceuticals, Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Donald B. Axworthy

  	
   

  
	
   

  	
   

  	
  Donald B. Axworthy

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NeoRx
  Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Jack L. Bowman

  	
   

  
	
   

  	
   

  	
  Jack L. Bowman

  
	
   

  	
   

  	
  Chief Executive Officer

  
							

 

9

 

SCHEDULE A

Pretarget Patents

 

[*]

 

10

 

SCHEDULE B

Pretarget Trademarks

 

[*]

 

11

 

SCHEDULE C

Third Party Licenses

 

[*]

 

12Exhibit 10.35

 

 

	
   

  	
   

  	
   

  	
   

  	
  Lease Number

  
	
  Banc of America Leasing
  & Capital, LLC

  	
   

  	
  Lease Intended as
  Security

  	
   

  	
  07489-00600

  

 

This Lease Intended as
Security (this
“Agreement”) dated as of March 19, 2004, between Banc
of America Leasing & Capital, LLC (“Lessor”), a Delaware limited liability company having an office at
2059 Northlake Parkway, 4 South, Tucker, GA 
30084, and Vical Incorporated (“Lessee”), a Delaware corporation, having
its chief executive office at 10390 Pacific Center Court , San Diego,
California 92121.

 

1.     Lease Agreement;
Schedules.  Subject to the terms and conditions hereof, Lessor shall lease to
Lessee, and Lessee shall lease from Lessor, the items of personal property
(collectively with all attachments and accessories thereto, the “Units”) described
in one or more schedules (each, a “Schedule”; each Schedule, together with this
Agreement as it pertains thereto, a “Lease”) which incorporate by reference
this Agreement.  Each Schedule shall
constitute a separate and independent lease and contractual obligation of
Lessee.  Upon delivery and acceptance by
Lessee of each Unit, Lessee shall execute and deliver the Schedule relating to
the Unit, with all information required on the Schedule fully completed, identifying
and accepting the Unit.

 

2.     Term of Lease;
Rentals.  The lease term with respect to any Unit shall consist of an “Interim
Term” (if any) and a “Base Term” as specified in the Schedule covering such
Unit.  Lessee shall pay rent for the
Interim Term (“Interim Rent”) and for the Base Term (“Base Rent”) as specified
in the applicable Schedule.

 

3.     Net Lease;
Disclaimer of Warranties.  Each Lease is a net
lease.  All costs, expenses and other
liabilities associated with the Units shall be borne solely by Lessee.  Lessee’s obligation to pay rent and all
other obligations under any Lease are absolute and unconditional, and not
subject to any abatement, deferment, reduction, setoff, defense, counterclaim
or recoupment for any reason whatsoever. 
No Lease shall terminate, except as expressly provided herein, nor shall
the obligations of Lessee be affected, by reason of any defect or damage to, or
any destruction, loss, theft, forfeiture, governmental requisition or
obsolescence of any Unit, regardless of cause. 
Lessee acknowledges that Lessor is not a merchant or manufacturer, or
agent of any such person, or engaged in the sale or distribution of the Units,
and has not made, and does not hereby make, any representation or warranty as
to merchantability, performance, condition, fitness or suitability for Lessee’s
purposes of any of the Units, or make any other representation or warranty with
respect to the Units.  Lessor shall not
be liable to the Lessee for, nor shall Lessee’s obligations under any Lease be
affected by, any loss, claim, liability, cost, damage or expense of any kind
caused, or alleged to be caused, directly or indirectly, by any Unit, or by any
inadequacy of the Unit for any purpose, or by any defect in, the use or
maintenance of, any repairs, servicing or adjustments of, or any interruption
or loss of service or use of, any Unit, or any loss of business, profits,
consequential or other damage of any nature.  Lessor hereby transfers and
assigns to Lessee, to the extent allowable by law, for and during the lease
term of each Schedule, a non-exclusive interest in the Unit warranties, if any,
of the manufacturer, and hereby authorizes Lessee, when there exists no Event
of Default, to enforce such warranties and to obtain at its own expense the
customary services furnished by the manufacturer in connection with the Units.

 

4.     Use, Maintenance,
Location.  Lessee shall use, operate, protect and maintain the Units in good
operating order, repair, condition and appearance, and in compliance with all
applicable insurance policies, laws, ordinances, rules, regulations and
manufacturer’s recommended procedures, and shall maintain comprehensive records
regarding the Units.  The Units shall be
used solely for commercial or business purposes, and not for any consumer,
personal, home, or family purpose, and shall not be abandoned.  Lessee shall not, through modifications,
alterations or otherwise, impair the value or originally intended function of
any Unit without Lessor’s prior consent. 
Any replacement or substitution of parts, improvements, upgrades, or
additions to the Units made by Lessee shall become subject to the Lease and
title shall vest in Lessor, except that if no Event of Default exists, Lessee
may at its expense remove improvements or additions provided by Lessee that can
be readily removed without impairing the value and function of the Unit.  If requested by Lessor, Lessee shall cause
each Unit to be plainly marked to disclose Lessor’s ownership, as specified by
Lessor.  Lessee shall not change the
location or base of any Unit specified in its Schedule without Lessor’s prior
consent.  Lessee shall notify Lessor at
least 30 days before changing the location of its chief executive office.

 

5.     Loss and Damage.  Lessee
assumes all risk of, and shall promptly notify Lessor of any occurrence of, any
damage to or loss, theft, confiscation or destruction of (together, “Casualty”)
each Unit from any cause whatsoever from the date the Unit is shipped by the
vendor or manufacturer or otherwise made available to Lessee (“Shipment Date”).  If any Unit suffers a Casualty from the
Shipment Date until the Acceptance Date, Lessee shall pay Lessor any sum
required to be paid under any Progress Payment Agreement entered into between

 

 

Lessor and Lessee in relation
to such Unit.  If any Unit suffers a
Casualty on or after its Acceptance Date, Lessee shall, if the Casualty is
damage that is reparable in the judgment of Lessee, at Lessees option either:
(i) at its own expense promptly place the same in good repair, condition or
working order or (ii) pay the Balance Due with respect thereto, and if the Unit
is lost, stolen, confiscated, destroyed or damaged beyond repair (“Total
Loss”), on the rent payment date following such occurrence (or, if none, within
30 days) pay Lessor the Balance Due therefor, together with all other amounts
owing under the Lease with respect to the Unit.  The “Balance Due” for each Unit is, after the Acceptance Date and
before the Base Date for such Unit, Lessor’s Cost in respect of such Unit, together
with all Interim Rent accrued to the date of payment and all other amounts
owing under the Lease, and thereafter, the sum of (i) the present value, as of
such payment date, of the entire unpaid balance of all Base Rent for such Unit
that would otherwise have accrued under the Lease from such payment date to the
end of its scheduled Base Term and (ii) the present value, as of such payment
date, of the Purchase Amount therefor as specified in the applicable Schedule,
in each case, discounted at the implicit rate for the Lease reasonably determined
by Lessor.  Upon such payment, (a) the
Lease of such Unit shall terminate and Lessee thereupon shall become entitled
to possession of such Unit and (b) Lessee shall become entitled to proceeds of
insurance maintained by Lessee.  If less
than all Units in the applicable Schedule suffer Total Loss, the remaining Base
Rent under the Schedule shall be reduced as reasonably calculated by Lessor and
notified to Lessee.

 

6.     Insurance.  Lessee,
at its own expense, shall keep each Unit insured against all risks for the
value of the Unit and in no event for less than the Balance Due for the Unit,
and shall maintain public liability insurance against such risks and for such
amounts as Lessor may require. All such insurance shall be in such form and
with such companies as Lessor shall approve, shall specify Lessor and Lessee as
insureds and shall provide that such insurance may not be canceled as to Lessor
or altered in any way that would affect the interest of Lessor without at least
30 days’ prior written notice to Lessor (10 days’ in the case of nonpayment of
premium).  All insurance shall be
primary, without right of contribution from any other insurance carried by
Lessor, shall contain waiver of subrogation and “breach of warranty” provisions
satisfactory to Lessor, shall provide that all amounts payable by reason of
loss or damage to the Units shall be payable to Lessee (unless an Event of
Default has occurred and is continuing, in which case all such amounts shall be
payable to Lessor), and shall contain such other endorsements as Lessor may
reasonably require.  Lessee shall
provide Lessor with evidence satisfactory to Lessor of the required insurance
upon the execution of any Schedule and promptly upon any renewal of any required
policy.

 

7.     Indemnities.  (a) Lessee shall indemnify Lessor, its successors and assigns and their
respective officers, directors, employees, agents and affiliates (“Indemnified
Persons”) against all claims, liabilities, losses and expenses whatsoever
(except those directly and primarily caused by the Indemnified Person’s gross
negligence or willful misconduct), including reasonable attorneys’ fees and
allocated costs of internal counsel (together, “Attorney Costs”), in any way
relating to or arising out of this Agreement, the Units or the Leases at any
time, or the ordering, acquisition, rejection, installation, possession,
maintenance, use, ownership, condition, destruction, return, or disposition of
the Units, including such matters based in negligence and strict liability in
tort, environmental liability, statutory liability, or infringement.

 

(b) Lessee shall pay or reimburse Lessor and its successors and assigns
on demand for, and indemnify and hold harmless Lessor from, all taxes,
assessments, fees and other governmental charges paid or required to be paid by
Lessor or Lessee in any way arising out of or related to the Units or the
Leases, before, during or after the lease term, including foreign, Federal,
state, county and municipal fees, taxes and assessments, and property, value-added,
sales, use, gross receipts, excise, stamp and documentary taxes, and all
related penalties, fines, additions to tax, and interest charges (together,
“Impositions”), excluding only Federal and state taxes based on Lessors net
income, unless such taxes are in lieu of any Imposition Lessee would otherwise
be required to pay hereunder.  Lessee
shall timely pay any Imposition for which Lessee is primarily responsible under
law and any other Imposition not payable or not paid by Lessor, but Lessee
shall have no obligation to pay any such Imposition that Lessee is contesting
in good faith and by appropriate legal proceedings, the nonpayment of which
does not, in the opinion of Lessor, result in a material risk of adverse effect
on the title, property, use, disposition or other rights of Lessor with respect
to the Units.  Lessee shall furnish on
Lessor’s request proof of payment of any Imposition paid by Lessee.

 

8.     Return of
Units.  Upon any termination or expiration of the
lease term with respect to any Unit, subject to any Lessee purchase of the Unit
pursuant to the applicable Schedule, Lessee shall, at its own expense, prepare
and adequately protect the Unit for shipment and either surrender it to Lessor
in place or, if instructed by Lessor, ship the Unit to Lessor, freight and
insurance pre-paid, at a place reasonably designated by Lessor, in the
condition required under Section 4 hereof, subject to reasonable wear and tear
from proper usage, and in condition required under the applicable Schedule, and
able to be put into immediate service and to perform at manufacturer’s rated
levels (if any) for equipment of like age, together with all related manuals,
documents and records.  If Lessee does
not so surrender or return a Unit to Lessor, in addition to all other rights
and remedies available, at Lessor’s election, such Unit shall continue to be
subject to all the terms and conditions of the Lease, with rent and other
charges continuing to accrue and be payable under the Lease with respect to
such Unit until it is so surrendered or returned to Lessor, except that Base
Rent shall accrue, payable on demand, at the rate of 150% of the rate
applicable in the last period for which Base Rent was payable.

 

9.     Early
Termination.  (a) Upon any rent payment date relating to a Lease, and no less than 30
days’ irrevocable notice to Lessor, from and after the expiry of one-half of
the applicable Base Term, provided no Event of Default exists, Lessee shall
have the option to terminate the Lease with respect to all and not less than
all Units covered thereby by purchasing the Units “as is and where is” without
warranties or representations of any kind, express or implied, for a purchase
price equal to the Balance Due plus all other amounts owing with respect to the
Units, plus early termination charges in the amount set forth in paragraph (b)
below. The purchase price of the Units and any early

 

 

termination charge shall be
paid in immediately available funds at the time of exercising such option.

 

(b)  Upon any termination of the
Lease before the scheduled expiration of the Base Term, due to the exercise of
any early termination option, a Casualty or a default, in addition to all other
amounts to be paid by Lessee, Lessee shall pay Lessor an amount (the
“Make-Whole”), equal to the greater of (A) the amount (not less than zero) that
must be added thereto in order that the Make-Whole plus the Balance Due on the
early termination date is equal to the sum of the present values (using
discount rates per annum for each obligation equal to the Formula Yield (as
defined below) as of the early termination date of (x) all remaining
installments of Base Rent and (y) the Purchase Amount (collectively, the
“Discounted Payments”), or (B) an amount equal to 2% times the Balance Due.  “Formula Yield” for each obligation shall
mean, as of any date of determination, the rate, as published by Telerate
Systems, Inc. or other source, for United States Government Treasury
obligations of maturities corresponding to the weighted average life, rounded
to the second decimal place, of the Discounted Payments.  If no maturity exactly corresponds to such
rounded weighted average life for such obligation, yields of the two most
closely corresponding published maturities shall be calculated pursuant to the
foregoing sentence and the Formula Yield shall be interpolated from such yields
on a straight-line basis.

 

10.  Lessee
Representations and Agreements.  Lessee represents, warrants and agrees as
follows:

 

(a)  Lessee has duly authorized
the execution, delivery and performance of this Agreement, each Schedule, and
all other documents contemplated hereby, which are, or upon signing, will be,
binding on Lessee and do not contravene any other instrument or agreement to
which Lessee is party.

 

(b)  Lessor has and shall at all
times continue to have a perfected security interest in the Units and the other
Collateral, subject to no prior liens or security interests, to secure the
obligations specified in Section 17(g) of this Agreement.

 

(c)  In order to secure Lessee’s
payment and performance of all obligations under this Agreement, Lessee shall
provide to Lessor (and maintain) a first-priority perfected security interest
in cash (or cash equivalent) collateral, pursuant to that certain Security
Agreement dated  and substance
satisfactory to Lessor, in an amount equal to: 
(i) one hundred percent (100%) of the aggregate Lessor’s Cost of all
Units leased hereunder, or portion thereof, with respect to which (and to the
extent) Lessee has placed money market mutual funds in the “Account” (as
defined in the Security Agreement) as security therefor, and (ii) one hundred
five percent (105%) of the aggregate Lessor’s Cost of all Units leased
hereunder, or portion thereof, with respect to which (and to the extent) Lessee
has placed United States treasuries and/or United States government agency
securities in the Account as security therefor (in the aggregate, the “Cash
Collateral Amount”) as such amount may be hereafter amended from time to time
pursuant to the Security Agreement. If and to the extent Lessee places money
market mutual funds in the Account, Lessee covenants and agrees not to convert
the same to either of the other two permitted forms of cash collateral (United
States government agency securities and United States treasuries). The
foregoing shall not be construed to prohibit Lessee from directing funds from
matured United States government agency securities or United States treasuries
in the Account to money 6.government agency securities. Six (6) months
following the Base Date of the first Schedule hereunder, and semi-annually
thereafter, Lessee may request in writing that Lessor release a portion of the
cash collateral to reduce the Cash Collateral Amount.  Lessor may in its sole but reasonable discretion either refuse or
grant the request to reduce the Cash Collateral Amount.

 

(d)  In the event Lessee’s
“Liquid Assets” (as defined hereinbelow) shall at any time fall below Forty
Five Million Dollars ($45,000,000), Lessee shall provide (and maintain at all
times), within ten (10) business days thereafter, as security for Lessee’s
obligations hereunder, an irrevocable letter of credit in an amount equal to
the Cash Collateral Amount, in a form and issued by a bank acceptable to
Lessor, whereupon Lessor shall release its security interest in the cash
collateral required in Subsection (c) hereinabove.  “Liquid Assets”, for purposes of the foregoing, shall mean,
Lessee’s unrestricted and unencumbered:

 

(i)                                     cash and certificates of deposit;

 

(ii)                                  U.S. treasury bills and other obligations of
the federal government; and

 

(iii)                               readily marketable securities (including
commercial paper, but excluding restricted stock and stock subject to the
provisions of Rule 144 of the Securities and Exchange Commission).

 

11.  Personal Property.  The
Units shall remain personal property at all times, notwithstanding the manner
in which they may be attached or affixed to realty, and title shall at all
times continue in Lessor.  Lessee shall
obtain and record such instruments and take such steps as may be necessary (a)
to prevent any person from acquiring any right or lien in or on any Unit,
whether by reason of such Unit being deemed to be attached to real or other
property, or otherwise, and (b) to ensure Lessor’s right of access to and
removal of the Unit, in accordance with the Lease.

 

12.  Default and
Remedies.  (a) Each of the
following is an “Event of Default” hereunder and under any and all Leases then
in effect: (1) Lessee fails to pay when due any installment of rent or other
sum owing by Lessee under any Lease; (2) Lessee fails to maintain insurance in
respect of any Unit as required herein, or sells, leases, subleases, assigns,
conveys, encumbers, or suffers to exist any lien or charge against, any Unit
without Lessor’s prior consent, or any Unit is subjected to levy, seizure or
attachment; (3) Lessee fails to comply

 

 

with the provisions of
Section 10(c), and such failure is not cured within two (2) business days
following receipt by Lessee of written notice thereof from the Lessor; (4) Lessee
fails to comply with the provisions of Section 10(d); (5) Lessee fails to
perform and comply with any other covenant or obligation under any Lease, or
any progress payment, assignment, security or other agreement related to any
Lease or Unit (together, “Related Agreements”) and, if curable, such failure
continues for 30 days after written notice thereof by Lessor to Lessee; (6) any
representation, warranty or other written statement made to Lessor in
connection with this Agreement, any Lease, Related Agreement, or any guaranty,
by Lessee or any person providing such guaranty (“Guarantor”), including
financial statements, proves to have been incorrect in any material respect
when made; (7) Lessee (x) enters into any merger or consolidation with, or
sells or transfers all, substantially all or any substantial portion of its
assets to, or enters into any partnership or joint venture other than in the
ordinary course of business with, any entity, without the prior written consent
of Lessor, which consent may be withheld for any valid credit or business
consideration Lessor reasonably deems important, (y) dissolves, liquidates or
ceases or suspends the conduct of business, or ceases to maintain its
existence, or (z) enters into or suffers any transaction or series of
transactions as a result of which Lessee is directly or indirectly controlled
by persons or entities not affiliates of Lessee as of the date of this
Agreement, without the prior written consent of Lessor, which consent may be
withheld for any valid credit or business consideration Lessor reasonably deems
important; (8) Lessee undertakes any general assignment for the benefit of
creditors or commences any voluntary case or proceeding for relief under the
Bankruptcy Code, or any other law for the relief of debtors, or takes any
action to authorize or implement any of the foregoing; (9) the filing of any
petition or application against Lessee under any law for the relief of debtors,
including proceedings under the Bankruptcy Code, or for the subjection of
property of Lessee to the control of any court, receiver or agency for the
benefit of creditors if such petition or application is consented to by Lessee
or not dismissed within 60 days from the date of filing; (10) any payment
default or other event of default occurs under any other bilateral or
multi-lateral lease, or credit, or other agreement or instrument to which
Lessee and Lessor or any affiliate of Lessor are now or hereafter party; (11)
the repudiation of or breach or default under any guaranty relating to any
Lease; or (12) the occurrence of any event described in clauses (7), (8),
(9),  or (10) of this Section with
reference to “any Guarantor” in lieu of “Lessee”.

 

(b)  Upon the occurrence of an
Event of Default, and in addition to all other rights and remedies provided
herein or under law, all of which rights and remedies are cumulative and not
exclusive, Lessor may: (i) proceed by appropriate court action or actions,
either at law or in equity, to enforce performance by Lessee of the applicable covenants
under any or all Leases, and (ii) terminate any and all Leases, whereupon (A)
Lessee’s right to retain possession and use of the Units shall cease, unless
and until the Balance Due is paid, (B) the aggregate Balance Due, together with
all other amounts owing under the Leases shall be immediately due and payable,
and (C) Lessor may pursue any and all remedies available to it under applicable
law, including as a secured party under the Uniform Commercial Code.  Lessor may also recover from Lessee all
Attorney Costs incurred by Lessor in connection with any enforcement or
attempted enforcement of any Lease.

 

(c)  The exercise or partial
exercise of, or failure to exercise, any remedy shall not restrict Lessor from
further exercise of that remedy or any other remedy otherwise available.  To the extent permitted by applicable law,
Lessee waives any right to require Lessor to sell, release or otherwise use or
dispose of any Units or otherwise mitigate Lessor’s damages, or that may
otherwise limit or modify any of Lessor’s rights or remedies.

 

13.  Assignment, Etc.  (a)
Lessor (and any subsequent assignee) may assign or transfer any or all of
Lessor’s interest in any Lease, Unit or rentals therefrom without notice to
Lessee.  Lessee agrees that the rights
of any assignee shall not be affected by any breach or default of Lessor or of
any prior assignee.  Lessee further
agrees that (i) no such assignee shall be required to assume any of the
obligations of Lessor under any Lease except the obligation in respect of the
application of any insurance monies received by such assignee, as provided
above, and the obligation of non-interference as provided below, and (ii) any
assignee expressly assuming the obligations of Lessor shall thereupon be
responsible for Lessor’s duties under the applicable Lease accruing after any
such assignment and Lessor shall be released from such duties.  Lessor may disclose to any potential or
actual assignee or transferee any information regarding Lessee, any Guarantor
and their affiliates.

 

(b)  Lessee
shall not assign, pledge, hypothecate or in any way dispose of all or any part
of its rights or obligations under any Lease, or enter into any sublease of any
Unit, without Lessor’s prior consent.

 

14.  Financial and Other
Data.  (a) During the term of any Lease, Lessee
shall (i) maintain books and records in accordance with generally accepted
accounting principles (“GAAP”) and prudent business practice, (ii) from and
after Lessee ceases to be a publicly-traded company, promptly and in no event
later than 120 days after each fiscal year end furnish Lessor annual audited
financial statements of Lessee and of any Guarantor, prepared in accordance
with GAAP consistently applied, together with an unqualified opinion of an
independent auditor, and (iii) at Lessor’s request, furnish Lessor all other
financial information and reports reasonably requested by Lessor at any time,
provided the provision of such information would not violate any applicable law
or regulation.  Lessee shall furnish
such other information as Lessor may reasonably request at any time concerning
Lessee, any Guarantor and their respective affairs, or any Unit.  Lessee shall promptly notify Lessor of any
Event of Default or event or circumstance which, with notice, lapse of time or
both, would be an Event of Default.

 

(b)  Lessee represents and
warrants that all information furnished and to be furnished by Lessee or any
Guarantor to Lessor is accurate, and that all financial statements Lessee or
any Guarantor has furnished and hereafter may furnish to Lessor reasonably
reflect and will reflect, as of their respective dates, results of the
operations and the financial condition of Lessee, such Guarantor or other
entity they purport to cover.

 

 

(c)  Credit and other information
regarding Lessee, any Guarantor or their affiliates may be shared by Lessor
with its affiliates and agents.

 

15.  Inspection;
Non-Interference.  (a) Lessor, its agents and employees shall
have the right to enter any property where any Unit is located and inspect any
Unit, together with its related maintenance and repair records, at any
reasonable time and upon reasonable prior written notice.  Such right shall not impose any obligation
on Lessor.

 

(b)  So long as no Event of
Default exists, Lessor shall not, and each direct or indirect assignee or
transferee of Lessor agrees that it shall not, interfere with the rights of use
and enjoyment of the Units by Lessee.

 

16.  Other Charges;
Application.  If Lessee fails to pay within ten days of the date due  any amount of regularly scheduled Interim
Rent or Base Rent, Lessee shall pay a late charge equal to five percent (5%) of
the amount not timely paid.  Lessee
shall pay interest at the per annum rate equal to the lesser of (a) 15% or (b)
the highest rate permitted by applicable law (“Default Rate”) on (i) any sum
other than regularly scheduled Interim Rent and Base Rent owing under any Lease
and not paid when due, and (ii) any amount required to be paid upon termination
of any Lease under Section 11 hereof. 
Payments received under any Lease will be applied, first, to interest,
fees and other amounts owing, other than Interim Rent or Base Rent, then to
Interim Rent or Base Rent, in order of Acceptance Date.

 

17.Miscellaneous.  (a)
Lessee’s indemnity and reimbursement obligations, including under Section 7,
shall survive the termination or cancellation of any Lease or this Agreement.

 

(b)  At Lessor’s request, Lessee
shall execute, deliver, file, and record such financing statements and other
documents, agreements and instruments as Lessor shall reasonably deem necessary
or advisable to protect Lessor’s interest in the Units and to effectuate the
purposes of any Lease and the Related Agreements.  Lessee hereby irrevocably appoints Lessor as Lessee’s agent and
attorney-in-fact for Lessee, coupled with an interest, (i) to execute, deliver,
file, or record any such item, and to take such action for Lessee and in
Lessee’s name, place and stead, and (ii) to enforce claims relating to the
Units against insurers, vendors and other persons, and to make, adjust,
compromise, settle, and receive payment under such claims; without any
obligation to do so.

 

(c)  Time is of the essence.

 

(d)  The invalidity of any
portion of this Agreement, any Schedule or Related Agreement shall not affect
the force and effect of the remaining valid portions thereof.  The term “including” is not limiting.  The term “affiliate” includes any entity
controlling, controlled by or under common control with the referent entity;
“control” includes the ownership of 25% or more of the voting stock of any
entity.  The term “guaranty” includes
any guaranty, surety instrument, indemnity, “keep-well” agreement, or other
instrument or arrangement providing third party credit support to Lessor
relating to any Lease or Unit.

 

(e)  This Agreement, the
Schedules, any approval letter by Lessor in relation hereto and any replacement
or successor letter thereto (together, the “Approval Letter”) and the Related
Agreements, constitute the entire agreement between the parties with respect to
the leasing of the Units.  Any amendment
to such documents must be made in writing and signed by the parties hereto or
thereto.  Such documents may be executed
in one or more counterparts.  Where
multiple counterpart originals of any Schedule exist, only the counterpart
marked “Lessor’s Copy” shall be deemed chattel paper and evidence a monetary
obligation of Lessee.

 

(f)  All demands, notices,
requests, consents, waivers and other communications under the Agreement, any
Lease, the Approval Letter, or any Related Agreement shall be in writing and
shall be deemed to have been duly given when personally delivered or three
business days after being deposited in the mail, first class postage prepaid,
or the business day after delivery to an express carrier, charges prepaid, or
when sent by facsimile transmission (with electronic confirmation of receipt),
addressed to each party at the address or fax number set forth below the
signature of such party on the signature page, or at such other address or fax
number as may hereafter be furnished in writing by such party to the other.

 

(g)  (i) To secure the payment
and performance of its obligations under the Lease relating to such Unit and
the repayment of any advances, with interest and fees, made by Lessor on
account of the Unit, and (ii) as a separate grant of security, to secure the
payment and performance of its obligations under all other Leases owing by
Lessee to Lessor, in each case, now existing or hereafter arising, Lessee
hereby grants to Lessor a security interest in all Lessee’s right, title and
interest in and to each Unit, together with (A) all attachments, accessories
and accessions to, and substitutions and replacements for, the Unit, (B) all
rights to chattel paper arising from the Unit, (C) all insurance, warranty and
other claims against third parties with respect to the Unit (including claims
for rent upon any lease of the Unit), (D) all software used in connection
therewith, (E) all proceeds of any of the foregoing, including insurance proceeds,
and (F)all books and records pertaining to any of the foregoing, in each case,
now existing or hereafter arising and including, with respect to clause (ii) of
this subsection, Units as to which Lessee has satisfied its end of term
purchase obligation under the applicable Schedule (together, the “Collateral”).

 

(h)  To the extent specified in
any Approval Letter, Lessee shall reimburse Lessor upon demand for reasonable
costs and expenses incurred by Lessor in connection with the execution and
delivery of this Agreement and the other documents contemplated hereby.  Lessee shall reimburse Lessor on demand for
all reasonable costs and expenses, including Attorney Costs, incurred in
connection with any amendment

 

 

of any Lease or related document requested by Lessee, or any waiver.

 

(i)  This
Agreement, each Schedule and (unless otherwise specified therein) the Related
Agreements shall be governed by and construed according to the internal laws of
the State of California, to the non-exclusive jurisdiction of the courts of
which, and the Federal courts located therein, the parties hereto submit.

 

(j)  Lessor and
Lessee each waive trial by jury in any action, proceeding or counterclaim
brought by either against the other on any matter however arising out of or in
any way connected with any Lease on the Units.

 

In Witness Whereof, Lessor and Lessee have executed this
Agreement as of the date first above written.

 

	
  Banc of America Leasing & Capital, LLC (Lessor)

  	
  Vical Incorporated (Lessee)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ CAROL JONES

  	
   

  	
  By: 

  	
  /s/ MARTHA J. DEMSKI

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Printed Name:

  	
  Carol Jones

  	
   

  	
  Printed Name: 

  	
  Martha J. Demski

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title: 

  	
  Vice
  President

  	
   

  	
  Title:

  	
  Vice President and CFO

  	
   

  
	
   

  	
   

  
	
  Address:

  	
  2059 Northlake Parkway, 4 South

  	
   

  	
  Address:

  	
  10390 Pacific Center Court

  	
   

  
	
   

  	
  Tucker, Georgia 30084

  	
   

  	
   

  	
  San Diego, CA 92121

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
  (770)270-8635

  	
  Facsimile:

  
																						

 

 

SECURITY
AGREEMENT

(Securities)

Dated as of March 19, 2004

 

1.             Grant of
Security Interest.  As security for
any and all Indebtedness (as defined below) of VICAL INCORPORATED (“Pledgor”),
Pledgor hereby irrevocably and unconditionally grants a security interest in
and assigns and transfers to BANC OF AMERICA LEASING & CAPITAL, LLC
(“Lessor”) all property referred to in Exhibit A attached hereto (the
“Collateral”).

 

2.             Indebtedness.  “Indebtedness” means all debts, obligations
or liabilities now or hereafter existing or incurred, absolute or contingent of
Pledgor or any one or more of them to Lessor, whether voluntary or involuntary,
whether due or not due, or whether incurred directly or indirectly , arising
out of the Schedules (the “Schedules”) now or hereafter entered into under  that certain Lease Intended as Security No. 07489-00600 dated as of March 19,
2004 (and any extensions, amendments, modifications or supplements thereto) by
and between Lessor, as lessor, and Pledgor, as lessee (the Schedules and the
Lease Intended as Security as it pertains thereto, collectively, the
“Lease”).  Unless otherwise agreed in
writing, “Indebtedness” shall not include such debts, obligations or
liabilities which are or may hereafter be “consumer credit” subject to the
disclosure requirements of the Federal Truth-in-Lending law or any regulation
promulgated thereunder.

 

3.             Trading or
Substitution of Collateral.  Unless
otherwise agreed by Lessor in any lease agreement or otherwise, Lessor shall be
under no obligation to permit any trading, redemption, exchange, distribution
or substitution of the Collateral or to permit the release of any Collateral or
the proceeds thereof until the Indebtedness has been paid in full.

 

4.     Pledgor’s
Covenants.  Pledgor covenants and
warrants that unless compliance is waived by Lessor in writing:

 

(a)           All
of the Collateral consists of and will continue to consist of only cash and/or
cash equivalents as described in Exhibit A. 
Pledgor owns the Collateral free and clear of any and all liens,
encumbrances, or interests of any third parties other than the security
interest of Lessor, and will keep the Collateral free of all liens, claims,
security interests and encumbrances of any kind or nature except the security
interest of Lessor.

 

(b)           Pledgor
will at all times maintain Collateral of a character and value satisfactory to
Lessor.

 

(c)           Pledgor
shall take all actions necessary from time to time to maintain the first
priority and perfection of said security interest and shall not take any
actions that would alter, impair or eliminate said priority or perfection.

 

(d)           Pledgor
agrees to pay prior to delinquency all taxes, charges, liens and assessments
against the Collateral, and upon the failure of Pledgor to do so, Lessor at its
option may pay any of them and shall be the sole judge of the legality or
validity thereof and the amount necessary to discharge the same.

 

5.             Powers of Lessor.  At any time, without notice, and at the
expense of Pledgor, Lessor in its name or in the name of Pledgor may, but shall
not be obligated to:

 

 

(a)           Collect
by legal proceedings or otherwise, endorse, receive and receipt for all
dividends, interest, principal payments and other sums now or hereafter payable
upon or on account of the Collateral.

 

(b)           Make
any compromise or settlement it deems desirable or proper with reference to the
Collateral.

 

(c)           Insure,
process and preserve the Collateral.

 

(d)           Participate
in any recapitalization, reclassification, reorganization, consolidation,
redemption, stock split, merger or liquidation of any issuer of securities
which constitute Collateral, and in connection therewith may deposit or
surrender control of the Collateral, accept money or other property in exchange
for the Collateral, and take such action as it deems proper in connection
therewith, and any money or property received on account of or in exchange for
the Collateral shall be applied to the Indebtedness or held by Lessor thereafter
as Collateral pursuant to the provisions hereof.

 

(e)           Cause
Collateral to be transferred to its name or to the name of its nominee or the
name of a depository or its nominee.

 

(f)            Obtain
from any custodian or bailee holding the Collateral any and all information
with respect to the Collateral, without any further consent of or notice to
Pledgor.

 

(g) Exercise as to the Collateral all the
rights, powers and remedies of an owner necessary to exercise its rights under
this paragraph, but prior to any Event of Default under this Security
Agreement, Lessor shall not vote any securities constituting Collateral except
as instructed by Pledgor.

 

Pledgor hereby appoints Lessor its attorney-in-fact to carry out any of
the powers granted by this paragraph.

 

6.  Events of Default.  Any one or more of the following shall be a
default hereunder (“Event of Default”):

 

(a)           Pledgor
fails to pay any Indebtedness when due, or breaches any other term of any
agreement evidencing the Indebtedness, subject to any applicable notice and
cure period provided in the Lease.

 

(b)           Pledgor
breaches any term, provision, warranty or representation in any material manner
under this Security Agreement, subject to any applicable notice and cure period
provided in the Lease.

 

(c)           Any
custodian, receiver or trustee is appointed to take possession, custody or
control of all or a substantial portion of the property of the Pledgor or of
any guarantor of any Indebtedness.

 

(d)           The
Pledgor, or any guarantor of any Indebtedness becomes insolvent, or is
generally not paying or admits in writing its inability to pay its debts as
they become due, fails in business, makes a general assignment for the benefit
of creditors, dies, becomes incompetent, or commences any case, proceeding or
other action under any bankruptcy or other law for the relief of, or relating
to, debtors.

 

 

(e)           Any
case, proceeding or other action is commenced against the Pledgor or any
guarantor of any Indebtedness under any bankruptcy or other law for the relief
of, or relating to, debtors.

 

(f)            Any
involuntary lien of any kind or character attaches to any Collateral.

 

7.             Remedies.  If an Event of Default occurs, Lessor may do
any one or more of the following:

 

(a)           Declare
any Indebtedness immediately due and payable, without notice or demand.

 

(b)           Exercise
as to any or all of the Collateral all the rights, powers and remedies of an
owner (including the right to vote any securities constituting Collateral).

 

(c)           Enforce
the security interest given hereunder pursuant to the Uniform Commercial Code
and any other applicable law.

 

(d)           Sell
all or any part of the Collateral at public or private sale, without demand,
advertisement or notice, in such manner and order as Lessor may elect.  Lessor may purchase the Collateral for its
own account at any such sale.  Pledgor
acknowledges that Collateral may be sold at a loss to Pledgor, and that, in
such event, Lessor shall have no liability or responsibility to Pledgor for
such loss.

 

(e)           Enforce
the security interest of Lessor in any deposit account which is part of the
Collateral by applying such account to the Indebtedness.

 

(f)            Exercise
any other remedy provided under this Security Agreement or by any applicable
law.  Pledgor acknowledges that all such
rights and remedies are cumulative, and the exercise of any right or remedy
shall not preclude the further exercise of any other right or remedy.

 

8.             Waivers.  Lessor shall be under no duty or obligation
whatsoever (a) to make or give any presentment, demands for performances,
notices of nonperformance, protests, notices of protest or notices of dishonor
in connection with any obligations or evidences of indebtedness held by Lessor
as Collateral, or in connection with any obligation or evidences of
indebtedness which constitute in whole or in part the Indebtedness, or (b) to
give Pledgor notice of, or to exercise, any subscription rights or privileges,
any rights or privileges to exchange, convert or redeem or any other rights or
privileges relating to or affecting any Collateral.

 

9.             Additional Waivers.  Pledgor waives any right to require Lessor
to (a) proceed against any person, or (b) proceed against or exhaust any
collateral, and waives any defense arising by reason of the cessation from any
cause whatsoever of the liability of Pledgor or any other person.  Until the Indebtedness is paid in full,
Pledgor waives any right of subrogation, reimbursement, indemnification, and
contribution (contractual, statutory or otherwise), including without
limitation any claim or right of subrogation under the Bankruptcy Code (Title
11 of the U.S. Code) or any successor statute, arising from the existence or
performance of this Security Agreement, and Pledgor waives any right to enforce
any remedy which Lessor now has or may hereafter have against Pledgor or against
any other person and waives any benefit of and any right to participate in any
Collateral or security whatsoever now or hereafter held by Lessor.

 

 

10.           Return of
Collateral.  Lessor may at any time
deliver the Collateral or any part thereof to Pledgor and the receipt of
Pledgor shall be a complete and full acquittance for the Collateral so
delivered, and Lessor shall thereafter be discharged from any liability or
responsibility therefor.

 

11.           Transfer of
Collateral.  Upon the transfer of
all or any part of the Indebtedness, Lessor may transfer all or any part of the
Collateral and shall be fully discharged thereafter from all liability and
responsibility with respect to such Collateral so transferred, and the
transferee shall be vested with all the rights and powers of Lessor hereunder
with respect to such Collateral so transferred; but with respect to any
Collateral not so transferred Lessor shall retain all rights and powers hereby
given.

 

12.           Continuing
Agreement.  This is a continuing
Security Agreement and all the rights, powers and remedies hereunder shall
apply to all Indebtedness of Pledgor or any one or more of them to Lessor,
including that arising under successive transactions which shall either
continue the Indebtedness, increase or decrease it, or from time to time create
new Indebtedness after all or any prior Indebtedness has been satisfied, and
notwithstanding the death, incapacity, cessation of business, dissolution or
bankruptcy of Pledgor or any one or more of them, or any other event or
proceeding affecting Pledgor or any one or more of them.

 

13.           Continuing Powers.  Until all Indebtedness shall have been paid
in full, the power of sale and all other rights, powers and remedies granted to
Lessor hereunder shall continue to exist and may be exercised by Lessor at the
time specified hereunder irrespective of the fact that the Indebtedness or any
part thereof may have become barred by any statute of limitations, or that the
personal liability of Pledgor or any one or more of them may have ceased.  Pledgor waives the benefit of any statute of
limitations as applied to this Security Agreement.

 

14.           Custody of
Collateral.  Lessor may, in its
discretion, hold some or all of the Collateral in an account with a custody
unit of Bank of America National Association (“BANA”).  Pledgor shall reimburse BANA for the usual
custody charges and expenses of BANA’s custody unit, but shall not duplicate
any such charges currently being paid by Pledgor.  Lessor may, in its sole discretion, retain the Collateral in
physical form or with a depository. 
Lessor shall not be required to segregate the Collateral from other
securities owned by third parties. 
Pledgor agrees to be bound by the rules, procedures, practices, liens
and assessments of each depository used by Lessor.  Lessor shall not be liable for any loss to the Collateral
resulting from acts of God, war, civil commotion, fire, earthquake, or other
disaster beyond the reasonable control of Lessor, or for any other loss or
damage to the Collateral unless shown to have arisen from Lessor’s intentional
misconduct or lack of reasonable care.

 

15.           Intentionally
Deleted.

 

16.           Custody of
Collateral at Bailee.  If permitted
by Lessor, some or all of the Collateral may be held at a broker or other
bailee (the “Bailee”).  Pledgor shall
pay to Bailee any charges or costs imposed by the Bailee.  Pledgor at no time shall request that Bailee
release any Collateral to Pledgor, except as expressly permitted by
Lessor.  Lessor may, at any time,
require Bailee to do any or all of the following: (a) disburse any or all of
the Collateral to Lessor; (b) allow Lessor (and not Pledgor) to exercise any
rights relating to the Collateral; (c) sell some or all of the Collateral and
remit the sales proceeds (less Bailee’s normal sales charge) to Lessor; and (d)
buy and sell Collateral only upon the instructions of Lessor (and not Pledgor).

 

17.           Indemnity
Regarding Bailee.  If Lessor permits
any of the Collateral to be maintained at a Bailee, Pledgor hereby agrees to
indemnify, defend and hold harmless Lessor, its successors and assigns and its

 

 

directors, officers, employees and agents, from and against any and all
losses, liabilities, damages, obligations, deficiencies, payments, costs and
expenses (including, without limitation, costs and expenses of any and all
actions, suits, proceedings, arbitrations, demands, assessments, judgments,
settlements, compromises relating thereto and reasonable attorneys’ fees and
disbursements in connection therewith, and including allocated costs of in-house
counsel) sustained or incurred by Lessor or any other indemnitee in any way
arising from or related to Lessor’s actions with respect to Bailee as
contemplated herein or contemplated by any agreement with or notice to Bailee,
except such as are due to Lessor’s willful misconduct or gross negligence.

 

18.           Costs.  All advances, charges, costs and expenses,
including reasonable attorneys’ fees, incurred or paid by Lessor in exercising
any right, power or remedy conferred by this Security Agreement or in the
enforcement thereof, and including the charges and expenses of Lessor’s custody
unit or of any Bailee, shall become a part of the Indebtedness secured
hereunder and shall be paid to Lessor by Pledgor immediately and without
demand, with interest thereon at an annual rate equal to the highest rate of
interest of any Indebtedness secured by this Security Agreement (or, if there
is no such interest rate, at the maximum interest rate permitted by law for
interest on judgments).

 

19.           Intentionally
Deleted.

 

20.           Miscellaneous.

 

(a)           Any
waiver, express or implied, of any provision hereunder and any delay or failure
by Lessor to enforce any provision shall not preclude Lessor from enforcing any
such provision thereafter.

 

(b)           Pledgor
shall, at the request of Lessor, execute such other agreements, documents,
instruments, or financing statements in connection with this Security Agreement
as Lessor may reasonably deem necessary. 
Pledgor hereby appoints Lessor as its attorney-in-fact with full power
and authority to (i) sign any financing statements which must be executed or
filed to perfect or continue perfected our security interest in the Collateral,
and (ii) file any such financing statements by electronic means with or without
a signature as authorized or required by applicable law or filing procedures.

 

(c)           This
Security Agreement shall be governed by and construed according to the laws of
the State of Georgia, to the jurisdiction of which the parties hereto submit.

 

(d)           All
terms not defined herein are used as set forth in the Uniform Commercial Code.

 

(e)           This
Security Agreement shall benefit Lessor’s successors and assigns and shall bind
Pledgor’s successors and assigns.

 

(f)            Pledgor
shall immediately deliver to Lessor (or the Bailee, if any) any Collateral now
or hereafter in Pledgor’s possession.

 

 

(g)           In
all cases where more than one party executes this Security Agreement, all words
used herein in the singular shall be deemed to have been used in the plural
where the context and construction so require, and the obligations and
undertakings hereunder are joint and several.

 

21.           Maintenance of
Collateral.  As of March 19, 2004, the value of the
Collateral is in excess of $1,755,373.00
(“Cash Collateral Amount”). 
Pledgor shall have the right to manage investments with respect to the
Collateral but no withdrawal from any account constituting the Collateral shall
be made without the Lessor’s prior written consent.  In the event that the value of the Collateral at any time falls
below the Cash Collateral Amount, the Pledgor shall immediately deliver to the
Lessor such additional cash (which shall become part of the Collateral) in an
amount necessary to cover such shortfall.

 

In Witness Whereof, Pledgor has executed this Security Agreement (by
its duly authorized officer, if Pledgor is not an individual) as of March
25, 2004.

 

	
   

  	
  Pledgor:

  
	
   

  	
   

  
	
   

  	
  Vical
  Incorporated

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/
  MARTHA J. DEMSKI

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Martha J. Demski

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President and CFO

  	
   

  
						

 

 

Pledgor’s Location (residence,

if Pledgor is an individual;

chief executive office, if

Pledgor is not an individual):

 

10390 Pacific
Center Court

Street Address

 

	
  San Diego, CA

  	
  92121

  
	
  City

  	
  State

  	
  Zip

  
			

 

 

The Pledgor’s Taxpayer Identification

Number (TIN) to be used for tax reporting

purposes with respect to the Collateral

is ###-##-####.

 

(Check if applicable):

 

o  The Pledgor
is not a citizen or a resident of the United States; is not a legal entity
organized under the laws of the United States: and is not doing business in the
United States.

 

 

Exhibit A to Security Agreement

Description of Collateral

 

(a)  All of the United States
government agency securities, United States treasuries and money market mutual
funds now or hereafter held in that certain Enhanced Cash Account No.  0650093 maintained with Bank of America,
National Association and all successor and replacement accounts (the
“Account”).

 

(b)  All rollovers, renewals or
reinvestments of any of the foregoing property.

 

(c)  All stock or conversion
rights, rights to subscribe, liquidation dividends or preferences, stock
dividends, dividends, rights to interest, interest payments, dividends paid in
stock, new securities or other property which Pledgor (or any one or more
Pledgor) is or may hereafter become entitled to receive on account of any of
the foregoing property.

 

(d)  The proceeds, increase and
products of any of the foregoing or replacements thereof or substitutions
therefor.

 

 

PROGRESS PAYMENT AGREEMENT

Dated March 19, 2004

 

Reference is
made to Lease Intended as Security  Number 07489-00600 dated March 19, 2004
(the “Lease Agreement”), between Banc of America Leasing & Capital, LLC
(“Lessor”) and Vical Incorporated (“Lessee”). 
Capitalized terms not otherwise defined herein have the meanings
specified in the Lease Agreement or the pro forma Schedule delivered to Lessee
under cover of the Approval Letter relating to such Lease Agreement.

 

Lessee may
request from time to time that Lessor lease to Lessee under the Lease Agreement
the items of equipment described in letters, schedules, purchase orders or
purchase agreement assignments executed and delivered to Lessor by Lessee
(“Units”) and that Lessor purchase such Units from manufacturers or vendors
designated by Lessee.  Such
manufacturers or vendors may require advance payments, progress payments or
full payment (collectively, “Advances”) for such Units prior to the delivery
and acceptance of such Units by Lessee. 
To induce Lessor to make such Advances for such Units, Lessor and Lessee
agree as follows:

 

1.             Lessee shall execute and deliver to
Lessor a request for advance, in form satisfactory to Lessor, describing the
amount of the Advance and the applicable Units (“Request for Advance”).

 

2.             All Units purchased by Lessor
pursuant to the provisions hereof will be Lessor’s property and, immediately upon
the delivery and written acceptance of the same by Lessee and execution and
delivery of a Schedule relating thereto, and satisfaction of all other
conditions to funding of the Lease specified in the Approval Letter, will be
Units leased under the Lease Agreement and such Schedule.

 

3.             Lessor shall be under no obligation
to fund any Advance relating to a Unit unless (a) there has occurred no Event
of Default under the Lease Agreement, or any event that with notice, lapse of
time, or both, would be such an Event of Default; (b) no Material Adverse
Change has occurred since December 31, 2002, in Lessor’s judgment as to Lessee
or as to any Guarantor that is required 
under the Approval Letter; (c) Lessee has delivered to Lessor, duly
signed, in form satisfactory to Lessor, (i) a Request for Advance relating to
the Advance, (ii) a Lease Agreement, (iii) the Approval Letter, (iv) any
guaranty required by the Approval Letter, (v) a Purchase Agreement Assignment
relating to the applicable Unit, and (vi) any other documents reasonably
required by Lessor, and (d) all other applicable conditions precedent (if any)
specified in the Approval Letter have been satisfied.

 

4.             Interest on all Advances shall
accrue from the date of the Advance until the earlier of the date repaid or the
date the applicable Interim Term or, if none, Base Term, relating to the Unit
that is the subject of such Advance, begins, at a fluctuating rate per annum
equal to the LIBOR Index plus 1.75%,
such interest to be paid within ten (10) days of the date Lessor’s invoice
therefor is sent to the Lessee in accordance with the notice provision in the
Lease Agreement.  “LIBOR Index” shall mean the per annum rate of interest equal to the “average of
interbank offered rates for dollar deposits in the London market based on
quotations of sixteen major banks” for a term of thirty days as published in
The Wall Street Journal under a heading entitled “Money Rates London Interbank
Offered Rates (LIBOR)”

 

 

(or any future or substitute heading) on the first day of the month
preceding the month in which the Advance occurs.

 

5.             Lessor may demand immediate
repayment of any outstanding Advance, together with accrued interest, if and at
such time as (a) the Interim Term or, if none, Base Term, in respect of the Unit
that is the subject of the Advance does not commence by the earlier of (i) the
end of the Utilization Period specified in the Approval Letter or (ii) 10 days
after the date such Unit is delivered to and accepted by Lessee; or (b) there
occurs prior to the beginning of its Interim Term or, if none, Base Term, a
Casualty as to the Unit that is the subject of the Advance.  Lessor may demand immediate repayment of all
outstanding Advances, together with interest at the Default Rate if (A) there
occurs any Material Adverse Change as to Lessee or any Guarantor; (B) there
occurs any Event of Default under the Lease Agreement, or (C) Lessee fails to
make any payment as and when required hereunder.

 

6.             This Agreement shall be governed by
and construed in accordance with the internal laws of the State of California.

 

	
   

  	
  Vical Incorporated
  (Lessee)

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ MARTHA J. DEMSKI

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Printed
  Name:

  	
  Martha J.
  Demski

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice
  President and CFO

  	
   

  
	
  Accepted at
                                  as
  of the date first above written.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BANC OF AMERICA LEASING &

  CAPITAL, LLC

  	
   

  	
   

  
	
  (Lessor)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ CAROL JONES

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Printed
  Name:

  	
  Carol Jones

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice President  

  	
   

  	
   

  	
   

  
														

 

 

 

	
  March 19,
  2004

  	
   

  	
  Banc of
  America

  
	
   

  	
   

  	
  Leasing
  & Capital, LLC

  
	
   

  	
   

  	
  2059
  Northlake Parkway, 4th Floor

  
	
   

  	
   

  	
  Tucker, GA 30084

  

 

	
  Vical
  Incorporated

  	
   

  	
   

  
	
  10390
  Pacific Center Court

  	
   

  	
   

  
	
  San Diego,
  CA 92121

  	
   

  	
  Tel  770-270-8400

  
	
  Attn: Glen
  Medwid

  	
   

  	
   

  

 

 

Re:                               The proposal letter
issued by Banc of America Leasing & Capital, LLC to Vical Inc. dated December
23, 2003 (the “Proposal Letter”)

 

Dear Mr. Medwid:

 

Subject
to the terms and conditions set forth in the Proposal Letter and in this
letter, Banc of America Leasing & Capital, LLC (“BALC”) is pleased to
confirm its willingness to extend term financing (the “Lease” or “Leases”) to
Vical Incorporated (“Lessee”) in an amount not to exceed $8,500,000.

 

	
  DOCUMENTATION:

  	
   

  	
  Lessee shall execute and deliver all
  documents and satisfy all conditions required by BALC.

  
	
   

  	
   

  	
   

  
	
  EXPIRATION
  DATE:

  	
   

  	
  The
  transactions described herein must close on or before December 15, 2004,
  or BALC shall have no further obligation hereunder or under any of the
  documentation relating to such transaction.

  
	
   

  	
   

  	
   

  
	
  REVISED CONDITIONS TO

  	
   

  	
   

  
	
  PROPOSAL LETTER:

  	
   

  	
  Additional Cash Collateral:
  Cash Collateral must be held at Bank of America, N.A.  Release of excess collateral on a
  semi-annual basis must be requested in writing by the Lessee.  It will not be released automatically.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Soft Costs:  The percentage of soft cost at any given
  time during the life of the approval cannot exceed 50% of the total amount
  financed up to that time.

  
	
   

  	
   

  	
   

  
	
  PREVAILING CONDITIONS:

  	
   

  	
  The terms and conditions of the Proposal Letter, by reference, are
  incorporated herein.  If there is a
  discrepancy between the terms and conditions of the Proposal Letter and this
  commitment, the terms and conditions of this commitment shall prevail.

  

 

The commitment of BALC to enter into this transaction is based on the
current business, management, and financial condition of Lessee and the Guarantors.  Accordingly, such commitment shall be
subject to the condition that there will be no material adverse change in or
damage to the business, current management, or financial condition of Lessee or
the Guarantors as determined in BALC’s sole discretion.

 

This letter is subject to the internal laws of the State of California,
is intended solely for the benefit of Lessee, and may be amended only in a
writing signed by BALC and Lessee.

 

 

All of the foregoing is intended as a general statement of understanding
and not as a definitive contract.  The
written agreements and related documents which will subsequently be executed
and delivered between Lessee and BALC will take precedence over and supersede
this commitment in its entirety and will control all aspects of the Lease(s).

 

Please acknowledge your acceptance of the terms and conditions of this
commitment and return it to my attention no later than ten (10) business days
after the date of this letter.  If BALC
is not in receipt of your acceptance by that date, the commitment set forth
herein will terminate.  My address is:

 

Banc  of America Leasing  & Capital, LLC

2059
Northlake Parkway, 4th Floor

Tucker,
GA  30084-4431

 

Thank you for allowing Banc of America Leasing & Capital, LLC to
make this financing facility available to you. 
If you have any questions, please do not hesitate to call me at (770)
270-8468.

 

Sincerely,

 

	
  /s/
  CAROL JONES

  	
   

  
	
  Carol T.
  Jones

  
	
  Vice
  President

  

 

 

cc: Paul Nolta, Vice President

 

Vical Incorporated
hereby agrees to the terms and conditions set forth herein.

 

	
  By:

  	
  /s/
  MARTHA J. DEMSKI

  	
   

  
	
   

  	
   

  
	
  Printed Name:

  	
  Martha J. Demski

  	
   

  
	
   

  	
   

  
	
  Title: 

  	
  Vice President and CFO

  	
   

  
							

 

 

 

	
  Paul L. Nolta

  	
   

  	
  Banc of
  America

  
	
  Vice
  President

  	
   

  	
  Leasing and
  Capital Group

  
	
   

  	
   

  	
   

  
	
  Commercial
  Markets

  	
   

  	
  CA6-137-02-02

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  675 Anton
  Blvd., 2nd Floor

  
	
   

  	
   

  	
  Costa Mesa,
  CA  92626

  
	
   

  	
   

  	
  Tel

  	
  714-850-6533

  
	
   

  	
   

  	
  Fax

  	
  714-850-6586

  
	
   

  	
   

  	
  Paul.L.Nolta@bankofamerica.com

  

 

 

SUMMARY OF TERMS AND CONDITIONS

 

	
  Date:

  	
   

  	
  December 23, 2003

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lessee:

  	
   

  	
  Vical, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lessor:

  	
   

  	
  Banc of America Leasing & Capital, LLC or its
  designee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Equipment

  	
   

  	
   

  	
   

  
	
  Description:

  	
   

  	
  Various office and lab
  equipment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lessor’s

  	
   

  	
   

  	
   

  
	
  Cost:

  	
   

  	
  An amount
  not to exceed $8,500,000 which may with Lessor’s prior consent include soft
  costs such as freight, installation and taxes paid up-front by Lessor not
  exceeding 50% of the Lessor’s Cost, but may not exceed the Fair Market Value
  of the Equipment.  Lessor’s cost  for used Equipment may be subject to
  verification by an independent third party appraiser at Lessee’s expense.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lease

  	
   

  	
   

  	
   

  
	
  Structure:

  	
   

  	
  This lease is a lease intended as security transaction; all tax
  benefits will remain with Lessee; the lease will be a net financial lease,
  and all expenses, including (but not limited to) insurance, maintenance, and
  taxes, will be for the account of Lessee. 
  Lessee will grant, and will represent and warrant that Lessor will
  obtain, a first priority perfected security interest in the Equipment.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Additional

  	
   

  	
   

  	
   

  
	
  Collateral:

  	
   

  	
  This facility will be 100% cash
  secured by a financial instrument to be agreed upon by both parties.  Excess collateral will be released on a
  trailing semi-annual basis as principal is paid down.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Term:

  	
   

  	
  Term for both hard assets and soft costs will be
  thirty-six (36) months.  Payments will
  be made monthly, in arrears.

  	
   

  

 

 

	
  Amortization:

  	
   

  	
  A)     Thirty-six month amortization for all soft costs

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B)      Forty-eight month amortization for all hard assets

  
	
   

  	
   

  	
   

  
	
  Rate:

  	
   

  	
  Fixed = 2.63%

  
	
   

  	
   

  	
  Floating = 1.95%

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The
  Rate shall be subject to adjustment (“Rental Adjustment”) as set forth
  hereinafter:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Rate Adjustment for fixed rate option:  The rate shall be increased or decreased
  on or prior to the Lease Commencement Date for any change in the two year
  constant maturity as published by Bloomberg Market Rates as follows:  The rate shall be adjusted to reflect the
  difference between the yield of the two year Treasury as of December 18, 2003
  (equivalent to 1.80%) and the yield on or closest to the projected Lease
  Commencement Date under the Lease as determined by Lessor.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Rental Adjustment for floating rate option:  The Rate will be decreased or increased by
  one basis point for each basis point change in the LIBOR Index.  “LIBOR Index” shall mean the per annum
  rate of interest equal to the “average of interbank offered rates for dollar
  deposits in the London market based on quotations of five major banks” for a
  term of one month as published in The Wall Street Journal under a heading
  entitled “Money Rates London Interbank Offered Rates (LIBOR)” or any future or
  substitute heading acceptable to Lessor (the LIBOR Index as of December 18,
  2003 was 1.15%).  A change, if any, in
  the LIBOR Index shall be determined by reference to the LIBOR Index published
  on the first publication day of the month preceding the month in which such
  Adjustment Date falls.

  
	
   

  	
   

  	
   

  
	
  End of

  	
   

  	
   

  
	
  Term

  	
   

  	
   

  
	
  Options:

  	
   

  	
  At the expiration of the Lease Term, Lessee will purchase all (but
  not less than all) of the soft assets for $1.00 and all (but not less than
  all) of the hard assets for the then outstanding principal balance.

  
	
   

  	
   

  	
   

  
	
  Expenses:

  	
   

  	
  Lessee
  agrees to reimburse Lessor for all costs and expenses including UCC filing
  and search fees and legal costs incurred by Lessor in committing and closing
  the Lease.

  
	
   

  	
   

  	
   

  
	
  Lease

  	
   

  	
   

  
	
  Documents:

  	
   

  	
  Lease documents will be in a form and substance satisfactory to
  Lessor and its counsel.

  

 

 

	
  Utilization

  	
   

  	
   

  
	
  Period

  	
   

  	
   

  
	
  Expiration

  	
   

  	
   

  
	
  Date:

  	
   

  	
  The latest date for any funding will be December 15,
  2004.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Compliance:

  	
   

  	
  All
  financial institutions are required by Federal Law to obtain, verify and
  record information that identifies each customer who opens an account with
  us.  When you open an account with us,
  we will ask you for your name, address and other information that will allow
  us to identify you, such as documents evidencing legal status and formation,
  taxpayer identification number and date of birth (if applicable).

  
	
   

  	
   

  	
   

  
	
  Covenants:

  	
   

  	
  (a)   Cross-default with any present Bank of
  America facilities.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)   Lessee
  must maintain unrestricted cash balances of 
  $45,000,000 for any one quarter or issue a letter of credit for the
  benefit of Lessor drawn from a financial institution acceptable to the Lessor
  for the then outstanding amount.  Upon
  receipt of the letter of credit, Lessor will release the balance of the
  financial instrument held as Additional Collateral to the Lessee.

  
	
   

  	
   

  	
   

  
	
  Non-Utilization

  	
   

  	
   

  
	
  Fee:

  	
   

  	
  If for any reason (provided this
  transaction receives final approval of Lessor) the Lessee fails to request
  funding for at least 75% of the total Lessor’s Cost,  Lessee shall promptly pay to Lessor a
  Non-Utilization Fee equal to 1% of any difference between the Lessor’s Cost
  and the total cost of the Equipment actually accepted or financed under the
  transaction.

  

 

This Term Sheet includes only a brief description of the principal
terms of the Proposed Transaction, and is intended for discussion purposes
only.  Please understand this proposal
is not a commitment or offer to loan funds, and does not create any obligation
for Lender.  Lender will not be
responsible or liable for any damages, consequential or otherwise, that may be
incurred or alleged by any person or entity, including Borrower, as a result of
this Term Sheet.  Lender will notify you
in writing of its decision if Borrower agrees to proceed with the Proposed
Transaction after completing its review and analysis.

 

 

Glen, thank
you for the opportunity to be of service and I look forward to a favorable
response to the above proposal.  If you
are in agreement with the terms and conditions enclosed, please sign and date
this proposal and return it to my attention at:

 

 

Banc of America
Leasing

ATT:  Paul Nolta

675 Anton Boulevard,
2nd Floor

Costa Mesa, CA 92626

 

Sincerely,

 

	
  /s/ PAUL NOLTA

  	
   

  
	
  Paul Nolta

  
	
  Vice President

  
	
  Banc of America Leasing & Capital, LLC

  

 

 

	
  Vical, Inc.  

  
	
   

  
	
   

  
	
  By:

  	
  /s/ MARTHA
  J. DEMSKI

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  CFO

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  12/23/03

  	
   

  

 

 

Please choose one of the following:

 

Fixed Rate Option: ý

 

Floating Rate Option: o

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